Crossed wires

Conflicting claims over impact of privatisation on users and shareholders

Q What is Openreach? A

Openreach is the infrastructure arm of BT responsible for building and maintaining the UK’S broadband and telephone network. It is also building large swathes of a new faster full-fibre network, which currently connects around four million people.

Openreach is a wholly owned subsidiary of BT, but most of the UK’S networks and broadband providers piggyback off its network. Smaller providers such as Sky, Talktalk and Plusnet all use Openreach’s network.

Q

What is Labour’s plan for British broadband? A

Labour has plans to create a new British broadband organisation, re-nationalising Openreach and parts of BT’S other businesses that support it.

Jeremy Corbyn said it would cost around £20billion and include expanding the full-fibre network to cover the whole of the UK by 2030. Labour estimated running costs to be £230million per year, funded through a tax on tech companies. However, Philip Jansen, BT’S chief executive, said its true cost could be as high as £100billion, with £5billion a year in running costs. Openreach would be taken private, with shareholders bought out, although Labour would not say how much they would receive. Investors would be offered government bonds as a replacement, which currently have a 2 per cent return compared to a 7 per cent return for BT shares.

Q

What will it mean for you? A

Labour said its new policy would save the average family £30 per month on broadband bills. The Conservatives claimed that Labour’s total spending plans could cost British workers £2,400 each.

The initial privatisation of British Telecom was associated with lower prices and a more responsive service. One Treasury study found that real prices after a decade of privatisation had fallen 50 per cent for telecommunications. In the same period, the share of British Telecom’s service calls completed within eight days rose from 59 per cent to 97 per cent.

Q

What about its rivals? A

It’s not yet clear how Labour’s broadband plan would affect other telecoms companies, including Virgin and Talktalk. These companies would end up competing with a freely available state-run broadband service if Labour’s plan went ahead.

John Mcdonnell, the shadow chancellor, said yesterday that he hoped to “come to an agreement” with these commercial providers, but did not rule out nationalising them too.