back to article Vodafone joins calls to pry Openreach from BT's hands

The political ding-dong over prising broadband biz Openreach out of BT’s hands entered another round today with the release of a Vodafone-commissioned report on the £6.5bn in “excessive profits” BT has been making from the UK broadband market. The blows and counterblows come during Ofcom's once-a-decade Strategic Review of …

  1. Anonymous Coward
    Anonymous Coward

    Link?

    Anyone got the report link?

    1. Roland6 Silver badge

      Re: Link?

      There is this report: https://www.vodafone.com/content/dam/group/policy/downloads/the-relationship-between-BT-profitability-and-charge-controls.pdf

      However, that seems to be a previous iteration since it is dated November 2014 and only covers the period 2006~2012.

    2. Paul
      Holmes

      Re: Link?

      http://mediacentre.vodafone.co.uk/pressrelease/frontier-economics-report-into-bt-overcharging/

  2. Red Bren

    Yet to be convinced

    Ed Vaizey has yet to be convinced of the benefits of separating BT and Openreach. But he's fully convinced of the benefits of a BT executive directorship.

    Where's the revolving door icon?

    1. Roland6 Silver badge

      Re: Yet to be convinced

      A Vodafone spokesperson told The Register: “BT’s Openreach business needs to be structurally separated from the rest of BT and provide access to its ducts and poles to encourage and enable effective multi-operator network investment.

      Did El Reg ask the spokesperson if they had any evidence for this statement? Given Vodafone owns the C&W network there is nothing stopping Vodafone opening up its own infrastructure and providing access to others. Until then I'll treat the Vodafone demand as simply the cries of a spoilt child and hence best ignored.

  3. Roland6 Silver badge

    Frontier Economics need to publish their sources...

    "Our analysis shows that over the period April 2006 to March 2015 reported returns on BT’s regulated services overall were consistently above the rate required to compensate investors, as determined by Ofcom."

    So basically, Frontier Economics are saying Ofcom have been negligent in their oversight of BT! Because it is highly unlikely that Frontier Economics has gained any greater access to BT's financial systems than Ofcom and hence either the figures are obvious and Ofcom has misread the accounts or Frontier are merely parroting what their client, Vodafone, wants them to say...

  4. Steve Davies 3 Silver badge

    murdoch (aka Sky) only wants OpenReach

    to be a separate company so that they can buy it and then get back at BT for all those years of so called overcharging.

    I would not trust any of the usual suspects to have any financial interest in OpenReach. At least as it is, BT have to answer to Ofcom who does tell them what and what not they can do. If it gets hived off and they all have part ownership then what is to stop the new company acting in 'the best interests of the shareholders'. OfCom would have very (IMHO) little influence on such a company.

    1. rhydian

      Re: murdoch (aka Sky) only wants OpenReach

      Compared to the influence it has on BT now?

    2. Anonymous Coward
      Anonymous Coward

      Re: murdoch (aka Sky) only wants OpenReach

      It's hardly likely that a regulated near-monopoly business unit of BT would magically be allowed to become an unregulated near-monopoly standalone company, is it?

  5. Anonymous Coward
    Anonymous Coward

    Equal treatment of all Openreach customers

    "--while Openreach might be obligated to give the same level of service to all customers and not favour BT, that doesn’t always happen. It is impossible to confirm or refute this."

    Answer (from the mouth of a horse that had just escaped the BT Consumer stable):

    "We get better payment terms than the others, because we buy more".

    Neat.

    1. Anonymous Coward
      Anonymous Coward

      Re: Equal treatment of all Openreach customers

      "We get better payment terms than the others, because we buy more".

      That seems unlikely. I doubt one part of BT writes a cheque to another part of BT once a month. Intra-group trading in corporates doesn't tend to work that way.

  6. ukgnome

    Sky doesn't want to add LLU to my village exchange

    Vodafone don't want to pay back tax

    Both companies have sour grapes because they are charged as open reach customers.

    Both companies are slimier than a tupperware box full of eels.

    1. rhydian

      @ukgnome

      What back tax?

      http://www.theregister.co.uk/2015/02/18/once_more_into_the_tax_breach_dear_friends/

    2. alpine

      But neither of them are QUITE as slimey as BT...

  7. chris 17 Silver badge

    if there is so much profit to be had, why don't the others band together and form their own open reach, putting in their own cables etc, a bit like what Virgin do, maybe call it Strategically Local Unbundling Telecom to differentiate it from Virgin?. In fact why don't they badger Virgin to let them on their coax network (obviously sky won't be interested in paying Virgin anything) instead of using openreaches copper? you would have though Virgin would welcome the extra custom, encouraging them to build out further their network.

    1. Paul Crawford Silver badge

      Virgin (no longer owned by the beardy one) bought over past telcos coax networks, they have laid very little since.

      It costs real money to do so, and there is not profit in that when there is no universal obligation on them to do so (and bugger-all for openreach putting in fibre outside of VM's areas).

      1. Steve Davies 3 Silver badge

        VM coax

        The thing that run past my house was laid by NTL around 20 years ago. The original coax is still there and being used today. Naff all investment in upgrading it so as a result the speeds between 3pm-Midnight are back to dialup days. BT OTOH have put a nice new green cabinet at the end of the street and we now get FTTC from BT and several other companies that have LLU (inc Sky & T-T) kit in the local exchange.

        68Mbit down/16Mbit up as of 10 mins ago

  8. rhydian

    I'm all for hiving off Openreach, as long as...

    ...The following improvements also come to pass:

    1: Us mere muggles/mortals are allowed to directly contact the New Openreach when faults occur. Half the problem at the moment is chinese whispers between you, your comms provider (Sky/BT retail) and Openreach. It would save 1000s of missed appointments and reduce the causes of head shaped dents in techie desks

    2: nOpenreach actually pulling its finger out and maintaining infrastructure. Their policy is to fix it when it breaks. However in rural areas this can lead to villages losing all phone services for weeks in bad weather, rather than a pre-planned outage to fix a drooping cable/pole for example.

    1. Anonymous Coward
      Anonymous Coward

      Re: I'm all for hiving off Openreach, as long as...

      "1: Us mere muggles/mortals are allowed to directly contact the New Openreach when faults occur."

      I'm pretty sure that the reason you can't is because of the insistence of the other telcos at the time this was all set up. There were two options on the table - one where BT retained the relationship with the customer for the physical line and the new telco had the relationship for the services running over it; and one where the relationship was entirely with the new telco and BT acted as a supplier to that telco, not having any relationship with the end customer.

      The latter choice was taken because the other telcos didn't trust BT to not use any interaction with the customers as an opportunity to bring their services back to BT. They wanted a single bill with their name at the top and to be able to add a margin to the line rental cost from BT.

      1. rhydian

        Re: I'm all for hiving off Openreach, as long as...

        That may indeed be the case, however if NewOpenreach is only an infrastructure firm then the argument is moot.

        Personally, I'd model phone/broadband infrastructure on how the electricity supply market is done. You go to a local networks supplier (OK, for phones it would still have to be national) and order your voice/ADSL/VDSL/Fibre line directly from them, and pay them the line rental. Any line fault reports and remedies go straight through them. You get to book engineer appointments directly, and you, not your comms provider, are the "customer".

        You then buy your voice/data service from another supplier who runs on top of that line (as happens now). Any billing etc. enquiries or onward routing issues are their problem.

  9. dogged

    >"If BT is so adamant that Openreach does not provide it with advantages over alternative providers, then why is it so opposed to structural separation?”

    Having worked for BT a couple of times - as a contractor, I hasten to add - I think I can answer this one. First, of course Openreach makes ludicrous profits and yes, BT charge rivals punitive rates. But they don't do it specifically for profit. They do it because as far as BT are concerned, every other voice and data provider is an upstart newcomer whom it is their business to utterly crush.

    BT regard their privatisation as a minor hitch in being the UK's only telecoms company. Minor and temporary.

    1. Anonymous Coward
      Anonymous Coward

      "First, of course Openreach makes ludicrous profits and yes, BT charge rivals punitive rates."

      I'm pretty sure the charges are set by Ofcom and all telcos have to pay them the same amount.

      "BT regard their privatisation as a minor hitch in being the UK's only telecoms company. Minor and temporary."

      BT was created in 1982 and privatised in 1984. They were the UK's only telecoms company for two years - and that's only if you exclude Kingston Communications, Cable & Wireless, Racal, British Rail Telecoms and so on...

  10. Disgruntled of TW
    Facepalm

    Ed Vaizey ... the telecommunications market expert?

    It pains me to see individuals in government wield such power over matters utterly foreign to their experience in the real world. We should name the civil servants that advise the ministers, so we know where the commentary comes from, or the minister should state clearly that neither they nor the civil servants know diddly squat about the matter in hand and are "taking a punt" based on lobbyist incentives.

    Right. That's going to happen. Almost makes me appreciate Mr Corbyn who might just say he knows nothing about something when that is indeed true. Almost.

  11. Wolfclaw

    Vaizey got shares in BT and doesn't want his dividend reduced ?

  12. Commswonk

    Not in my name...

    I suppose that I had better clarify my own position at the outset; I have never worked for BT, nor am I a BT shareholder.

    As a customer of BT for both (residential) 'phone and broadband services I am happy to put up my hand and say "please leave well alone". while the existing arrangement may have its imperfections I cannot help but feel that separating Openreach from its parent company would at best be neutral, and at worst could make things a whole lot more complicated while not really making things materially better for the customers of Sky, Virgin, and so on.

    As others have said the first point to make (one made by others) is that there is nothing stopping other operators from setting up their own networks; in fact that would be the only way in which true competition could take place.

    According to Wikipedia BT has a 31% market share, compared to 20% each for Sky and Virgin; who holds the balance was not specified. (2014 figures) Now while 31% may make BT the dominant provider the figure is not really high enough for anyone to claim that BT has a stranglehold on any part of the market. IMHO the likes of Sky (etc) are trying to blame BT for things that may well not be BT's fault; perhaps BT is simply too easy a target. Much easier than accepting that some people (for whatever reason) simply don't want to buy their product.

    If my understanding is correct there is also another anomaly; Openreach operates the local end from the exchange to the subscriber, but the exchange itself (and the trunk network) is firmly BT proper. That would mean that even if Openreach was spun off as a separate company other providers would still require access to exchange premises for their equipment to be installed. If that understanding is correct then it is hard to see how other providers would be able to rid themselves of BT; the local ends go into BT exchanges and that's that.

    So while BT may be looking after its shareholders (as it is legally obliged to do) and Sky, Virgin, Vodafone et al are jumping up and down seeking preferential treatment, who is speaking for the "normal" customers of BT + Openreach? The other broadband providers are just customers after all, admittedly big ones. I suspect that nobody is, which troubles me slightly. I do not see my (our) best interests being served by pressure groups who have their own commercial agendas; I don't see them worrying about me (us) much.

    One final thought; does Ofcom actually have the power to instruct BT to dispose of Openreach anyway? Recommend separation, possibly, but enforce? I would have thought that any such edict would have to come from the CMA, not Ofcom.

    Perhaps someone can enlighten me.

    1. rhydian

      Re: Not in my name...

      First of all, is that 31% "BT" market share simply their retail/business arm? Or does it include BT wholesale?

      Secondly, with regards to LLU/exchange access, many LLUs will be using BT wholesale backhaul, while others use their own. Remember Vodafone owns the Cable and Wireless network which is quite substantial and Virgin Media also serves a lot of phone masts via its fibre backbone networks. Sky and Talktalk are trialling their own fibre networks in some cities (York springs to mind) and VM are infilling the gaps on their distribution network (i.e. passing more houses).

      Thridly, there are no "Normal" customers of Openreach. Openreach's customers are the communications provider. All you're doing is supplying a convenient wall to mount an Openreach master socket. Openreach's biggest failing is a total lack of accountability to the end user. Now splitting it away from BT Group might not change that, however the review will certainly look at it.

    2. SImon Hobson Silver badge

      Re: Not in my name...

      Let me correct that for you :

      > As others have said the first point to make (one made by others) is that there is nothing stopping other operators from setting up their own networks

      Actually, yes there is - there is a great deal stopping them, and you don't have to look far to see how it's panned out in the past. Not all that long ago (your perspective may vary), loads of companies set up with a view to rolling out "cable TV" services which also included phones in most cases. They pretty well all collapsed (ran out of money) and ended up being bought by bigger fish for peanuts - in effect, the investors lost loads of money, and got a small amount of their money back from selling the business for whatever anyone would pay.

      Via various mergers and buyouts, what is now Virgin Media was formed - and a huge part of their infrastructure was paid for by investors in the original companies who lost their investments.

      The key thing is that the wires to your house are a natural monopoly - just like the gas pipes, water pipes, drains, roads, electricity cables. It would make no sense to build another competing road network and have you on a different road network to the neighbours - phone cables are not that much different.

      So the natural state is to have one supplier who runs one lot of infrastructure, and in a neutral manner allows anyone who is financially and technically competent to rent that infrastructure to provide services

      Assuming I've not persuaded you of that, now consider what is probably a typical situation. You have a village of (say) 100 houses, it's miles from anywhere, and is currently served by BT OpenRetch. For OR to connect up a new subscriber, they can (probably) use a spare pair in cables that are already laid; if there isn't a spare pair they can (probably) put a new cable in the existing duct or along the existing poles; and if they do need a new cable, it's highly unlikely to be needed for all the miles back to the exchange since it's highly unlikely that all the trunk cables have exactly zero spare pairs in them.

      Now suppose the subscriber instead wants service from ANOther provider who builds their own "local loop". ANO doesn't have any services in the village, so it's going to have to lay new cables - meaning new poles (and given how nimbys are, more likely ducting) all the way back until they reach their existing network. That could be many miles of ducting to lay - for just one subscriber. The last price I saw from BT was many years ago, and back then it was something like £1000 per 100m, or £10k/kilometer.

      ANO may decide that it's worth it, perhaps they think they can sell services to other people in the village, but more likely they'll decide that laying out many tens of thousands of pounds in the hope of getting more than a handful of £20/month subscribers doesn't make sense.

      Even in an urban setting with shorter distances, it just doesn't add up - and trenching in urban environments costs more anyway.

      Perhaps if 50% of the villagers clubbed together and guaranteed to take services for some years, then it might be possible. But even with 50 subscribers, @20/month each doesn't really start to pay back the investment. It's only £1k/month assuming that ALL of what they are paying goes just to repaying the costs - which is perhaps only 100m/month of trenching cost if you ignore the interest on the money you had to borrow to pay for that.

      That's what killed the cable TV companies - they had to borrow huge amounts to build out a network, and just didn't get enough subscribers, fast enough, and paying enough, to finance the interest let alone make a profit.

      1. Roland6 Silver badge

        Re: Not in my name... @Simon Hobson

        Let me correct that for you :

        You give a good explanation for why Vodafone and Virgin Mobile won't be in a hurry to expand their existing networks into new residential areas and in so doing also provide a reason as to why the calls for BT/Openreach to provide access to its ducts and poles are simply opportunistic mudslinging. Because even with access to BT's ducts and poles, the per residential customer economics still don't workout, however, they potentially do make the economics of connecting business customers more attractive. So on the pretence of giving consumers greater choice etc. the primary objective is to make it cheaper (for them) to target BT's more profitable business customers, thereby further crippling BT...

        1. SImon Hobson Silver badge

          Re: Not in my name... @Simon Hobson

          > So on the pretence of giving consumers greater choice etc. the primary objective is to make it cheaper (for them) to target BT's more profitable business customers

          That's an aspect that hadn't occurred to me. Perhaps that could be offset by some form of "you can share the ducts & poles, but that comes with a universal service obligation" trade ?

  13. J. R. Hartley

    Has Vodafone decided to pay tax yet?

    Fuck em

  14. Martin-73 Silver badge

    Ok this isn't difficult

    BT and openreach ARE the same company. They have a monopoly due to having been the only phone company prior to $theft-by-thatcher date... have sky, vodafone, or any of these other whiney companies bothered to set up their own networks. No, they want a piece of someone else's. Gits.

    BT should tell ofcom to piss off, and disconnect all connections to non BT networks. Wouldn't bother me in the slightest

    1. M man

      Re: Ok this isn't difficult

      Would when BT double or triple you bill.....

      without offcom they CAN do that.

      and with sharholders they WILL do that.

    2. Paul

      Re: Ok this isn't difficult

      you do know, don't you, that even if you're a Virgin Media customer then part of your connection may go over BT infrastructure.

      BT essentially have a monopoly in all but very specific parts of the country it's nearly impossible to not use at least some part of their infrastructure.

  15. Paul

    Those football deals need to be paid by someone, and if the costs can be pushed into OpenReach, then all ISPs using Openreach's infrastructure can be made to subsidise BT's Retail operations.

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