BT has stepped in to rescue collapsed broadband provider TalkTalk, protecting millions of connections and hundreds of jobs.
But instead of allowing the normal commercial and regulatory process to run its course, Labour’s Culture Secretary Lisa Nandy has intervened, and is now preparing an urgent change to Britain’s competition laws. It raises an obvious question: why?
TalkTalk’s consumer business and wholesale arm, PlatformX Communications, have been acquired by BT after falling into administration, bringing 2.5 million connections under the umbrella of Britain’s biggest telecommunications company.
There is an understandable case for ensuring that TalkTalk does not simply go dark. The company provides connections relied upon not merely by households and businesses but, according to the Government, by hospitals, emergency services and vulnerable people using medical alarms.
Nobody seriously argues that an elderly person’s emergency alarm should stop working in order to prove a point about free-market economics.
But protecting essential services is one thing. Changing the rules under which a private-sector takeover will be judged is quite another.
And that is where Labour has questions to answer.
Culture Secretary Lisa Nandy has issued a Public Interest Intervention Notice under the Enterprise Act 2002, allowing the Government to consider wider public-interest issues alongside the competition implications of BT swallowing one of its rivals.
Nandy said phone and broadband services were “vital national infrastructure” and warned that the failure of TalkTalk’s services could create a “genuine risk to life and public services”.
If the situation is really that serious, an obvious question follows.
How did critical national infrastructure get this close to the edge in the first place?
The Department for Culture, Media and Sport says it has been “closely monitoring” TalkTalk’s situation as the company struggled financially and sought a buyer.
So when did ministers first become aware that its financial difficulties potentially presented a risk to life? When was the Culture Secretary informed? What contingency arrangements were made? And if the Government knew TalkTalk’s networks were so important to hospitals, emergency services and vulnerable customers, why has Britain apparently arrived at a situation requiring emergency intervention?
There is an even bigger question.
Why is Labour now changing the law?
Nandy is relying partly on an existing public-interest consideration concerning the ability to respond to public health emergencies. But she is also intervening on the grounds of maintaining continuity of telecommunications services.
There is a problem. That latter consideration is not currently specified in the Enterprise Act.
The Government therefore says Nandy will, “as a matter of urgency”, lay an Order before Parliament to amend the Act and add the new ground. The legislation allows a Secretary of State initially to identify a consideration which, in his or her opinion, ought to be specified.
That does not mean anything improper has happened. The powers exist precisely because governments sometimes encounter exceptional circumstances.
But changing the legal framework during such an extraordinary takeover deserves proper scrutiny, not a shrug.
Britain is supposed to believe in competitive markets. Companies succeed, companies fail, investors take risks and, when those risks go wrong, shareholders and creditors bear the consequences.
Government’s job should not ordinarily be to pick winners, protect unsuccessful businesses or decide which competitor should absorb which failed company.
Nor should protecting consumers automatically mean protecting a failed corporate structure.
TalkTalk went into administration. BT concluded that there was a commercial case for acquiring its consumer and wholesale businesses and keeping their connections operating.
That is, in itself, the market functioning.
The uncomfortable question is why Whitehall must now intervene in that process and urgently expand the grounds upon which ministers can consider the takeover.
There are legitimate competition concerns too.
BT isn’t simply another broadband provider. Its group operates BT, EE and Plusnet, while Openreach provides infrastructure used by hundreds of other communications providers.
Now another substantial competitor and wholesale operation is coming under the BT umbrella.
That does not automatically mean the acquisition should be blocked. Indeed, if nobody else was prepared or able to rescue the whole business, BT may have prevented an extremely damaging collapse.
But free-market Conservatives should be instinctively wary whenever the answer to corporate failure becomes greater concentration in the hands of the largest player, accompanied by greater discretion in the hands of ministers.
The Competition and Markets Authority has now been ordered to report to Nandy by October 19.
Suppose the CMA identifies serious competition problems. What then?
Will normal competition principles prevail, or will ministers argue that the takeover must nevertheless proceed because continuity of telecommunications is now a public-interest consideration?
That tension goes to the heart of this extraordinary intervention.
The Government should answer some straightforward questions.
When did ministers first know that TalkTalk’s financial problems potentially threatened critical services? Why weren’t adequate contingency arrangements already in place? Why does protecting essential connections require an urgent amendment to the Enterprise Act? Could those services have been guaranteed temporarily while allowing the normal insolvency and competition processes to operate? What alternatives to a takeover by BT were considered? And what protections will consumers have if consolidation ultimately means less competition?
There is an important distinction here.
Free-market economics does not require government to sit on its hands while emergency telephone systems fail.
Government absolutely has a responsibility to protect life and ensure that genuinely critical national infrastructure continues operating.
But the principle should be simple: protect the public, not failed companies.
Keep the phones working. Keep hospitals connected. Protect vulnerable customers. Maintain emergency communications.
Beyond that, government should be extremely cautious about interfering with the operation of competitive markets.
BT says it has stepped in to prevent an unprecedented collapse. If that is the only realistic means by which TalkTalk’s customers could have remained connected, ministers should explain the evidence and make that case.
But Labour should also explain why a private company’s financial collapse has suddenly necessitated an urgent expansion of ministerial intervention under Britain’s competition laws.
The Government may have perfectly good answers.
It now needs to give them.
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