The government has declined to comment on the alleged leaking of a Broadband Delivery UK (BDUK) document that reportedly suggests BT has been inflating prices for the deployment of its fibre network to rural areas, which needs taxpayer-derived funds. It has also been claimed that the author of the apparently damning document - …
Break up BT
Should be like the electric, one company manages the network (highly regulated) whilst service companies offer competing offerings for the customer. BT gets away with it as it has a huge pension deficit which would crystalise if this happened which neither the Govt or the unions want (as their defined benefit pension would close). The public are being ripped off to pay for overpaid employees just as in most of the public sector.
Re: Break up BT
Whilst I agree that Openreach should be standalone, the pension issue shouldn't be the case. As a private company, the funding state of the pension scheme should be on the balance sheet already, and BT had to bung £2bn in earlier this year (although a bad bet on the bond market cost them £750m in 2011, so some of the damage is self inflicted). There's about a further £2bn deficit, but for a group like BT that's manageable.
Something I would add, and that supports the thrust of the article, is the lack of transparency in the accounts publicly visible for Openreach. I've worked for a couple of different regulated industries, and I'm used to reading, interpreting and contributing to such things, but I can't make much of Openreach's material. I'd go so far as to say they look as though they could have been purposely made as complex and obtuse as possible.
Mind you, when your regulator is the overpaid jobsworths of OFCOM, what's the chance of this mess being sorted out?
Re: Break up BT
Um, do please correct me if I'm wrong but I belive it's already been done. Openreach was created in 2006 for precisely that reason.
Re: Break up BT
Oh FFS! its still BT group.... the Chinese walls fool only the gullible and allow the regulator to feel that they have actually done something- the reality is we have an abusive company with SMP in many areas that are allowed a free hand by an impotent regulator
Surely the record of honesty speaks for itself.
No, we've never intercepted web traffic
No, we've never had anything to do with DPI
No, we'd never do something like impose bevavioural advertising trial on our customers without asking them first.
No, it MUST be your PC
No, we're not scamming prices.
By way of a response, may one refer to the reply given in the case of Arkell v. Pressdram?
Re: Surely the record of honesty speaks for itself.
not seen a private eye joke in ages! thumbs up
"Openreach was created in 2006 for precisely that reason."
Openreach has the same shareholders and the same board of management and the same annual report as the rest of BT.
Even the banks had better Chinese walls, before Big Bang here (or the repeal of Glass Steagall in the US).
Oh good, so they denied it!
That's pretty much a cast iron guarantee that inflating prices is exactly what they were doing.
I still haven't forgiven BT for stalling local loop unbundling.
The Govt should level the playing field by either repealing the tax on fibre in the ground or charge BT the same rate as everyone else so that they have the incentive to use what is already in the ground. There is tonnes of unlit fibre in the ground that is not being used by BT as in all reality it doesn't cost them anything to just leave it there.
BT denied it, well i'm sure that makes us all feel better about BT.
They didn't deny it.
That was a suspiciously worded statement. Didn't anyone else catch the qualifier "full cost" to the tax payer?
Therefore giving BT so wiggle room when it turns out they passed on 70% of the cost to the tax payer they can be accused of complete lies.
BT Openreach IS A STANDALONE COMPANY and has to bid for the business of BT Global Services or BT Retail (for example) just like anybody else. BT has effectively been "broken up" into seperate entities which are not allowed to favour each other or give special pricing due to anti-competitve laws. So all this talk of breaking up BT really does smack of ignorance and the standard practice of internet person being a know-it-all yet having none of the facts.
Re: Just FYI@envmod
Crap. You might be daft enough to believe that (and maybe you work for OFCOM). But as somebody who has worked for a regulated infrastructure business, the whole game is to play the system to the advantage of shareholders and to the disadvantage of new entrants, and we've seen plenty of that from BT.
That's why Clare Spottiswoode and her motley crew at OFGEM forced British Gas to demerge Transco, and why at privatisation the CEGB was split into separate distribution, transmission and supply companies. Were OFCOM in the slightest bit competent then they'd get clear air between Openreach and the rest of BT, rather than a series of pretend chinese walls.
So a private sector company in receipt of public funds regards the Treasury as a blank cheque book and will do whatever it thinks it can get away with to scam the Treasury into giving them as much money as possible.
Isn't that business as usual for almost any private sector contractor? Just look at the fees charged by the late Building Schools for the Future scheme and numerous Public Private Partnerships / Private Finance Initiative schemes...
...reading the blog it sounds like he got a bit carried away. Very nice chap though
Surely the 'BT haters' would like to see BT inflate its figures. That way the competitors would have room to undercut it. The fact that BT appears to be the sole survivor of the BDUK process surely makes it unlikely that they inflated their costs?
1. Of course it costs more to upgrade rural areas. Anyone who has every lived in the countryside will tell you that. It's a downside for living in the countryside
2. The reason it costs more to upgrade rural areas is because the company responsible for doing the upgrades in the past hasn't done much in the way of actual upgrades. Unless of course painting a green box green every ten years and removing public phone boxes counts as upgrade. Struggling to remember the name of that company. I think it has something to do with an apiary and a produce of india.
If you plan a seperate company
If you plan to make OpenReach a totally separate company, BT would need to be compensated for that.
I'm not fan of BT, but they've been an independent company for 2 decades and pretty much everything you think of as "broadband" has been put in by them since privatisation from their own money. It's only the last 50 feet of cable to your house that is still original, (and the major buildings) and even half of both of those will have been replaced.
I'm no fan of BT but if you're going to take away their network and leave them with nothing (effectively bankrupt) then you'll need to compensate them.
If you're looking for forcefully renationalise infrastructure at the point of a gun, start with the water boards.
Re: If you plan a seperate company
"If you plan to make Openreach a totally separate company, BT would need to be compensated for that."
No they wouldn't. A demerger would leave the shareholders owning the same proportionate chunk they always have done of both Openreach plc and BT plc, and they could then decide whether they wanted to own an infrastructure utility or a telecoms provider, or retain both. Some years ago Severn Trent plc decided to demerge the Biffa Waste Services business from the group in exactly this way, and there's plenty of other demergers where the shareholders own the equity in both demerged businesses.
If BT are going to be left with nothing having demerged Openreach, how come they've been spunking billions on sports broadcasting rights recently? How come they've told investors that their other divisions provided about two thirds of group EBITDA in 2011? How come you haven't done the slightest bit of checking your facts?
I haven't suggested renationalising BT or Openreach (indeed, the persistent failure of all forms of state ownership is a good reason not to). But that doesn't mean allowing BT to continue with its virtual monopoly of local loop, overseen by a toothless regulator.
When did the local loop start being a source of profit?
"If you plan to make OpenReach a totally separate company, BT would need to be compensated for that."
Hmmm. Not sure about that. It doesn't seem that long ago that BT were forever whinging about how much of a loss they made on the local loop. Since all the local loops losses now live in Openreach, why would BT not want to *pay* someone to take those losses away, PFI-style?
The gentleman who said Openreach were a standalone company may want to look at the BT Corporate website:
Openreach don't look to be any more standalone than BT Woolsale or BT Retail (the well known default provider of often poor quality and overpriced telelphony and broadband to the ill-informed and naive).
As has been frequently suggested, the answer is to (re)nationalise openreach, and then regulate it properly.
Meanwhile, I'm waiting for the authorities to spot that Big BT are using BT Sheffield (the ISP formerly known as Plusnet) to drive coach and horses through the regulatory rules. Big BT are for regulatory reasons not supposed to do predatory pricing, but Plusnet apparently are, which makes life awkward if you are an ISP or telco foolhardy enough to want to compete against BT. No wonder Fujitsu gave up.
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