TalkTalk calls on Ofcom to break-up BT

In its submission to the regulator's ten yearly review of the telecoms market, challenger calls for Openreach to be spun out of BT

TalkTalk is positioned as Britain's challenger broadband operator 

By James Quinn, Group Business Editor

7:30PM BST 10 Oct 2015

TalkTalk has criticised BT for still dominating the UK telecoms market some 30 years after privatisation, calling for the FTSE 100 giant to be broken in the name of competition.

In its strongly worded submission to Ofcom’s ten year review of the telecoms market, the telecoms challenger claims that BT’s “motive is to extract value” from its existing copper assets and instead plough money into pay TV sports rights and its pending £12.5bn acquisition of mobile operator EE.

The submission, a copy of which has seen by The Telegraph, calls for BT to be dismantled, with a full separation of ownership of Openreach, which manages the UK’s telecoms wires and infrastructure.

“An incumbent of this size or reach will never have a strong enough incentive to invest in transformative new technology and infrastructure,” claims TalkTalk in the document.

The operator, which is run by chief executive Baroness Harding and chaired by Carphone Warehouse founder Sir Charles Dunstone, says that the status quo, with Openreach remaining part of BT, will detract from Britain’s role in winning the “global race.”

Baroness Harding, chief executive of Talk Talk  Photo: Julian Andrews
BT has used its ownership of Openreach to gain “a very substantial advantage particularly in superfast broadband”, the FTSE 250 budget operator claims, alleging that it has “manipulated” control over product design and pricing to dominate market share.

TalkTalk, which provides fixed line, television, mobile and broadband services, is also concerned about consolidation in the mobile sector – in addition to BT’s tie-up with EE, O2 is merging with 3 – and says that it shares Ofcom’s view that four mobile operators are needed to “ensure customers are treated fairly.”
The deadline for filing submissions to Ofcom’s review was last Thursday. The Telegraph reported on Friday that in its own submission, BT hit out at Sky’s dominance in the pay television market as it attempted to deflect attention over Openreach.

Setting out the case for Openreach remaining part of its business, BT claimed the fact that Sky and TalkTalk account for around 40pc of the retail broadband market shows “the model has promoted competition.”
BT chief executive Gavin Patterson said Openreach – set up in 2006 to ensure rival have equal access to BT’s local network - must stay part of BT to continue to benefit from its capital as well as the £500m it spends each year on research and development.
However Ed Vaizey, the minister responsible for the telecoms industry, said in an interview ten days ago taking Openreach out of BT could have unintended consequences: “Separation would be an enormous undertaking, incredibly time consuming [and have] lots of potential to backfire.”