FCS reacts to Ofcom's 'deal' to legally separate BT from Openreach

Responding to news that Ofcom and BT have got their heads together and come up with a deal to nudge Openreach into becoming a limited company, the Federation of Communication Services (FCS) has strongly emphasised the need to ensure that the newly constituted Openreach Board reflects the aspirations of all Openreach stakeholders and customers.

"We therefore call upon Openreach, Ofcom and Government to take the next step to create a truly inclusive governance structure and arrangements to allow all industry stakeholder constituencies to be part of an inclusive and equitable investment decision making process," stated FCS CEO Chris Pateman (pictured) .

"FCS is ready to play our part in this proposed governance structure to ensure the development of effective competition and quality networks for the benefit of all customers and stakeholders."

According to Pateman, Openreach is not ‘separate' in any 'meaningful sense' of the word. "BT is still the sole owner and still the sole source of cash," he added.

But the real problem, believes Pateman, is the influence of legacy BT corporate culture. "Openreach has made progress under CEO Clive Selley's leadership," he added. "Even the Ethernet guys are starting to see improvements. But progress may have been achieved much faster if Openreach had not been held back by having to drag through the leaden slough of BT 'corporatethink'. This new ‘legal separation' does little to address that corporate drag."

BT's strong hand in shaping the look and feel of Openreach's ‘independent' Board did not go unnoticed by Pateman. Nor, once the Board was in place, did the timing of the Ofcom-Openreach deal.

"I am not aware that any industry stakeholders were consulted as part of this process," he added.

"But it is a Board with the operational responsibility for the management of Openreach's business. This is a good thing, and it gives us hope that quality of service and the value of Openreach's engineering workforce will be properly emphasised in the years to come. 

"It is not a Board in the sense of being able to raise money from anybody but BT, and dictated by BT. This we regard as a systematic weakness in the Board's ability to truly plan and behave like the long-term steady pay-back player the industry needs."

Pateman is also scratching his head over the strong arguments put forward by Ofcom relating to the difficulties posed by pension schemes in the context of structurally separating Openreach from BT.

But as part of the legal separation announced today BT is to TUPE 32,000 employees across to Openreach, which brings into question the validity of Ofcom's previous posturing on pension matters, and suggests that Ofcom did not have a grasp on the reasoning it put forward.

"This is interesting since one of Ofcom's main objections to forcing full structural separation was around the risks to the pension scheme," added Pateman. 

"We and other industry stakeholders have always argued that this was specious nonsense. So why all the delay and prevarication?

"We remain convinced that - as both Ofcom and the DCMS Select Committee independently concluded - the only sustainable and truly customer responsive Openreach is an Openreach which is fully master of its own destiny, structured and managed as a utility company and completely structurally separate from BT. Nonetheless, we are where we are."