BT should spin off network division, says MP-backed report

LONDON (Reuters) - Britain's BT (BT.L) should be forced to spin off its national broadband network to improve speeds and quality of service, an independent report backed by more than 100 lawmakers said on Saturday.

The British Infrastructure Group, which brings together lawmakers from all parties to promote improved services, said 42 percent of small and medium-sized firms were reporting problems with their internet connection, at an estimated cost of 11 billion pounds to the British economy.

"Given our modern economy is so reliant on the internet, it is time to stop being held back by BT's lack of ambition and under investment," it said.

BT, the former telecoms monopoly which owns the Openreach networks division responsible for connecting homes and offices to the internet, has come under sustained attack from its rivals in recent years who want the firm to be broken up.

The broadband market leader, which is buying mobile operator EE, owns the copper and fibre networks that serve rivals like Sky (SKY.L) and TalkTalk (TALK.L) as well as BT's own residential and business customers.

The networks division Openreach is managed at arm's length, but critics say the structure allows BT to abuse its market position and has hampered investment.

A spokeswoman for the government division responsible for broadband speeds said the report was "entirely misleading" and said the superfast broadband rollout would cover 95 percent of the country by 2017.

BT said in response that independent data from the European Union repeatedly placed Britain as the number one performer for broadband and superfast broadband when compared to other large EU countries.

British regulator Ofcom is investigating whether to force a break up of BT, however most industry analysts do not expect it to recommend that move.

(Reporting by Kate Holton; Editing by Janet Lawrence)