Vodafone's Vittorio Colao has a point about Openreach. So it’s over to you, BT

Outlook

Vittorio Colao urged the UK to stay in the EU (AFP/Getty Images)

Vodafone’s Vittorio Colao could have been forgiven for sitting back and enjoying a few plaudits after unveiling the first rise in first-half earnings in four years. There may be more to come, and with analysts busily revising their forecasts, the market was cock-a-hoop.

Instead of taking a bow, however, Mr Colao took the opportunity to launch a broadside against the biggest bugbear of a UK broadband industry he’s recently entered. That would be his infrastructure provider, BT’s Openreach.

Mr Colao’s central case was that BT is engaged in the creation – or the recreation – of a monopoly, that doesn’t invest enough in the right kit, and that offers broadband speeds that compare poorly to those in, say, southern Europe.

Au contraire, said BT, which supplied me with a detailed and lengthy rebuttal at a commendably rapid speed that may just have raised the eyebrows of some of Openreach’s customers. Teasing aside, BT refuted Mr Colao’s claims on broadband speeds, and argued that it can hardly be considered a monopoly when its retail arm has only 33 per cent of the broadband market. BT also pointed out that Openreach is subject to price controls as well as a requirement to treat all customers equally.

It was good knockabout stuff, and the industry’s main players will be trading blows for a while yet.

Of course, Mr Colao, BT, Sky et al are all coming at this issue with their own commercial interests front and centre. Well, you can hardly criticise any them for that. The question that should be foremost in the minds of the authorities, however, is not what works best for any of these plcs. It should be what works best for UK plc.

As I’ve written before, the debate is an extremely important one from an economic standpoint, and it is by no means clear that regulators schooled in a neo liberal consensus that makes the “free” market king, will get it right.

Sky’s preferred solution would see Openreach spun off as an independently listed business. The problem with this is that investors in the UK stock market have grossly under valued the assets placed with them. A prized piece of infrastructure like Openreach wouldn’t long retain its independence.

When I spoke to Mr Colao, however, he was keener on an alternative in which the users of Openreach’s service would all be able buy into the company on an equal basis. Critics have argued that a business resulting from such a process might never get anything done because the owners would never be able to agree on anything. But that’s why you have regulators: if owners’ arguments were to gum things up they would have the power to give them a kick.

Mr Colao’s case was a persuasive one and the onus is now very much on BT to prove that such a creation is not needed.