BT unit woos rivals with fiber plan to target Liberty Global

Bloomberg

BT Group Plc was accused of dragging its feet for years as competitors using its network demanded the former UK phone monopoly run more fiber-optic lines to homes and businesses. Now BT’s wholesale division has seen the benefits of installing the faster connections, and is trying to coax its rivals into helping out.
Under a regulatory compromise reached in March, BT’s Openreach unit is becoming semi-independent, opening the door for more collaboration with customers like Sky Plc, Vodafone Group Plc and TalkTalk Telecom Group Plc. The companies have long maintained that BT didn’t invest enough in nation’s largest telecom network and gave own phone and internet services an advantage.
With the separation, Openreach Chief Executive Officer Clive Selley wants the company to be seen as an industry ally. While the new structure won’t fully take effect until April 2018, Openreach is already preparing to consult with its rivals about how to accelerate the deployment of so-called fiber-to-the-premises, which can deliver data at much faster speeds than the copper upgrades BT has favored. “I want to collaborate and that is very new,” Selley said. “It’s now time to get around a table and figure out how we do it.”
Part of the reason for the shift toward fiber is cost, which BT has managed to more than halve by using new equipment and techniques. Openreach thinks it can reach
10 million connections by the mid-2020s, up from a current goal of 2 million by 2020. Still, the effort is expected to cost billions of pounds. Openreach wants communication providers to commit to switching over to the new fiber, allowing the old copper to be ripped out and sold to help fund the expansion.
There’s not much precedent for cooperation. Mistrust lingers, over everything from prices to technology choices to duct-and-pole access and the speed of repairs. The separation agreement comes with a raft of conditions — Openreach has had its own board in place since January, employees are being moved to a new company, and the government has to extend to Openreach a pension guarantee dating back to when the UK owned the network. Even the deadlines for Openreach to remove the BT logo from its service vehicles were committed to writing.
“It’s a big change of mindset for the industry,” said Andrew Millington, the acting head of UK equities at Standard Life Investments, a BT shareholder. BT and its customers have often had conflicting priorities, with each camp lobbying communications regulator Ofcom “rather than getting around a table to work for something that benefits everybody.”
But there’s a lot to gain. Consumers are gobbling data using services like video chat, Netflix and online gaming, and that will only increase when ultra high-definition TV, smart homes and virtual reality become more common. The UK has put digital infrastructure at the center of its economic strategy as it prepares to leave the European Union, but the country lags far behind Spain and others in full-fiber buildout.
The plan’s importance was underscored when the government introduced a bill that would incentivize investment in full-fiber broadband by scrapping business taxes on new installations for five years.