What's going on?

The British government, via one of its regulatory divisions called Ofcom, has taken initial steps to force BT and Openreach to become legally separate companies. It�s a good example of antitrust laws in action (a.k.a. “competition laws”).

What does this mean?

Brits can get their internet from providers like BT, Sky, TalkTalk and others � but most of the broadband service providers use the infrastructure that is owned and operated by Openreach, which is a subsidiary of BT. Internet providers have been pushing the government to force BT into turning Openreach into a separate company. They argue that Openreach isn�t independent enough from BT, and that gives BT an advantage over the other providers (for example, when someone�s internet breaks down due to a fault with Openreach�s infrastructure, BT customers might be prioritized over customers that use other providers).

Why should I care?

For markets: BT shares were actually up on the news.
Ofcom isn�t actually pushing for a full and total separation, but it does want the two to be legally separated (i.e. the companies would be operationally independent but profits would still flow to BT shareholders). BT�s investors appeared to be relieved that the breakup wouldn�t be larger � and sent the stock up marginally (about 1%) on Tuesday.


The bigger picture: Too little competition can be bad for customers.
If companies can unfairly influence a marketplace (like the provision of broadband internet services), then a government regulator tends to step in to change the situation. Government regulators often take action to limit or reject proposed mergers or acquisitions for the same reason: the reduction of competition could be too harmful for consumers� interests, e.g. lead to higher prices. This is the �antitrust risk� that we often refer to when writing about mergers and acquisitions.