You’re now too late to lobby Ofcom on the troubled question of whether BT should be forced to say goodbye to Openreach, the bit that owns and manages the copper and fibre network. The deadline for submissions passed on Thursday night, and the regulator’s first thoughts on this question and much else besides are promised early in the new year.
Good luck with that deadline, Sharon White, Ofcom boss: the lobbying frenzy over the past few months suggests this inquiry will set a record for submissions and evidence. In the telecoms world, they talk of little else. Quite rightly, of course: the quality of broadband services in the UK is plainly an issue that matters to the health of the economy.
At heart, Ofcom must answer a simple question: would Openreach invest more in broadband infrastructure, and improve its service, if it wasn’t owned by BT, its biggest retail customer?
At first glance, the idea is entirely reasonable. The likes of Sky and TalkTalk, running their broadband services over BT’s wires, complain of bad service and appalling numbers of missed appointments for customers. As for investment, they argue BT will never be truly ambitious on fast fibre because it has an incentive to sweat the old copper assets.
An independent Openreach would answer to many customers, continues the argument. And its new shareholders wouldn’t be distracted by Champions League football, or £12bn purchases of EE. Instead, they would get on with the job of investing in new infrastructure.
It’s an appealing vision. But here’s the problem. Can we really be confident that a liberated Openreach would do better? BT’s performance may often be poor (dismal, many in rural areas would say), but even Ofcom-endorsed studies say its overall statistics on broadband price and speed compare well against France, Germany, Spain and Italy.
“As a standalone FTSE 100 company, Openreach would be highly attractive to long-term investors and able to raise fresh capital to invest on the back of future growth from the whole industry,” argues Sky.
Well, it might be “able” to do those nice things. But would it? It seems equally possible – if nothing else changes – that a liberated Openreach would be inclined to milk the current assets in the knowledge that its only national competitor is Virgin Media.
That’s the challenge for White. If she can create robust incentives to invigorate Openreach in independent form, then, yes, let’s get radical and break up BT; it’s a big beast and would cope.
But if she can’t guarantee that independence means improvement, then re-engineer the current regulatory system. She could start by ensuring that fines for poor service actually hurt, including in the boardroom.
Small beer for SABMiller
Twenty four hours after Carlos Brito, Anheuser-Busch InBev chief executive, called for SABMiller’s shareholders to rise in rebellion against their directors, little has happened. Fund managers have not popped up in the usual places to do Brito’s bidding. There seems to be general satisfaction that SAB chairman Jan du Plessis made a correct call when he dismissed AB InBev’s £65bn offer as a “very substantial undervaluation”.
There is still time for a whispering campaign to develop, of course. But Brito did himself few favours with his presentation of the bid. He comes across as a man who expects every asset to be for sale at a price he dictates, and rages against an SAB board he thinks is “frustrating the process”.
In fact, SAB’s board is doing what it is supposed to do: offering an opinion on what it thinks the company is worth, and what it is capable of achieving. There is no obligation to “engage” until there is a reasonable proposal on the table – and Brito is about 10% short.
Uphill challenge for challenger banks
The make-up of the UK banking industry, you will have noticed, was not transformed by the 2008 crisis. The big boys remain entrenched and the rise of the “challenger” banks remains a work in progress, despite George Osborne’s oft-repeated claim that he wants the upstarts to upset the old oligopoly.
The chancellor’s words, though, haven’t matched his actions. In his summer budget he transformed the taxation of banks to replace the old bank levy – a charge on the size of a bank’s global balance sheet – with a corporation tax surcharge. The net effect: the likes of HSBC and Barclays will pay less and the challengers will pay more.
Unfair? Well, Osborne won’t be bounced into a U-turn; HSBC’s threat to move to Hong Kong has worked its dubious magic. But the impact on competition can’t be ignored. The Bank of England’s Prudential Regulation Authority is duty-bound these days to promote effective competition in banking. Does it think the corporation tax surcharge is a setback for the competitiveness of challengers? If so, should the newcomers, obliged to hold more capital than established rivals, be allowed to hold less?
Well done Andrew Tyrie, chairman of the Treasury select committee, for demanding a few answers from the PRA. Without a prod, one suspects regulators would pretend nothing has happened.
