BT slams ‘ludicrous’ Openreach report as Vodafone smirks BT has labelled a report into its apparently inflated return on broadband investment as "ludicrous", as Vodafone calls on the government to tighten the regulations surrounding Openreach. A confidential November 2014 report from Frontier Economics (seen by El Reg) has claimed that while the historic return on investment, which …
"Vodafone, Sky and the other ISPs and telcos, which have to buy services from BT."
I don't think they HAVE to buy services from Openreach. No-one's stopping them laying their own cable and setting up their own network and exchanges, it's just none of them seem very keen to do it. Can't think why.
"Possiby because the Govt isn't offering them a big fat subsidy to do so, either directly ala the rural BB rollout or indirectly via an inflated connecton charge."
Fact is that the only other serious bidder for the work (Fujitsu), basically said "We want all of the contracts. If we don't get all of the contracts we won't do it).
@ Pen-y-gors
Er, short memory old chap. BT was gifted all that expensive (monopoly) infrastructure for a knock down price back in the 80s which was built up at taxpayers expense before that. This gives BT a considerable advantage as it inherited all the existing ducts and doesn't have to dig anything up.
"Er, short memory old chap. BT was gifted all that expensive (monopoly) infrastructure for a knock down price"
I don't know if that's entirely correct. It was sold to shareholders. The shareholders paid for it, it wasn't gifted. The share price is lower today then it would have been if it had kept pace with inflation, which doesn't normally indicate an asset being sold massively under value.
The network wasn't really paid for by the taxpayer either - post office telephones was a net contributor to the exchequer. That means that instead of the government subsidising the operation, the phone business subsidised the government. Your tax bill was a little lower than it otherwise would have been.
In response to AC
"The network wasn't really paid for by the taxpayer either - post office telephones was a net contributor to the exchequer. That means that instead of the government subsidising the operation, the phone business subsidised the government. Your tax bill was a little lower than it otherwise would have been."
Nationalised monopoly industry, all payments to such including exorbitant phone bills are tax.
It was gifted, the land value alone of BT at the time was probably worth more than the capital value ascribed by the Gov of the day. History just repeated with Royal Mail
BT was shockingly mismanaged after floatation and went on a disastrous overseas expansion campaign that left it saddled with debt.
In response AndrueC
Kit in exchanges is loose change compared to what it costs to dig up roads and lay new ducts and service manholes. Every Gov sale of state assets has always undervalued the land asset.
"It was gifted, the land value alone of BT at the time was probably worth more than the capital value ascribed by the Gov of the day. History just repeated with Royal Mail"
Of course, it's child's play to move a telephone exchange. It's not like there's a load of cabling infrastructure running in and out of them is it...
"Er, short memory old chap. BT was gifted all that expensive (monopoly) infrastructure for a knock down price back in the 80s which was built up at taxpayers expense before that. This gives BT a considerable advantage as it inherited all the existing ducts and doesn't have to dig anything up."
BT got that infrastructure at that price because it was old and clapped out. BT had to raise its own funds to pay for the (then) new System X and System Y exchanges and all the upgrades that entailed.
As for being built up at taxpayer's expense, the GPO charged a fortune for phone calls, and any profit it made would no doubt have gone straight to the exchequer rather than be reinvested in the network.
Of course BT is in a dominant position thanks to that network, however they are the only network provider who HAVE to allow 3rd parties access to their network for regulated, predetermined prices.
They're the only network that doesn't have to pay rates on their fiber, giving them another price advantage.
That's not entirely correct but they do have a special rate that gives them (in my opinion) an unfair advantage. The VOA has been asked to review this a couple of times now but keeps coming down on the side of BT :-/
BT was gifted all that expensive (monopoly) infrastructure for a knock down price back in the 80s
And you think BT are still using that network unaltered from the way the PO left it? BT pretty much rebuilt the core using fibre optics (a condition of the floatation I believe) and upgraded all the exchanges to digital. A lot of the local loop is unchanged from PO days but a lot of houses have been built in the last 30 years so even that has been considerably extended since privatisation. And that's to say nothing of the roll-out of v90(*), IDSN, ADSL and now the installation of thousands of street-side cabinets.
Harping on about what BT may or may not have inherited from the PO is unhelpful. It was over 30 years ago and in telephony terms that makes it pre-history. What BT inherited from the PO was a network creaking at the seams, barely fit for purpose and in need of serious investment. BT has brought that network into the modern world and turned it into a world-class telephony network.
BT has earned the right to be judged on its own merits. Criticise if it you want but stop dragging ancient history into the discussion, please.
(*)That required BT to install modems in telephone exchanges so that one of the D/A conversions could be skipped.
"(*)That [V90] required BT to install modems in telephone exchanges so that one of the D/A conversions could be skipped."
Utter tripe. V90 only requires that the analogue local loop at the subscriber end is converted to and from 8kHz 8-bit digital at the local exchange as it always is with digital exchanges. If the other end, e.g. at an ISP, is digital it can then control the DAC/ADC in the subscriber's exchange directly allowing it to provide anything up to just under 64kbps using a bit of fancy digital signal processing. BT didn't have to do anything to help other than putting the digital exchanges in and supporting ISDN. (The reason why V.90's top rate is only 56kbps is because in some digital systems in other countries, the telco nicks one out of eight bytes to handle signalling instead of doing it out of band.)
Utter tripe.
Charming. Are you a professional debater?
Perhaps I'm thinking of SurfTime then. I'm sure I recall something about BT installing analogue modems (presumably just something more akin to a DSLAM) at exchanges back before ADSL appeared. I've found this article which may be what I'm thinking of:
"Currently, BT has plans to upgrade its exchanges with digital local exchanges by November. It said that this would allow it to separate all internet traffic generated by SurfTime and other unmetered access products."
Anyway it was all a long time ago (almost as long ago as the PO) so if my memory is a bit rusty I apologise. If I'm wrong, just correct me. There's need for you to be a dick about it.
Hmm. Found another article which says that Surftime is just a discount scheme so shouldn't need dedicated hardware. My guess is I'm just remembering about the traffic separation system mentioned in the first article. Whatever - that first article still indicates additional work carried by BT on their network.
Or maybe not further on the article states "BT Net have a product called Surfport available to ISPs. With Surfport a BT Net not-modem answers the customers call and routes the IP traffic onto the BT Colossus IP only network, where it is collected and sent on to the ISP by a high bandwidth permenant connection".
" Perhaps I'm thinking of SurfTime then. I'm sure I recall something about BT installing analogue modems (presumably just something more akin to a DSLAM) at exchanges back before ADSL appeared.
You're thinking of FRIACO, and yes, it was like the analogue equivalent to a DSLAM, where the dial-up call terminated in the exchange and was carried as IP/ATM through the BT network.
The advantage of this was that it could be rolled out 100% immediately - those exchanges not upgraded would simply pass the 'phone call' on to the next hop. I seem to remember that my FRIACO across number terminated in the main Swansea exchange, despite being connected to a small village exchange that took forever to get DSL when it was released.
EDIT: Bugger, just noticed this topic is nearly 3 months old (and yet, replies are still allowed!)
This post has been deleted by its author
i tried reading that but 11% is a nice regulated return on an expense which is really 100%. took 5 readthroughs before i gave up
then the use of underscores for some crazy reason and it brought me back to the first time i read amanfrommars1's comments, and i aborted
Of course BT and openreach are being paid by the government to give broadband to rural villages, Except where there are too few people on the exchange so they say its not worth upgrading the exchange to even provide adsl,
For instance Plaistow Surrey/Sussex border near Dunsfold (where top gear is filmed)
has a max speed of 14400 bps on dialup if any internet providers still offer dialup services.
Funny I live within 100 yards of the Virgin Cable on a main road, on the edge of an ancient town. The odd thing is that Virgin passed us by though someone else did cable us up and allegedly have a fibre option we might be able to access - or not; the story keeps changing. However, we do have some sort of service, hence my sending the message from my desk top PC.
@ LAF
Yes I wonder just how much it would cost them to dig up the (x)km to reach you while BT just uses it's already nicely dug and paid for ducts ?
If they are luck they just might get a ROI by the second coming of Christ and as I'm an atheist I don't see either of them happening.
"perhaps because your exchange is owned by BT and the local NIMBY's wont let their BT share price drop..... by letting other Telco's planning applications through"
There's no PP needed for LLU kit, but surprisingly they're not rolling that out either....
There are a LOT of hoops to jump through before BT will allow LLU kit in areas where it's the monopoly.
It was this kind of behaviour and a wish to avoid it being repeated in New Zealand which was a large factor in the regulators there refusing to allow Telecom NZ to have its own version of Openreach. History has proven them right.
"perhaps because your exchange is owned by BT and the local NIMBY's wont let their BT share price drop..... by letting other Telco's planning applications through"
No planning requests have EVER been put in. No objections have ever been raised for the larger BT units on the street; no objections for the road works they had to do to get some of the ducts sorted.I know this for a FACT (unlike your stereotyping) as I know the all the people on the village planning committee.
Nope, the simple fact is, now this is really going to hurt, t he simple fact the others simply can't be arsed.. We are NOT OK YAH people objecting, or carrot crunching yokels, just normal folk.
"Of course BT and openreach are being paid by the government to give broadband to rural villages, Except where there are too few people on the exchange so they say its not worth upgrading the exchange to even provide adsl,"
Isn't the money supposed to fund extending it to percentage of the UK population rather than 100% coverage?
Samknows says that Plaistow has 199 premises which seems pretty small - but it also says that there's broadband available from a non-BT source - a wireless provider called Kijoma - with 30Mbps broadband available.
When i lived in Ifold (next door to plaistow) we only had 0.5mb down broadband from BT, and we tried to contaks Kijoma, It was a small business and we were told, Sorry there is a tree in the way and that hill over there blocking line of sight to the tranciever, Its essentially somone nearby had a microwave link at their house so if you could see it you could have it. and they also took 6 months to respond to sales calls.
The money went to the county councils, who set up organisations to get the services provided. Plaistow is West Sussex, so http://www.westsussex-betterconnected.org.uk/check-availability is your guide.
Like most government funded stuff "we have made funding available" does not mean that the money has actually been used yet. But the council do seen to be grinding through their programme; But Plaistow is an area they've not go to yet.
If I were a cynic, I might suggest that a county council might do first the areas with lots of tax payers, and put a smaller village on the border (such that a lot of those who benefit pay their taxes to the county next door instead) lower down the list.
"Except where there are too few people on the exchange so they say its not worth upgrading the exchange to even provide adsl,"
They say that until the village arranges its own broadband and EU funding, at which point the tune changes, which in turn nobbles the EU funding.
Cranleigh is smaller than Plaistow and it happened there.
as that would allow them to monopolise it instead potentially sharing it with the other Telco's via OpenReach.
I'm all for BT being more strongly regulated but not at the expense of giving control to a corporate entity which would operate in exactly the same manner given half a chance.
Here's a big argument in favour of dark fibre (and there are various flavours of that including multiplexed bandwidths)
The less "stuff" there is along the line, the more reliable it tends to be.
EVERY SINGLE FAILURE on our current circuits has been down to BT interface equipment, but thanks to the current multilayer supplier approach that's added _at least_ 6 hours to repair time, every time - BT monitor their circuits and have known full well they have a fault but won't lift a finger until the telco we contract with raises a fault with them and jumps through hoops to do so (BT won't tell them their kit is down, so a telco tech has to drive out to the site and verify the BT interface kit has died), with a minimum delay to get onsite and deal with it of 2 hours.
One particular BT optical interface in Reigate is repeatedly failing (wedges and needs power cycling) - but BT refuse to replace it "as it tests ok".
When BT were the end-to-end supplier they treated interface faults as an automatic callout and have been known to have people onsite in 20 mins. They replaced dead kit on the spot. Interestingly although they're the supplier of the tail circuit in any case, the figure they charged us for it was _lower_ than the what they charge the competing telco.
Anyone who actually believes there's a full separation of Openreach/BTwholesale/BTretail has forgotten that BT Head office can see over the walls and direct operations _and_ that there's clear customer experience that contradicts that assertion.
It was investigation into the BT/Openreach model which made New Zealand regulators realise that it's a sham and that the only way to achieve true separation and market fairness the divisions had to be completely separated into different companies with different financials, shareholding, CEO, Board and offices.
Why does the existence of BT prevent competition?
In the past I've bought network in the UK from 186K (who used redundant trunk gas pipes to run fibre down) and Colt and Verizon. The important point in all of these cases was that their offering was cheaper than BT's and didn't touch BT's network at all. KCOM's website offers a 2300km network with 30 metro networks, offering dark fibre and again, no dependence on BT.
http://channelpartners.kcom.com/products/data-connectvity/dark-fibre/
Virgin's network reaches Reigate too, so it seems like there should be a choice.
If the thing you're paying for doesn't meet your needs, why not buy something else from one of the other providers?
"If the thing you're paying for doesn't meet your needs, why not buy something else from one of the other providers?"
We had a quote from another provider who at the moment are not a presence in our building.
all the costs tallied fine but our landlords (and the fact we're on top of an old BT exchange) want as wayleave a permanent foreseeable future unlimited liability insurance from us (one tenant in a 16 floor building) for the said company to run a 4" duct from 5 metres in the street outside (they already run past us) into the building.
How easy it is to stop competitors without actually saying "NO"
A bit more info for you BT apologists out there who think it's a completely non state subsidised company, you might want to look up the Crown Guarantee and what it means.
http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/telecoms/8079404/Taxpayers-face-22bn-bill-if-BT-goes-bust.html
"Why does the existence of BT prevent competition?"
It is not in BTs interest to allow competition in areas where it is the monopoly - and that's the vast majority of the country outside of core city areas.
As such they make it as hard as possible for 3rd parties to get into such areas - and as happened in Cranleigh, if a competing provider makes an announcement that they're about to start rolling out broadband you can guarantee that BT will have a doorstepping campaign running in _days_ to ensure they lock all the existing customers into 2 year contract extensions.
Openreach doesn't exist out of the goodness of BT's heart. It was the absolute minimum possible thing they could do to stave off regulatory intervention and is mostly for show, not for the benefit of 3rd parties.
"Vodafone wants direct access to dark fibre"
Well of course they do but they didn't lay it. They'll also want access to it at rates they decide are competitive.
I mean, BT are obviously massaging the truth a bit with the desperate PR chaff countermeasures here but Void-a-phone are blatantly just throwing some shit here to see if Ofcom or BT will gift them a fibre network to get them to go away. Bunch of chancers.
Void-a-phone :) bought Cable and Wireless WorldWide (the other half of Cable & Wireless plc when it split) so has iirc the second largest fibre network in the UK and a worldwide network presence. They could if they wanted to build out their own network like NTL/Telewest/Virgin but won't as its cheaper to lobby OFCOM and gain access to open reach at cheaper rates.
When the New Zealand looked at the options for dealing with Telecom NZ's anticompetitive behaviour, TNZ pushed the BT/Openreach model hard and even split itself up "voluntarily" internally to try and make it a done deal they only needed to rubberstamp. (Telecom became "Spark" and the lineside "Chorus")
After looking long and hard at the UK model and how it was working in real world terms, the NZ regulators decided that the best way forward was to force divestment of the lineside, which was done after a lot of squealing and claims that the lineside company would not be economic to run, etc etc.
This was done by making it a condition of getting funding to sort out rural broadband (which is hellaciously more expensive to run in NZ than in the UK because of the terrain and low population densities)
End result: After the handbrake effect of the incumbent dialtone provider was removed the NZ lines market has exploded. Chorus actively sells LLU (instead of making it as hard as possible to deal with) duct access _and dark fibre_ - something which Openreach flatly refuses to do(*)
Chorus is now highly profitable and extremely responsive, with a huge range of 3rd party telcos hanging off their lines. On the other hand Spark seems to be losing ground rapidly.
(*) As a result, our 60km 1Gb circuit goes via a BT ethernet device & BT tail for 15km, comes out as copper, gets turned back into fibre for 50km of Sky run and ends up in a rack on another campus where it comes out as copper on a Sky interface. A single 65km fibre run could trivially be plugged straight into our gear at both ends and upgraded to 10Gb/s / multifrequency without further telco interference, but in order to "upgrade" to 10Gb we have to fork out 100k and pay an extra 200k/year under the current environment.
Thanks Ofcom.
"Out of interest, how does ordering a new line or reporting a fault work under the NZ system? Do you still have to go through a retail firm to do it?"
Yes. Chorus is wholesale _only_. The difference is because the lines company is no longer beholden to the incumbent, it really does treat everybody equally.
There is no competition to CHORUS though...it's an absolute monopoly.
In the UK VM has 50% coverage of the most profitable bits of the market...
There also seems to be some issues with charges being higher than anywhere else as a result...
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11407238
"There is no competition to CHORUS though...it's an absolute monopoly."
Not quite, but close - that's what 30 years of one of the lightest regulatory touches on the incumbent telco gets you, coupled with a policy of asset-stripping by not reinvesting in infrastructure..
In 1997 it cost $US9000/month for a 1.5MB/s circuit from San Francsico to Auckland - and $4000/month to deliver it within Auckland, or $20000/month for anywhere else in the country.
The thing about the price from Chorus is, it's the SAME for everyone, as is the level of service given and access to those lines or ducts, whether they're in a central city or a rural area.
It's kind of rich for Spark to be complaining about the regulatory prices set for Chorus, given they're heavily based on (but lower than) the prices quoted by Spark when it was Telecom New Zealand and trying to justify not separating the company. Because it's subject to regulatory oversight the pricing should be self-correcting longer term in any case.
I'd agree with you on the pricing re: Spark complaining if it wasn't for one aspect in the news item.
It's the consumer groups who are complaining about it too...unfortunately the article quoted focuses on Spark, only mentions in passing the consumer groups having issue and no detail.
"a monopolist is creating a 'shortage' where none actually exists."
Telcos used to dictate what you wanted and when you got it.
That changed in the mid-late 1990s, but incumbent telcos are like supertankers - not exactly manouvreable. and traditionally cushioned by lots of govt protection plus the ability to leverage existing monopolies.
The current situation is as if Ford built roads and the only non-Ford cars allowed on Ford Roads were required to do so by sitting on top of (expensive) Ford Interface Units which Ford supplied and soley existed to isolate the non-Ford car's tyres from the Ford road, even though the tires were identical to the ones used by Ford, the non-Ford cars complied with all the same standards the Ford Cars did and the interface units were not required on non-Ford Roads, whether the cars on the non-Ford roads were Fords or non-Fords.
Oh and by the way, if you have a non-Ford car on the Ford road, you can't report a pothole or a problem with the (unreliable) Ford Interface Unit until you have exhaustively checked down a 120-point faultfinding list on your car and you go to the back of the problem queue unless you pay extra fees to be treated with the same priority as the Ford cars.
Who's forking out 1.2 billion for football? Openreach, BT wholesale or BT retail? I suspect its coming from the profits from all of them. I heard BT where sitting on a cash pile of 15bn. So Openreach profit is propping up BT Retail while it tries to monopolise UK TV and Sport by pouring yet more money in footballers pockets.
Meantime i just cancelled a big business move because OR missed their dates for TalkTalk. Only two things as an IT Director stress me out - my bosses and BT. Thankfully canned BT Retail last year saving £420k (62%) per annual. I inherited the bill and it was just a paper change. That was one of my happiest days in my career.
"Meantime i just cancelled a big business move because OR missed their dates for TalkTalk. "
The thing about TalkTalk is that they let Openreach do it.
My current provider was onto Openreach within a few hours of them not showing up and had them out the same day, but that's a simple thing because it's just cable monkeys being dickheads and they're easily dealt with.
When it comes to navigating the byzantyne mess of openreach vs bt wholesale in non-LLU areas, you need the patience of a saint. Even in LLU areas the ISPs end up having to deal with multiple entities within BT who don't seem to talk with each other, even if they're within BTW or BTO, making faultfixing a stressful nightmare.
Whenever I think of BT, I don't think of a benevolent organization that provides value for money.
I think of an organization that offers a crappy service, and charges what it can get away with.
It may offer BT Infinity now, and substantial speed improvements in many areas, but when you've got to wait 5 days for something to happen, and with abysmal customer service - surely there's room for better companies.
Openreach or BT or somebody describes their DSL service as Superfast.
Enough said eh?
BT are beyond the pale, culturally hardly changed from their old GPO days and they are exacting a terrible price which the British economy - we poor bloody taxpayers - have to pay.
Oh, and if you don't like BT why, you can go to Plusnet.
More dishonesty and confusion marketing from possibly the worst company in the world.
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