back to article If BT gets EE, it will trigger EU treasure hunt for fixed lines

The agreement announced earlier this month for BT to enter exclusive negotiations with EE is part of what we have discussed now for the past two years: a re-pricing of the premium associated with cellular businesses, in favour of those based on fixed lines. This trend will continue and it is the yardstick by which you can …

  1. Anonymous Coward
    Anonymous Coward

    In theory....

    BT should be charging the same for backhaul to competitors as to its own business, and thus the advantage to BT, and disadvantage to the likes of 3 UK would be minimised. Unfortunately with OFCOM very much a "failed state" amongst regulators, there's no transparency on this at all, and we can expect BT to run rings round the OFCOM numpties and ensure that its business is favoured over competitors.

    The simple solution would be for government to refer the proposed transaction the Competition & Markets Authority, with a strong steer that Openreach needs to be demerged from BT's other businesses (or at the very least legally and financially separated, with proper public reporting of related party transactions). Probably about time that the VM cable empire was subject to similar rules on third party access as well.

    Sadly snow-covered pigs will be flying in hell before the bunglers of Westminster or at Southwark Bridge Road do anything useful. And the net result when they enthusiastically rubber stamp BT's plans will be reduced competition in all fixed and mobile markets, and higher customer charges.

    1. graeme leggett

      Re: In theory....

      "BT should be charging the same for backhaul to competitors as to its own business, and thus the advantage to BT, and disadvantage to the likes of 3 UK would be minimised."

      It could but it doesn't have to. It could cite admin costs and accounting reasons why it has to effectively charge 3 more. And if forced to, it could try and play something along the transfer pricing game, increasing the cost of the backhaul and decreasing something somewhere else in BT such that the internal costs remained the same but the competitors paid more.

      1. Richard 12 Silver badge
        Holmes

        Re: In theory....

        All of which are examples of things which BT are not permitted to do.

        They are also examples of why OFCOM are impotent and/or incompetent, as BT might or might not be doing some or all of these but OFCOM appear incapable or unwilling to examine whether or not they are, or of imposing meaningful sanctions should BT be doing so.

        1. Alan Brown Silver badge

          Re: In theory....

          "All of which are examples of things which BT are not permitted to do."

          I can guarantee they _are_ doing it, based on the costs involved in buying 10Gb circuits direct from BT or via third parties where BT is the only access provider in the area.

    2. Anonymous Coward
      Anonymous Coward

      Re: In theory....

      "The simple solution would be for government to refer the proposed transaction the Competition & Markets Authority, with a strong steer that Openreach needs to be demerged from BT's other businesses"

      How would that actually deliver any benefit? The cost of doing it would, I presume, be huge - building a new corporate entity, lots of new execs to appoint, HR, Finance, new headquarters, all that stuff.

      Alongside all that new cost - the underlying cost of running the business doesn't change. In fact, if prices are regulated and based on cost and the cost has just gone up, what do you think is likely to happen to prices? I presume today that the business is financed based on the totality of BT Group business - if Openreach was split it would be a much smaller business and it's finance costs would increase.

      I understand the desire to change things, but I can't see how changing the name over the door fixes anything. The economics remain the same.

      1. ShortLegs

        Re: In theory....

        "How would that actually deliver any benefit? The cost of doing it would, I presume, be huge - building a new corporate entity, lots of new execs to appoint, HR, Finance, new headquarters, all that stuff.

        Alongside all that new cost - the underlying cost of running the business doesn't change. In fact, if prices are regulated and based on cost and the cost has just gone up, what do you think is likely to happen to prices? I presume today that the business is financed based on the totality of BT Group business - if Openreach was split it would be a much smaller business and it's finance costs would increase."

        Not really, given that BTO already is a corporate entity, with its own execs, HR, Finance, HQ and staff, etc. So no real new costs to speak of. Your presumption is wrong regarding finance, BTO finances itself from the 'sale' of its own services to BT and the other 500 or so customers it has. Last year profits were in the region of £1.2billion of revenues of £5.6billion, iirc. If it was split off, there is no reason why it would shrink (it is expanding its engineering staff base to accomodate the increase in demand), nor see its revenues or profits shrink.

        1. Alan Brown Silver badge

          Re: In theory....

          "Alongside all that new cost - the underlying cost of running the business doesn't change. In fact, if prices are regulated and based on cost and the cost has just gone up, what do you think is likely to happen to prices?"

          Firstly: Money that BT spends on Openreach does around to head office and back down to bt retail.

          Secondly: The amount of creative accounting in the Telco world would make your head explode. Those "costs" are nothing like they're currently claimed to be - as evidenced by BT's charges to my employer estimated to be _halved_ if we had an alternate supplier in place.

          Thirdly: You're discounting the profoundly chilling effect on the market that the dominant market controlling access to the lines has.

          Openreach has to offer LLU, but it _will not_ sell dark fibre (which means that third party suppliers have to buy BT tail circuits and NTUs for the last mile at each end - 2 leased circuits - whilst BT only charge for one circuit) and they make it as difficult as possible for 3rd parties to both setup shop and get things done.

          The single biggest transformation in New Zealand was accessibility to the network - bear in mind that the NZ regulators specifically looked at what had happened in the UK since Openreach was setup before ruling that the lines side had to be completely separated from the Mothership.

          Telecom NZ was championing the BT/Openreach model and had internally moved to that model a couple of years before the break-up, renaming the parts "Spark" and "Chorus". The sea change in access happened when Chorus was fully separated. As with BT, prior to that point all unbundling moves had been made as slowly as possible and made as difficult as possible.

          The traditional telco model is to artificially restrict supply and dictate prices, maximising profit. Once that dam is broken, prices drop slightly, but the removal of speed restrictions is more important. The lines company doesn't make any more if you put 1Gb/s or 100Gb/s down the unbundled fibre, so completely artificial pricing structures that imposed massive penalties for going faster are no longer there.

          BT charges 5 times as much for a 10Gb/s ethernet tail as a 1Gb/s one and 5 times as much for that as a 100MB/s tail - the reality is that the equipment they put in to do 10Gb/s is 1/4 the price of the 1Gb circuit they put in 2 years ago, but they still charge you $20k installation and higher tail fees - because they can, not because of any actual technical reasons.

    3. Anonymous Coward
      Anonymous Coward

      Re: In theory....

      Given that 3 and EE have most of their network provided through the same joint venture company, its going to her difficult for BT to offer preferential backhaul rates to its new acquisition.

      1. Steven Jones

        Re: In theory....

        Indeed, there's already an Ofcom requirement for BTW and BTOR to supply wholesale communication services on an equivalence basis. This would simply roll over to any purchase of EE as it would not be part of BTW or BTOR. Of course, BTOR and BTW don't have to discriminate in favour of any BT-owned EE anyway. The fact that BTOR & BTW will gain a captive customer is a major advantage. However, I'm pretty sure that BT will not want to alienate other mobile operators who are significant purchasers of fixed line network services in their own right. It's in BT's interests to have a very strong offering for mobile operators.

        It's also an interesting point that the BDUK programme has, unwittingly or not, allowed for a considerable extension of fibre deep into the network. Those new fibre concentration points could be very useful, although no doubt the state aid aspects could get rather complex.

    4. chris 17 Silver badge

      Re: In theory....

      up vote only for every thing starting the last sentence of the second paragraph.

      Open reach de merged from BT will just be a cash cow for openreach share holders and the other ISP's who'll acquire controlling stakes and see costs further increase to up the end cost to the consumer.

    5. Alan Brown Silver badge

      Re: In theory....

      "Unfortunately with OFCOM very much a "failed state" amongst regulators, there's no transparency on this at all, and we can expect BT to run rings round the OFCOM numpties and ensure that its business is favoured over competitors."

      Even if it does charge itself the same as the others, the fact that Openreach is owned by BT means that it can be manipulated via head office by NOT providing services in critical areas and by making it difficult to get LLU access in the first place, not to mention the extra effort that "competitors" have to go to in digging parallel infrastructure.

      I know I keep bringing this up like a broken record but the New Zealand experience of completely cleaving the lines company from the services company has brought about a stellar change in that market because the now completely independent lines company is not just selling LLU, but actively going out and courting customers for LLU services AND selling space in their ducts to outfits which were previously direct competitors and therefore prohibited (Think of how the UK market would change if Virgin and other telcos were freely able to sling their own fibre down BT ducts.)

    6. This post has been deleted by its author

  2. vmistery

    Seems to me that the only real solution is to have more consolidation between the different markets, perhaps Virgin, Sky, 3, O2 and Talktalk should start talking to each other about it. Virgin with its fixed line with 3 or O2 perhaps or Sky with its TV with O2 or 3, even talktalk with its landline bedding with 3. I have to say I don't think Talktalk taking Blinkbox from Tesco will really give it enough.

  3. Uberseehandel

    Some of us have seen BT come up against DT in the past. Experience leads one to believe that Deutsche Telekom will have out-planned BT, well that is the polite term for it.

    Also, based on experience, It is hard to envisage BT being able to manage Fixed/Mobile convergence. BT has a well deserved reputation for corner cutting, and there are some significant issues to be resolved. Once upon a time, BT owned 40% of Germany's fourth mobile network, which included a small, but significant fixed network. because it seemed 'simpler and less capital intensive', they handed management of their Data Centre to a subsidiary of DT, effectively placing their own future in the hands of their principal competitor.

    Through all this incompetence shone the arrogance of many BT staff who were not only off-hand with anybody who wasn't a BT staffer but were alarmingly unreliable in the information they communicated.

    I can't see any reason why this takeover should benefit the people who will be using telecoms in all its various forms,

  4. Anonymous Coward
    Anonymous Coward

    BT were utter buffoons to offload Cellnet (now O2) in the first place in what was obviously an ever growing market at the time. Lets hope the current management has at least one working braincell unlike those back in the 90s and doesn't cock this up.

    1. Anonymous Coward
      Anonymous Coward

      "Lets hope the current management has at least one working braincell unlike those back in the 90s"

      'Fraid not. Two reasons for that:

      1) All corporates who believe that M&A are a road to riches and success are misguided - transaction costs are high, there's a distraction from running the core business, you invariably end up with asset writedowns and goodwill to pay off, and integrating two large businesses effectively is a skill rarer than hen's teeth. Admittedly BT get access to the mobile market when this goes through, but they could have got that through a virtual MNO deal (buying some OFGEM firepower if the MNO's balked at agreeing a MVNO deal).

      2) Companies have strong and enduring cultures that persist across generations of management. Look at how BT still have an arrogant, state monopolist mindset. Or how energy or water companies still offer standards of service biased towards the dismal standards of the public sector that they supposedly left twenty five years ago. Similarly BA's poor industrial relations. Even in the purely private sector corporate cultures persist for decades - for example John Lewis customer service, or (before they deservedly went bust) Comet's decades long attitude of "stuff your consumer rights, you're not getting your money back", or Ford's iffy reliability accompanied by an excellent parts organisation.

      So I think we'll see the same old story. BT have a tame regulator who won't hold them to account, so that's on their side. They're buying from a moderately distressed seller. And they have vast market clout, and a big bag of cash. They've previously agreed FTTC as the limit of their fixed line broadband obligation, and suddenly it all becomes clear why they liked FTTC. Hook up the cabinet as backhaul connected to a multitude of small aerials fitted to the adjacent street furniture, and they're laughing - those cabinets suddenly become hugely valuable commercial assets, despite being paid out of the Openreach "regulatory" settlement, and not needing planning permission. Suddenly LLU grinds to a halt because "there's no spare capacity at the exchange", so that'll be competitors and business customers f***ed.

      BT's customer-hating and inept management will be undoubtedly be able to snatch some small defeat from the jaws of this huge victory, but overall our former national telecoms monopolist will have just reconstructed itself, with (at best) a single second tier competitor in the shape of (perhaps) Vodafone/Virginmedia. As a big picture strategic play, BT's management have played a blinder here and I tip my hat to them if they pull it off, unfortunately this strategic success is very one sided and the only beneficiaries will be BT management and shareholders, with the losers including all mobile and fixed line customers and all competitors.

      1. 2+2=5 Silver badge

        > Hook up the cabinet as backhaul connected to a multitude of small aerials fitted to the adjacent street furniture

        And by 'adjacent street furniture' I assume you mean telephone poles? That fits in well with the article's comment about the administrative hassle of getting permission for cell towers on buildings.

        So big towns that have most phones line ducted rather than carried on poles will be done last, if at all and still no incentive to extend coverage into the countryside.

    2. Bunbury

      It was the 2000s, not the nineties and they sold Cellnet because the alternative was going broke, being £31Bn in debt at the time

      1. Nick 23

        BT wireless which became mmo2 was a mobile network that covered Holland,Germany,Ireland and the UK

        The spin off of Manx telecom was also incorporated into mmo2

        My point is, they should have sold off the dutch,German and possibly the Irish arms of the business. They should have retained BT Cellnet and genie but still rebrand it to O2 as the BT Cellnet brand was falling behind Orange at the time. They should have also kept Manx telecom as it is an important part of developing the UK's telecoms infrastructure and is also a monopoly, so it was a good revenue source.

        Manx telecom has been home to testing 3G and 4G and also IP fixed line services.

  5. Old Man - Grey Fleece
    WTF?

    Jargon!

    OK so everybody uses jargon but CapEx and OpEx? Actually it was worse no capitalisation: "capex mitigation". When the beancounters start reading El Reg then maybe but for now spell it out in full at least once in the article. Capital Expenditure (CapEx), Operational Expenditure (OpEx) - you have my permission to cut and paste this into your next article.

    1. Anonymous Coward
      Anonymous Coward

      Re: Jargon!

      "When the beancounters start reading El Reg...."

      You haven't noticed the increasingly populist nature of the Reg? The car reviews, the TV reviews, the hand blender and hairdryer reviews? And a move towards more graphical content, bright colours and baubly HTML? And an increasingly international editorial stance. All of which has a cost, in particular the quality of the commentariat, where there's now more than a few posters who appear to know nothing about anything, and would be better served over on SpeakyawbraneBook.

      This change has a distinct smell to it. Many other formerly specialist sites have gone down this route - build a strong reputation in your niche, establish a community (that's us), prettify, diversify, and build the eyeball count, then sell out.

      Purch Inc could do with a decent business IT publication, having swallowed the more hardware focused Tom's and Anandtech, so maybe that's who will be running the Reg by sometime in 2016. Could somebody please start up a UK focused, rather cocky, red-top tech web site to take over the true mantle when the Reg finally passes over into the corporate world?

    2. Irongut

      Re: Jargon!

      If you don't know what capex and opex are you shouldn't be reading the article. They are standard accounting terms used in all industries.

  6. YetAnotherLocksmith

    So...

    So does this mean I'll get more than 1Mbps internet at home, & some EE signal?

    If not, I'm against it.

  7. damien c

    Goodbye EE

    If does go through then I will be cancelling both my EE contract's and will switch to either O2 or migrate them over to Virgin.

    Virgin already provide the backbone for EE's 4G network, and if it switches to BT then I will cancel as BT cannot provide a decent speed even on Fibre.

    1. Anonymous Coward
      Anonymous Coward

      Re: Goodbye EE

      You know that backhaul networks aren't generally provided via consumer broadband services?

      A leased line works at the speed on the tin - every time, without fail, 24 hours a day. That's why they cost twenty times as much as broadband.

    2. Nick 23

      Re: Goodbye EE

      That's a bit extreme!

      But you do realise that Telefonica O2 depends heavily on BT, from backhaul to 4G roll out, BT are involved, even national data roaming is or already has gone over to BT following vodafones take over of Cable and Wireless.

      A few years ago, a deal was reached to merge the O2 mobile and fixed line network into a single core network within BT.

      As for vodafone, data is incredibly slow and considering that they hold the largest amount of 4g

      G spectrum, they are going really slow!

  8. Anonymous Coward
    Anonymous Coward

    Good Article.

    And good comments from Ledswinger.

    I agree about the M&A aspects. Working in a company that has "merged" with four companies in the last two years, and having been an unfortunate cog in the corporate IT restructuring over that time (when all we have done is care and maintenance, whist we join 5 different IT systems in to one), I can assure you that the acquisition part is one hell of a lot easier than the merger. Merger involved savage wholescale sackings in the "merged" company and the merging company left to pick up the pieces.

    In the Telco world, in which I once worked, the problems are increased over my current world, because you have things called customers. They dislike being cut off from their YouTwitFace feed for even a gnats crochet and bleat the Daily Fail every time. Merging NMM (thats Network Management Centres for those who don't like the jargon) is a very hard thing to do. Still, it will keep my friends who still do work in the Telco Industry (mad fools that they are) gainfully employed piecing this nice little mess together. Work for all, lads.

    I am posting this anonymously in case my current employer recognises the tag and gets somewhat upset, as they are want to do. I have a shit job, buts its mine and I would rather like to keep it!

    1. Anonymous Coward
      Anonymous Coward

      Re: Good Article.

      @AC Upvote for YouTwitFace ;)

      Even has its own webpage: http://www.youtwitface.com

  9. Henry Wertz 1 Gold badge

    Wireless backhaul?

    Maybe they don't use this in Britain? But, here in the US, as Verizon Wireless (among others) found areas where the wireline providers were unable to provide adequate backhaul (rurally, if there's no fiber nearby, the phone lines will be too long for fast DSL and ther'l be no cable.) Or unwilling (either they want too much money, or keep dragging their feet getting faster service installed.)

    Solution? VZW (among others, I've heard T-Mobile US specifically) have been aggressively installing wireless backhaul (point-to-point microwave dishes) on every site -- sites that could not get good enough backhaul use it as their primary backhaul (and use the 1.5mbps or whatever wireline conection they already have hooked up as a backup), other sites can have good backhaul but use the wireless backhaul as a backup too (so ideally, a cut fiber will not disable service.) I've heard where I live, the main delay getting 3G (EVDO) service up was the (wireline) phone company being very slow in increasing backhaul speeds to the sites; so for 4G LTE, they got a big speed boost on the fiber optic line to like one site downtown (which does not use the phone company, it has fiber optics from another vendor), told the phone company to sit and spin on it and ran wireless backhaul from that site to the other sites in town.

    The standard backhaul hardware now can hit 1gbps, it exists up to 10gbps, and less expensive 100mbps hardware also exists if the demand is less demanding (this also probably supports higher range.) These tend to list at least 25km range, with some claiming over 100km.

  10. Anonymous Coward
    Anonymous Coward

    Quad play

    It is not exactly true regarding the set up of the mobile networks not offering fixed lines or quad play offers.

    Go back to 1998

    Cable and Wireless owned One2one and was also the largest Cable TV operator and also the second largest telephone and Internet service provider at the time.

    Around 3 million homes were passed by Cable and Wireless and they actually did briefly offer mobile deals.

    Not only that, Deutsche telekom acquired one2one in 1999 and at the same time for a few years Deutsche telekom also had cable and fixed line services within the UK called Eurobell, there was even German Eurobell style phone boxes in these areas.

    Yes I know it was dial up then but my point is, all of these companies have had many opportunities to go into the fixed line business and they messed it up.

    Vodafone DOES offer fixed line services following the acquisition of Cable and Wireless and also has an LLU network at around just under 1,000 telephone exchanges, this was originally set up for bulldog customers, currently Vodafone enterprise,demon and former Thus customers use the LLU network for those who are too far away from the Vodafone enterprise network.

    But why do these companies rely on BT so much? Nothing is stopping them from building there own networks. Vodafone is missing an opportunity here as they could easily build on the fixed line infrastructure they already have by rolling out fibre along sewers,tunnels,telegraph poles and power networks to avoid expenses.

    Take a look at Milton keynes, there is no longer a Cable network there and TV reception is a problem, to consumers telephone lines are all owned by BT, yet Vodafone/cable and wireless had a huge base at some business park within Milton keynes, what has stopped them from rolling out fibre,wifi and improving 3G in that area? Not a lot!

    If anything, I would relax the universal conditions now and allow BT to boot off companies who lie and treat customers as if they are stupid such as TalkTalk, it WAS cheap because it is atrocious and now they have acquired several other companies such as Tiscali they slowly put up prices and then blame everyone else for there incompetence. Ofcom's role should just enforce BT to provide several vital universal conditions provide telephone and basic broadband as a minimum as and when required,provide public payphone services,provide operator and emergency services,provide directory enquiries,allow access to 0500,0800 and 0808 numbers at no cost.

    Rival companies should roll out there own infrastructures just like Cable companies,city fibre and the current rollout of a fibre network across York by Sky and TalkTalk. Time has come now where there is plenty of competition and BT's monopoly ended long ago, now it faces a challenge, people will dump fixed lines for 4G services when network operators start offering unlimited allowances just like Relish, yes it will probably go up to 16mb but that is sufficient for many people and would mean they would no longer need to pay line rental for a underused phone line.

    So tell me, where is BT's monopoly?

    Sky TV customers: 10 million

    Virgin TV customers: 3.5 million

    BT TV customers: 1 million

    Sky broadband customers: around 4 million

    Virgin broadband: around 4 million

    BT broadband: 5 million

    TalkTalk broadband: 3 million

    So in the consumer market, you see that sky has more of a monopoly status, the broadband is quite level as it is near saturation.

    It is BT's own fault for the slump in take up of BT vision as development has been slow since it launched in 2006.

    1. Anonymous Coward
      Anonymous Coward

      Re: Quad play

      "So tell me, where is BT's monopoly?"

      You've not heard of this "Openreach" operation, I take it?

    2. Alien8n
      Alien

      Re: Quad play

      If it's not Virgin it uses BT's infrastructure (1). Regardless of whose name is at the top of the bill, it's BT that you're using. Which is not a good thing, as there's no incentive to improve. Our local network is either Virgin Media or BT. And since BT decided to install the infrastructure for the entire village using copper plated aluminium that pretty much just leaves Virgin Media if you want anything faster than the slowest ADSL connection in the country.

      (1) Except in extremely rare cases, such as Hull which for some reason has its own local telephone and broadband provider.

    3. Vic

      Re: Quad play

      Vodafone is missing an opportunity here as they could easily build on the fixed line infrastructure they already have by rolling out fibre along sewers,tunnels,telegraph poles and power networks to avoid expenses.

      That idea requires them to have access to those sewers, tunnels, telegraph poles and power networks at a reasonable price. Guess who owns many of them...

      Vic.

  11. Alan Denman

    BT ExpensiveReach doing well ?

    You can bet your telly on that.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2021