back to article Thank heavens the wrangling over BT's Openreach separation has ended

When Ofcom announced it had finally reached a settlement with BT over the future of Openreach on Friday, you could practically hear the collective sigh of relief. Exactly how the former state monopoly’s broadband unit would become a "legally separate entity" has been a tediously drawn-out process since Ofcom decided that was …

  1. John Smith 19 Gold badge
    Unhappy

    "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

    So OpenReach will operate like a nationalized industry under BT Group acting as The Treasury.

    Now if BTG treats it like a real part of its business and rewards growing business (not necessarily it's own) by funding them so OpenReach gets even bigger all will be well.

    But historically the Treasury took whatever it could get from Coal, Steel, Cars and Rail and (very grudgingly) handed them some of their money back. Analysis suggest the Treasury never seemed to acknowledge that some of these businesses would always be in loss and were operated for (perceived) strategic reasons.

    Time will tell if BTG accept this is an arm length company run for the good of the industry or if they use their budget control to keep it under their control.

    My instinct is they going forward OR needs to start making new assets that it owns outright and the pension situation needs to be slowly separated out.

    Personally I suspect BT have played OffComm yet again.

    1. itzman
      Thumb Down

      Re: "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

      Yup. You saved me making the exact same point.

      I suspect that rather than face years of EU appeals Ofcom decdied to take the best deal it could voluntarily get - for now.

    2. Roland6 Silver badge

      Re: "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

      Time will tell if BTG accept this is an arm length company run for the good of the industry

      In many respects, I and many others couldn't really care about the "good of the industry" ie. Governments/Ofcom's preoccupation with the creation of a "competitive market"! There is nothing in this decision that will lead to a faster deployment of FTTC and it's upgrade to FTTP - which requires both significant investment and skilled labour over a reasonable number of years, that many users want. As has been mentioned previously, if BT had from the outset been managed as a "community asset", the majority of households would already have FTTP, and Sky et al would be bidding for the rights to use the fastest services, just as they bid for football rights now.

      Remember back in 2008 we were talking about: 100mbps up and down at £100 pa, to 100% of homes in the UK and many inside the comm's industry regarded these figures as being realistic - although in some of the sessions I attended, some were uneasy about the wafer thin margins and ability to invest in upgraded kit given the speed with which things were moving. [Remember 20 years ago the majority of Joe Public were using 56kbps dial modems and those lucky enough to get that new ADSL technology were getting downstream speeds of up to 1Mbps (more typically 256~512kbps), now we talk about 100Mbps+ services...]

      So what we need isn't to wait and see, but to demand of Ofcom a change in their entire raison d'etre, and put the consumer first which means delivering better service now (or before 2020) this they can achieve by demanding matched upfront investment from the likes of Sky et al. removing the unnecessary regulatory constraints on BT/BTOR that hinder BT/BTOR from being a market leader in technology deployment in the vain hope that a company will suddenly appear and compete with BT.

      Finally, remember it is Ofcom (and the government), not BT, who are preventing the delivery of 100Mbps up/down, 100% coverage for £100pa...

      1. Alan Brown Silver badge

        Re: "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

        "Remember back in 2008 we were talking about: 100mbps up and down at £100 pa, to 100% of homes in the UK "

        Back in 1984(!) The japanese were taking about 140Mb/s symetric (E4) to the home to 100% of the population as their target. At the time I was involved in the deployment of state-of-the-art 140Mb/s (per channel) 7+1 microwave bearer systems and whilst we wondered what people would do with it there was no doubt the japanese govt would achieve it before the end of the decade.

        Back in 2001 the Koreans were _achieving 1Gb/s.

        I keep banging on about what's happened in New Zealand because it's germane to the discussion: In an effort to stave off government intervention after 20 years of an increasingly rapacious telco, the incumbent aped the BT/Openreach model and tried to sell it to the government there as "enough to ensure a fair market" - the NZ government _documented_ the ways that BT are able to continue manipulating the british market (including damaging the UK GDP) and act in blatently anticompetitive manners (eg, the way it's been able to shut down rural broadband initiatives) - and having no desire to see that kind of thing happen in New Zealand as a continuation of 20 years of rape&pillage, ordered that Chorus (the NZ version of Openreach) be completely cleaved from the incumbent - by the simple expedient of withholding any further broadband funding until it happened.

        Yes, the NZ regulators were braver than Ofcom - but just like Ofcom they were completely subject to regulatory capture and had spent a decade claiming that all was well in the face of increasingly loud complaints from across the spectrum before grudgingly admitting maybe things weren't so rosy, but just like Ofcom not actually doing anything about it. The actual shove came from the NZ ministry of Commerce (Equiv Competition and Markets Authority) to stepped in and forced the issue.

        People really should look at what's happened - the exact same arguments against breaking up BT were all raised there too. They've all turned out to be fabrications.

        Whilst a vertically integrated monopoly makes some sense as a regulated government entity in a completely regulated market (ie, the old days), it is damaging to the entire UK economy to allow a privately owned vertically integrated monopoly to exist and continue to leverage that monopoly to engage in rent-seeking behaviour. BT must be broken up and steps taken to ensure that Openreach cannot be captured by any entity or cartel.

        1. Roland6 Silver badge

          Re: "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

          @Alan Brown - Yes agree, back in the mid 80's I played around with plastic fibre-optic - which I suggest is a good technology fit for the cabinet-to-home market...

          I chose 2008, because it was the point that the UK government decided something needed to be done - "market forces" just weren't working. Plus it it did consider universal FTTP, before looking at universal FTTC, before looking at simply improving the worst areas so they got better than 2Mbps...

          Given what was possible and what was intended in the 1980's, the 2008 decision should have been a much simpler network upgrade from "legacy low speed fibre" to "new fast fibre".

          1. Alan Brown Silver badge

            Re: "where Openreach’s profits go,.. back to the BT Group. The group's budget..controlled by BT."

            > the 2008 decision should have been a much simpler network upgrade from "legacy low speed fibre" to "new fast fibre".

            At the very least, there should be cabinet MSANs deployed. This clusterfuckage of DSLAMs and copper voice runs back to the switches is an example of BT queering the pitch, because it can - in a deliberate way that disadvantages rivals on the supposedly "equal access" lines.

            It's not as if Combo DSLAM/MSAN cabinet equipment haven't been around since the very first days of VDSL. MSANs themselves have been around for 30+ years after all.

  2. Paul

    If BTOR have to lease all the infrastructure off BT, then we've not really made any progress. BTG can ensure pricing on fibre to the customer remains high, making ADSL and VDSL the only affordable choice for consumers, and thus continue to sweat their copper assets!

    I'll believe that the new BTOR is actually going to make things better if they

    1/ cancel some of the G.Fast research and deployments and bring back FTTx offerings at reasonable pricing, thus making it possible for me to get fibre internet to my home and small business

    2/ reduce the cost of just a phone line, because the cost of the line rental won't be used to subsidise BT's internet + tv + phone packages.

    3/ start offering "naked" phone lines without a dial tone purely as a carrier for broadband

    4/ start offering dark fibre links at sensible prices

    .. I could think of many more if I spent another 10 minutes.

    1. Anonymous Coward
      Anonymous Coward

      "because the cost of the line rental won't be used to subsidise BT's internet + tv + phone packages."

      BUT as it stands under the new structure BT will still get the revenue from Openreach to spend on what they want and thats NOT the Openreach Network.

    2. Anonymous Coward
      Anonymous Coward

      > 3/ start offering "naked" phone lines without a dial tone purely as a carrier for broadband

      Err, that already exists. It's called "Metallic Path Facility", a.k.a. Local Loop Unbundling. It has been available in exchanges for something like 15 years, and is widely used by broadband providers like Sky and Talktalk.

      Your broadband provider can obtain it on your behalf, if they have their own line termination equipment in the exchange.

      However, generally the broadband provider will apply their own dialtone on the line (using an MSAN instead of a DSLAM) and backhaul the voice traffic using VOIP. The primary reason for doing so is so that they can fleece the customer for an extra £18 per month at no cost to themselves.

      The secondary reason is that if you provide DSL service without dialtone, as BE used to do, you are very likely to find your circuit snarfed by an Openreach engineer looking for an unused pair.

      1. Alan Brown Silver badge

        "The secondary reason is that if you provide DSL service without dialtone, as BE used to do, you are very likely to find your circuit snarfed by an Openreach engineer looking for an unused pair."

        The fact that this even occurs us testament to how fucked up BT's recordkeeping actually is - and the reality is that they'll do it to a pair with dialtone on it when they're trying to switch a fucked line onto the "least bad pair" and get out of town to the next job. Even if there's no tone, the pairs aren't usually dry, as that would result in corrosion problems in the longer-term, so a quiet line will still have 50V on it and be detectable.

        Such events should come with an automatic £5000 per incident charge. They tend to stop rapidly when there's actually a cost involved.

        The _real_ problem is that Ofcom's collective gonads are sitting in a jar on a desk in BT's head office,

    3. Colin Bull 1
      FAIL

      continue to sweat their copper assets

      This is 100% the problem.

      Ofcom are a negative influence. They have not got a clue and never have.

      Openreach are relying on BT for funding and we will never get a decent percentage of FTTP/FTTH while this is the case. BT WILL SWEAT THEIR COPPER like they always have. They gave up on SDSL as soon as they could because it was threatening leased lines. They will never voluntarily convert existing copper to FTTH and realise the benefits of IP because they want to charge £200 a year for copper landlines. They will never install FTTH to new builds because OFCOM are a bunch of tossers and will never force the issue. Time to take my blood pressure tablets again!

    4. Anonymous Coward
      Anonymous Coward

      2) Openreach charge about £7 a month for a phone line. How much should it be reduced by?

  3. A Non e-mouse Silver badge

    Assets

    BT Openreach not actually owning the assets is a huge problem with this compromise. Whilst the separation is some (small) progress, the ownership of the assets is a biggie. A better compromise would have been if there had been a timescale for the transfer of ownership of the assets.

    As it stands, BT Openreach are basically BT Groups cash-cow to be milked as they want - which isn't much different to the current situation.

    1. SImon Hobson Bronze badge

      Re: Assets

      That's just what I was thinking.

      We now have this "independent" business, 100% owned by BTG, who doesn't own anything it manages (because that's all owned by BTG), and presumably all new stuff they install will be owned by BTG because otherwise ti would be a nightmare working out who owns which bit of cable in a duct, and where the budget is set by BTG.

      Perhaps it's just that I've never had any involvement with "big business" finances - but why is transferring ownership of the assets any harder than (say) dividing up the CDs during a breakup ? If the assets were transferred, then BTG would still own them - the assets would be owned by BTOR, but BTOR is 100% owned by BTG so there's no net change. Then if BTG were to start selling off shares in BTOR then it would get back (in effect) the value of those assets. I can see that where BTG has borrowed to invest, then there'd need to be a trasfer of the loan with the assets - but that's not really that hard a task.

      or perhaps it's a ploy, so that as some future time, BTG can sell the assets to BTOR (and lending it the money to o so). This them saddles BTOW with huge debts.

      1. Alan Brown Silver badge

        Re: Assets

        "but why is transferring ownership of the assets any harder than (say) dividing up the CDs during a breakup"

        It isn't. See the 2011 breakup of Telecom New Zealand into Chorus and Spark.

    2. Missing Semicolon Silver badge
      Devil

      Re: Assets

      .. since BT got the local loop for basically free in the first place, calling the copper "BT's assets" is a bit rich.

      1. Anonymous Coward
        Anonymous Coward

        Re: Assets

        Wouldn't it be more accurate to say the BT shareholders paid the UK government around £14Bn (ignoring inflation) over the years 1984-1993 for the total assets which included the local loop?

    3. Alan Brown Silver badge

      Re: Assets

      " Whilst the separation is some (small) progress, the ownership of the assets is a biggie. "

      Yup, Separation MUST be of ownership of assets and operations.

      This is done via a reverse share split (1 BT share becomes 1 BT-NEO share and one Openreach share), where openreach assumes onwership of the outside plant.

      What BT have done has actually cemented their monopoly and made things WORSE.

  4. Anonymous Coward
    Anonymous Coward

    Just out of interest why is not going to Brussels a benefit?

    A year is neither here nor there, given how long we have had to wait so far.

    In my opinion this "result" is BT being helped by OFCOM to scurry away from finally being fixed by the EU because OFCOM are not on the side of the consumer.

    Clearly BT makes up it's own rules to follow and then ofcom agree, just like with PHORM and the rest.

    Again like PHORM perhaps it is time for the EU to fix what the UK system is unwilling to address, it was the only way anything on PHORM happened and I am willing to wait a year for BT to finally be addressed fairly

  5. Roland6 Silver badge

    Kester Mann, analyst at CCS Insights, said a question remains to what extent the company will purse full fibre versus other technologies such as G.fast.

    A question that needs to be repeatedly asked of Ofcom: When will Ofcom no longer require BT to provide a universal telephony service over copper-to-the-premises?

    Until Ofcom cease demanding copper-to-the-premises, BT has no option but to provide copper-to-the-premises and thus use whatever technologies available to it to maximise the return from the copper infrastructure.

    So Kester Mann, when are you going to start being critical of Ofcom?

    1. Andy WIlson

      Nail on the head

      At last, a post that hits the nail on the head and calls out this well hidden gem...Ofcom insist that BT/OR maintain copper to every house. Wonder why? This will kill you...because the very low voltage that runs from the exchage to the home via copper allows a staic phone to operate when there is a power cut so that an emergency call can be made. Seriously, you can't make this up. How many homes have a phone that is not independently pugged into the mains to operate now? Do BT actually supply or sell a static phone? It is Ofcom's own rules that are preventing FTTP investment, although I'm still not convinced that hiving off OR while still under the financial control of BT will deliver any change to investment plans either.

      1. Alan Brown Silver badge

        Re: Nail on the head

        "Ofcom insist that BT/OR maintain copper to every house"

        No. Ofcom insist that BT/OR provide a phone socket with dialtone that works during power cuts - as do most regulators worldwide.

        BT _interpret_ this as "must provide a copper circuit back to the exchange" because it suits them to do so, but the reality is that a battery-backed NTU will work just as well and appropriate sizing will give several days' operation during no-power conditions.

        With a concentrator/MSAN at the cabinet the copper line only need be a few hundred metres long and the batteries can be centralised. Again, this is easy to do (in most cases virtually the same cost as the DSLAM in the cabinets) but BT are playing the game to prevent opponents getting access to high speed anything into the end-user premises without having them collecting differing rents based on the services offered.

        And then there's the issue of BT refusing to allow Openreach to install BB services into areas with large numbers of commercial premises because that would cannibalise their leased line business.

        1. Roland6 Silver badge

          Re: Nail on the head

          No. Ofcom insist that BT/OR provide a phone socket with dialtone that works during power cuts - as do most regulators worldwide.

          BT _interpret_ this as "must provide a copper circuit back to the exchange" because it suits them to do so

          Err the various Ofcom consultation reports disagree with your take on things...

          With respect to FTTP, BT accepted the need to provide a 'battery' at the consumer end as part of the line provision, however other providers of FTTP, have objected to having to provide a battery as part of their line provision, wanting to shift the responsibility to BT, on the basis that they are merely providing a data line and it is BT who has the universal dialtone service and thus should provide the battery...

          There has also been discussions about the size of the battery, which Ofcom seems to have accepted only needs to provide one hour of service rather than the four originally specified. At one hour this would seem to indicate the battery can be incorporated into a telephone base station, thus we may see Ofcom ultimately deciding that dialtone battery provision is the consumer's responsibility - particularly as they have already accepted that it is the consumers responsibility to maintain the battery.

          And then there's the issue of BT refusing to allow Openreach to install BB services into areas with large numbers of commercial premises

          Issue or opportunity? In various towns in the East Midlands, an ALT-ISP has stepped in and installed their own FTTC cabinets in these locations and offer a richer suite of services than BT/OR offer through their FTTC cabinets... The only issue is that none of the online availability checkers currently list these ALT-ISP provided services...

    2. Steve 114

      Always-on

      I like my copper, because the phones still work when there's a power cut.

  6. Anonymous Coward
    Anonymous Coward

    THis IS all about.....

    OFCOM do not want to deal with the political complication of the BT pension hole that BT are using as a whipping stick. for stopping "Real" separation.

    Send it to Brussels or save it till the UK leaves the EU and then grow some teeth and force a FULL separation.

    1. Alan Brown Silver badge

      Re: THis IS all about.....

      "the political complication of the BT pension hole"

      If that was a REAL pension hole BT would be falling over themselves trying to hand if off to some poor sucker who didn't know better.

  7. Anonymous Coward
    Anonymous Coward

    Employees count too

    Employees matter too

    I personally think that a lot of people a missing the fact that there are 32000 people and there families affected by this issue. Many long serving employees are very frightened about there pensions/ terms and conditions and the consequences of TUPE transfer. Its all very well and good talking about the pros and cons of the argument to split the company in two. Real people with mortgages and families are the driving force in this industry the possible ramifications of this are unknown at present so people sitting in a privileged position dictating what should and should not happen should remember people lively hoods are a stake here. Personally renationalise it as a government asset would be best as they ultimately hold the pension liability in any case a bit like network rail

    1. Missing Semicolon Silver badge
      Devil

      Re: Employees count too

      So what you are saying is that BT's profits are largely fictional, produced by disregarding the massive hole in the pension fund? If the Fund was funded up-to-date, splitting it between the two organisations would be trivial.

      If, like most public-sector and ex-public-sector Pension Funds it is actually massively under water, paying out pensions from current revenue, why hasn't BT been picked up for understating its liabilities?

      1. Anonymous Coward
        Anonymous Coward

        Re: Employees count too

        BT has an agreed plan with the pensions regulator to close the deficit over time, is my understanding. The net profit figures BT quote are post whatever payments have been made into the scheme each F/Y.

        Google points me at this;

        http://www.btpensions.net/180/pension-funding-valuation

        "BT and the Trustee have put in place a recovery plan to address the deficit over 16 years. BT will pay £1.5bn by the end of April 2015 and a further £250m in each of the years to March 2016 and March 2017. From 2018 to 2024 BT will make payments in line with the 2011 agreement (being an average of £690m per annum). These will be followed by £495m per annum through to 2029 with a final payment of £289m in 2030."

  8. halogen

    oh yes, that chocolate teapot OFCOM compromising again with BT the biggest ripper offer of the century

    1. Alan Brown Silver badge

      " that chocolate teapot OFCOM compromising again with BT"

      Concentrate on having the competition and markets authority weighing in.

      They're the elephant in the room. BT can perform regulatory capture on Ofcom but they can't do it to the competition regulator.

  9. hoola Silver badge

    Everyone's an expert

    It is always easy to be critical from a desk or armchair and BT/Open Reach get slated WHATEVER they do. They simply cannot please the armchair experts who always know better and provide an endless line of stories of how BT they are. OFCOM are useless, as are most of the OF??? organisations. I do not understand how spitting this provides any benefit what so ever, other than making both companies even more vulnerable to take over. As far as I am aware BT is still British, unlike every other utility that is now foreign owned.

    Just as Royal Mail has to provide a universal service to then entire UK at the same price and then gets clobbered by the competition creaming off the profitable bits.

    Why don't Virgin Media go out to rural places, because it costs too much. As for the copper to the home, it is cheap, it works and BT is in control of the backup. As soon as you put the battery at the termination you have to maintain it and you are susceptible to whatever the idiot consumer does.

    P

    1. Technomad

      Re: Everyone's an expert

      I'm not an armchair expert: I'm a bloke building a community fibre (FTTH) broadband network in the face of years of anti-competitive and blocking behaviour by BTOR. As others have noted, their cynical focus on sweating copper assets holds back the UK's economy and their ability to bullshit the government into paying them to use obsolete technology to cherry pick rural areas actively prevents local and regional competition, even where this would otherwise be cost-effective. I'll note here that B4RN was able to get started before BDUK/DSSB et al were throwing money at BT and are now eating BT's lunch, even in those areas where BT has now decided to come in. The rest of us, now suffering from competition paid for by our own taxes, have a much higher bar to entry.

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