back to article BT circles wagons round Openreach as Ofcom mulls forced split-up

BT has launched an offensive against moves to have its Openreach division completely hived off, with its view being that maintaining a near monopoly is the best thing for the country. Ofcom’s 2005 strategic review resulted in Openreach being repositioned to become a separate part of BT, but rivals have long been pushing for …

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    1. Anonymous Coward
      Anonymous Coward

      Re: Do it!

      I don't know how changing the name over the door improves anything. 'New Openreach' would still have the same share of the market and would still have the same pension liabilities as now. Pricing would still be regulated, the economics of reaching rural locations with the latest services would remain unchanged.

      The only likely outcome is that another big British company ends up in foreign ownership, using profits from the UK to subsidise domestic operations, as happens with our railways.

      1. Anonymous Coward
        Anonymous Coward

        Re: Do it!

        'New Openreach' would still have the same share of the market

        Initially, maybe. But in other distribution systems (gas, electricity, water, sewerage) regional monopolies are common, with the regulator using variations on benchmarking to judge performance, and incentivising preferred behaviours through punishment + reward financial settlements. I'd be staggered if Openreach had a single operational structure across the UK. If it does, then it's overdue for break up, and if it has regions then the dotted lines are already there to tear along.

        This will certainly result in some assets being owned by foreign investors, but so what? It's not like they can dismantle network assets and take them away.

        1. Steve Davies 3 Silver badge

          Re: Do it!

          It's not like they can dismantle network assets and take them away.

          Don't you believe it. IMHO some VC's think that everything can be done with long arms from India/China/wherever.

          The only way to keep SKY/TT/VM etc quiet is to spin off OpenReach into a Not-for profit company and let those who complain own part of it (assets and pension liabilities included). Then they will have to shut up and get on with providing proper services to their customers.

          But that won't happen so I'd imagine that BT/TT/VM are busy preparing a complaint to OFCOM about Sky's 'Free broadband for a year' offer. That can't be viable now can it?

        2. TheManCalledStan

          Re: Do it!

          But Openreach doesn't have a monopoly, it has Significant Market Power).

          Other utilities operate complete monopolies, in that there are no competing networks in the areas they operate. So unlike NATGRID or other utlity networks there is no guaranteed revenue.

          BTOR does have and VM has stated that it will grow it's network to 2/3rds of the country (very likely the most profitable bits), which means that BTOR will have no monopoly in 2/3rds of the most competive/profitable areas... VM is be vertically integrated so has multiple revenue streams to provide investment, hived off OR won't so will need to match VM somehow to diversify revenue stream... but that would be more or less what BT group is at the moment.

          1. Alan Brown Silver badge

            Re: Do it!

            "Other utilities operate complete monopolies, in that there are no competing networks in the areas they operate."

            Openreach effectively has this across most of the country other than city cores and some areas where Virgin operates. Even where Virgin is present, going 1-2 blocks either side often results in the choice being Openreach or Openreach.

        3. Alan Brown Silver badge

          Re: Do it!

          "I'd be staggered if Openreach had a single operational structure across the UK. If it does, then it's overdue for break up, and if it has regions then the dotted lines are already there to tear along."

          I can think of an operational monopoly like Openreach which doesn't have regionalisation.


      2. DaLo

        Re: Do it!

        In my experience with dealing with BT* and Openreach, it is a tortuous process.

        When Openreach first split away it was still possible to twist their arm to help you out as a BT customer. Now it's not and the 'firewalls' that have gone up between BT and Openreach have made life very difficult when things don't go right.

        As Openreach can't be seen to be given any special treatment to BT everything gets very bogged down when something doesn't fit to a standard order form. At the moment I have an EAD1000 order in suspension because BT and Openreach can't come to a consensus and I can't get to speak to anyone useful.

        If Openreach were a truly separate company then there would be less risk of special treatment and then perhaps dialogue could flow a bit more freely.

        * I'll use BT to cover their other groups such as BT Retail, BT Corporate etc. Throw BTLB into the mix and you've got a whole ring of miscommunication and Chinese whispers going on.

      3. Alan Brown Silver badge

        Re: Do it!

        "I don't know how changing the name over the door improves anything."

        Go and look at what happened in New Zealand.

        Openreach might be notionally separated from BT Wholesale/retail, etc but the dead hand of BT head office is able to see over all the chinese walls and direct business strategies accordingly.

        New Zealand forced Telecom NZ (Now "Spark") to divest its lines side (Now "Chorus") precisely BECAUSE of the market abuse documented in the UK. Telecom NZ was pushing for the UK model.

        Telecom New Zealand made precisely the same arguments against separation that BT is doing now, right down to the claims that a separated lineside company wouldn't have as much investment happening and couldn't survive.

        The reality is that without the anticompetitive activities of the mothership restricting things, investment has surged and Chrous is actively seeking out customers to sell services to (unlike the old days where they were difficult-to-impossible to deal with, just like Openreach are now), is flogging dark fibre and leasing duct space to outfits which were once deadly rivals (cable companies, etc)

        As a result of the splitup, New Zealand should have copper to the house eliminated within 7 years, according to friends within the industry there - that's with a far lower population density and far more challenging geography than the UK has.

        The most likely loser in the event of a splitup of Openreach from BT will be BT. Many companies are dealing with them because they have to and despite claims of "equal treatment" it's clear that BT favours its own in all aspects from installation to fault handling.

        Telecom NZ (Spark) is suffering from this right now. It's currently moaning loudly that Chorus (regulated) line charges are far too high and it can't possibly make money providing dialtone over them - this is despite those charges being based on figures Spark provided pre-breakup and being about half of what it used to charge its competitors - who are all very happy with the current arrangement because it means they're paying less whilst the rotting infrastructure that Telecom NZ asset-stripped over the last 30 years is finally being upgraded.

        1. TheManCalledStan

          Re: Do it!

          But Chorus is a true monopoly... there is minimal competition from other telecoms...

          Um... Monopoly = 1 dominant company....VM has 50% coverage which will grow to 66%, so not most but half currently which will shrink...

  2. This post has been deleted by its author

  3. AndrueC Silver badge

    I've often said that OR should be split off but that comes with caveats.

    My main concern is where the investment would come from for continued improvements. And I don't actually think Openreach has done a particularly bad job. It (or its descendant) could certainly have done a lot worse. Truth is for all the whining the UK's per capita internet use is amongst the highest in the world and has been for a long time. Whatever you might think about connection speeds they are clearly very fit for purpose. Whatever comes after it needs to be at least as good and looking at other such 'breakouts' (Network Rail, anyone?) that's far from a given.

    Better the devil you know, perhaps.

    The main areas I think need addressing are: End-user accountability. The current game of secret squirrels (User->ISP->[Wholesale->]Openreach often causes problems. It'd be far better if we could report faults direct to Openreach. Timescales is the other issue but again if customers could talk to OR direct it'd be that bit harder for them to faff around.

    As for Pay-TV: That ones tricky. It'd be nice if we had more flexibility but if that means a true 'a la carte' system then smaller channels will lose out. A lot of them can only survive by being part of a bundle.

    1. Anonymous Coward
      Anonymous Coward

      My main concern is where the investment would come from for continued improvements.

      It comes from retained profits or from additional equity investors. As a standalone infrastructure company (or companies) Openreach should find it easier and cheaper to raise debt or equity than as part of a conglomerate trying to get into high cost, low asset activities like TV.

      And that's why BT don't want to split out OR - because the retail business, the vanity TV project, and "Global Services" would suddenly find that their cost of capital had increased, and their exposure to competitive markets was far greater.

      1. AndrueC Silver badge
        Thumb Up

        It comes from retained profits or from additional equity investors.

        Hopefully, yes. It's just that networks need large investments and the profit margins and/or RoI don't make them hugely attractive. Look at what happened to the cable operators in the UK. But to counter my Network Rail example there is of course National Grid which seems to do okay. But NG doesn't have the same issues as OR would. Most of NG's construction is just putting more of the same in the ground or on a pylon(*). OR's issues are that various parts of its network keep needing replacing or major upgrading.

        But yeah. I cautiously supportive of the idea of splitting OR off :)

        (*)Yeah, I know they have also rolled out various clever bits of monitoring kit resulting in the UK having a very advanced power grid but still. It's not like customers are suddenly clamouring for 400v to be supplied to their homes to support the latest technology :)

        1. Anonymous Coward
          Anonymous Coward

          National Grid isn't the whole story and isn't anywhere near the best performing company in the electricity industry. All of the energy infrastructure firms use telemetry systems with varying levels of intelligence - the key piece in the puzzle being system control engineers who personally manage their networks from various control centres.

          Every ten(?) years, OFGEM sets revenue controls defining what each of the energy infrastructure companies can charge their customers in return for investment and innovation. If Openreach were to be removed from BT, processes such as this could actually reward investment and good performance assuming Ofcom managed this appropriately.

          1. jonathanb Silver badge

            My electricity supply was installed when the house was built about 12 years ago, is still perfectly adequate for what I want to do, and is likely to remain so until the house falls down in about 100 years time. 12 years ago, most of us had dial-up internet. Now the vast majority of ISPs have thrown their dial-up kit in a skip.

    2. TheOtherHobbes

      >Whatever you might think about connection speeds they are clearly very fit for purpose.

      if that purpose is to make profits for BT, then certainly.

      If it's to provide world-class broadband to the entire UK - you're havin' a larf, aincha?

      1. AndrueC Silver badge

        If it's to provide world-class broadband to the entire UK - you're havin' a larf, aincha?

        Depends. How funny is it that we are the 14th highest per capita internet users in the world, and that all our major economic competitors are below us?

    3. jonathanb Silver badge

      Pay TV is very different. There is no natural or legal monopoly. Other companies can and do enter the market, they just don't seem to be able to compete with Sky. Either they enter a niche market that Sky isn't interested in, and that can work, or they sell the channels at a loss which obviously isn't sustainable.

    4. Alan Brown Silver badge

      "Whatever comes after it needs to be at least as good and looking at other such 'breakouts' (Network Rail, anyone?)"

      Network Rail is different in that it inherited a clusterfuck of regionalisations which itself was a mishmash of dozens of smaller clusterfucks that got nationalised.

      Openreach is a uniform company across the country.

    5. Alan Brown Silver badge

      "My main concern is where the investment would come from for continued improvements."

      From the customers, same as it is now. The difference being that BT is just another customer, not hoovering the profits out via creative account methods.

      It's worth reating the NZ Ministry of Commerce reports on the separation there.

      "From the moment the government announced the Separation plan on 3 May 2006, Telecom's behaviours in the market place changed. Before separation it viewed its wholesale customers as unwelcome campers on its network. The moment separation became inevitable, it immediately started to recognise them as valued business partners."

    6. SImon Hobson Bronze badge

      > My main concern is where the investment would come from for continued improvements.


      For "run of the mill" stuff, the expenditure comes out of retailed profits. The equation is fairly simple, it charges "customers" for use of it's infrastructure, it pays out it's running costs (rates, wages, taxes, etc), and what is left over is retained profit. Of course, it'll need to do improvements - add a cabinet here, add more cable there, upgrade some old kit, and so on. For most of these, it's just another operating expense.

      Now for "big ticket" items (like a fast and nationwide rollout of FTTC) it goes out to the money markets with a business proposal along the lines of : "we need £X to fund this project, as a result of this project, we'll be able to take in £Y, and projected return on investment will be Z%. Who's up for a share of that ?"

      If the figures stack up, investors (who may include the ISPs who'll get to sell the services) will put their hands in their pockets and the capital will be raised that way - by either selling bonds or more shares. Behind the scenes, that's what BT will have been doing for their multi-billion investments - except that instead of selling bonds, they've sold shares.

      Where the figures don't stack up, they'll do exactly what BT did - and go to the government/councils/whoever and blackmail them. "If you want <spiffing new service> in these unprofitable areas, then you'll have to pay for it". Where someone will pay for, or at least adequately subsidise, it - then they'll install it.

      Where I'd see the biggest benefit is the removal of the political restraints. Those of us with an involvement in telecoms for long enough will know that pretty well every new service BT has done has been in some way crippled in order to protect their existing cash-cows.

      For example, ISDN2 never caught on in the UK because it was expensive and crippled. In some countries it flourished because it wasn't and wasn't. How and why was it crippled ?

      Well in Germany, you could send low speed data via the D channel without dialling up a B channel. This meant that for WAN applications you could handle low speed data without racking up the call charges, and then fire up one or more B channels when the link got busy. Over here you couldn't, except in certain expensive and crippled ways designed to make sure few actually did it.

      And why was it crippled like this ? Well of course you could never prove it, but had it been as full featured as Germany's ISDN2 then it would have slashed income from leased lines - BT's then cash cow. It was in BT's interest not to allow something that could harm that cash cow.

      And I can't help thinking that BT's lethargy in rolling out ADSL initially was a further attempt to stave off the further butchery of it's cash cows. Why pay £6k/year (at a previous employer, we had two lines that cost £8k/year each to give us 64k to a couple of remote sites) for a Kilostream when for many applications a couple of ADSL circuits and VPN capable routers would do the job for a fraction of the price ?

      I can believe the comments about NZ having a boom in services once the lines business was split from the services business. Over here we don't have dark fibre - much better to rent a lit fibre and screw the customer for speed related charges. You can't (other than very limited options) buy a circuit from A to B that doesn't go via the exchange. It's "very difficult" to rent duct space. And so the list goes on.

      Split off BTOR and the political pressure to not allow various services has gone. Yes I'd expect BT to squeal - it would remove some very real and very significant advantages it has (specifically being able to tailor available products to suit it's own requirements) and force it to compete on a more level playing field.

      Leaving aside some fairly light regulation ... Remember that **NOTHING** BTOR do at the moment is specifically to give "us" something better. **EVERYTHING** they do is designed to give BTOR (and therefore it's sole owner, BT) the best return possible.

      Split BTOR away from the controlling influence of BT and I'd expect to very quickly start seeing some new and "interesting" products and services.

  4. billat29

    Now let's see:

    a) Downsize the BBC and stop it making "popular" programmes

    b) Cut back its website as it "competes" with other "news" and "lifestyle" sites

    b) Split out OpenReach from BT and potentially stop BT moving further into the Pay-TV market

    c) Be "concerned" about BT buying EE. It might start offering a true mobile or higher speed broadband.

    I guess the next will be to drop the insistence that certain sporting events must be FTV.

    Can we guess at any media empire with political influence?

  5. Dr Paul Taylor

    Smash up BT Retail instead

    Better to leave Openreach and Wholesale alone but instead do something about the unfair advantage that BT Retail has because of customer inertia. Retails shoule be sold off in ten bits, with the existing customers allocated according to the last digit of their phone numbers. Then the bits would have to compete with telcos who treat their customers with more respect and are competent in getting faults fixed.

  6. msknight


    ""Consumers are getting more for less and the UK has outpaced its European peers in terms of superfast broadband."

    Who the hell are they kidding?

    1. AndrueC Silver badge

      Re: Huh?

      Who the hell are they kidding?

      Ask ofcom.

      or the EU.

      or indeed The Daily Telegraph.

      "Britain’s take-up of superfast broadband, capable of providing speeds equal to or greater than 30Mbps, stands at nine per cent, ahead of Spain’s six per cent, and the highest in the big European nations."

      "Overall, Britain has the highest broadband take-up at 83 per cent of all households,"

      So actually, yes, in terms of superfast broadband the UK is in fact doing quite well. In terms of 'bums on seats' it continues to be a world leader as it has been for many years. Whenever anyone claims that UK broadband is crap it amuses me a little because it doesn't seem to be preventing us from using the internet. We have pretty much always been in the top ten (often the top five) per capita internet users.

      Although this suggests we are down to number 14 now at 89%.

      1. Anonymous Coward
        Anonymous Coward

        Re: Huh?

        Explain to me why such a densely populated urbanised country should be compared with relatively sparsely populated or largely rural "peers". Why should countries with a large population such as the UK not instead be compared with those with similar demographics, but a small population?

  7. indalomansx

    Why mend whats not broken

    Gas ,Water, Electric ,Post, BR ,Banks ,Railtrack, Bus companies All seem to have been sold off in part over the last 30 years or so , All have big companies outside the UK controlling them. Thus taking money away from the UK , and profit for fat cats, Yet As soon as something breaks or goes wrong Who picks up the cost .... The consumer or tax payer never the shareholders ,

    All Of the above services constantly put up charges to keep shareholders happy ,Not that the government care higher prices more VAT but less taxes from the fat cats who find yet more ways to pay less. I cannot see 10 or more CEOs of a multitude of companies keeping things moving forward at the same pace keeping net works up to date , Much like the National Grid and the generation of Electric , No investment in new tech n new power stations for years equals less power poss blackout or and of course higher costs for the little man end user .

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