Has the Secretary of State been swayed by Openreach lobbying?

Openreach and Ofcom are not friends at the moment. As part of the wholesale local access (WLA) market review, the watchdog has suggested a cap on Openreach’s rental charges which clearly has rubbed up some the wrong way.

One of those who Ofcom has offended seems to be Secretary of State for Digital, Culture, Media and Sport Karen Bradley, who has written a letter (yes, it’s got that serious) to Ofcom outlining her concerns over the move.

“It is important that unreasonable profits within the sector are addressed,” said Bradley. “However, I am concerned that price suppression could reduce demand for better services, such as fibre, and so will disincentivise investment in the network.

“Transformation of our existing networks to full fibre or other, more future proof, technologies will take many years. So, decisions made now have significant consequences for the future digital infrastructure of the UK and the economy that will depend on it.”

This is not exactly a new battle. Ofcom wants to create a fairer environment which ultimately works better for the consumer, while Openreach seems to be saying leave us alone or we’ll stop investing in the network. This seesaw of regulatory balance is a bouncing tale which we have seen before, the topic of disagreement is different though. Bradley seems to be sitting on the side of Openreach.

There are two ways you could look at this intervention from the politician. Firstly, Bradley is concerned any changes to the status quo might be detrimental to the consumer. Or secondly, she has capitulated to BT/Openreach lobbying. Your presumption of driver might depend on how much sleep you had the night before, or how much faith you have that politicians are in it for the greater good. We know which way we are leaning.

The concern here is that if the charges are capped, less money will be made by Openreach, and therefore less will be allocated to network investment. This is a very real concern. Openreach is after all a commercial operation which needs to make money. And it is also a British organization harbouring the traditional investment mind set, which makes us so passive.

Openreach does not seem to have the long-term ambition of investment to facilitate the connected economy, instead focusing on short-term profits. You could argue this will be to the detriment of the UK’s digital ambitions, but you could also argue Openreach has a responsibility to make as much money as possible; it is not a charity.

Of course, Ofcom gave a perfectly placid response, which is just what you would expect in such a PC-driven landscape:

“We have had a number of responses so far to our consultation, expressing a range of views,” said Ofcom CEO, Sharon White in her own letter.

“Some stakeholders have argued for wholesale prices to be more aggressively constrained. Other stakeholders have taken the opposite position and suggested that BT should have greater pricing flexibility for superfast broadband as well as for higher speed services.”

The WLA is still going through the consultation period, so the final position will not be known until early 2018, but we have one prediction for you. Considering the growing practice of taking Ofcom to court we have been seeing over the last couple of weeks, we predict Ofcom lawyers will get another run out as the operators continue to lead the UK down the path of digital irrelevance. We’re not too sure who will take Ofcom to court, but you can almost guarantee someone will.