Vodafone: So what exactly is 'ludicrous' about the Frontier report? Vodafone has struck back at BT’s claim that the Frontier Economics report on Openreach’s apparent profiteering is “ludicrous”, with Matthew Braovac, Vodafone's head of competition and regulatory affairs, writing to his BT opposite number asking for a justification of the claims. “Far from being ludicrous, the report is based …
Isn't it about time someone conducted a similar analysis on Vodafone
No?
The report is talking about how BTO, which is an entity created to provide "market prices" for fixed line services to both other providers and BT, is gouging the other providers to create a higher profit for BT group than Ofcom had provisioned them to do on their level of investment*.
Vodafone doesn't have an equivalent unit, so what would you be analysing? Is this just "OMG VODERFONE IZ EVIL CUZ TAX?"
* BT invest in BTO, Ofcom allow BTO to make a profit because of the investment. The report in question says that BTO should only have made £11bn when they made £16bn, and that they are ripping off the other providers, whilst BT say that the numbers in the report are incorrect.
The key point is as you note "market prices".
I suggest that any one looking at Vodafone in a similar way might discover what Vodafone's margins are...
I had a FT100 client once who complained about our prices, until we said okay we will go open book on the condition that our margin on the contract is the same as the margin your company publishes in their annual report each year - it did the trick they accepted our prices without any further question because they had just declared a 30% net margin...
Agree, I dunno where people get the idea that Openreach is not seperate enough from BT, every bit of BT operates as if entirely seperate to every other bit of BT.
But to the point, the least qualified people to talk about the structure/pricing/competance of BT ARE OTHER COMMUNICATIONS COMPANIES.Their opinion should be considered entirely null and void before it's even voiced.
Some years ago BT got umpteen million quid to install broadband in Scotland's rural areas. They fitted the stupidly named "Exchange Activate" equipment which supplied a 512k connection. I kept checking with SamKnows and eventually we got ADSL+. Not only did BT not tell it's customers but also failed to inform my ISP who rent from BT Wholesale. BT were earning more money from the 512k package than what they could charge for the faster connection!
Only after I had informed my ISP did I get a speed increase to 4meg. I also rang my neighbours who were oblivious to the available but hidden improvement.
*Did I mention Phorm?
Virgin's network reaches more than half the UK, so Openreach can't have a monopoly in 'most' of it.
The problem with not for profit companies, in a business context, is that they can't raise the money they need to invest. Investors only lend companies money to build stuff on the expectation or at least hope that they'll make a profit. No profit, no investment. If you make a company not for profit you're actually better of nationalising it - as with Network Rail / Railtrack.
There is little incentive to lay competing cable to reach consumers in the UK. The logical choice would be cable companies, but despite a large number of cable companies springing up in the UK during my lifetime, Sky drove most of them out of business, and the few that remained went to Virgin Media which hasn't really done much to invest in reaching more homes.
A large factor in that is the cost of laying cables, because that involves digging up streets to put in new ducting.
Perhaps separating ducting from the rest of the infrastructure would help so companies can rent/buy duct access to run their own cable if they wanted to, thereby providing true competition for the last mile instead of just letting OpenReach dictate what the UK should be offered.
"Perhaps separating ducting from the rest of the infrastructure would help so companies can rent/buy duct access to run their own cable if they wanted to, "
I think that exists - I remember reading about Virgin and others being able to rent duct and pole space for their own cables.
"Hollow curbstones"
I see where you're going but - people hit them with their cars and park on them all the time and you'd need to close off one side of the road to work safely on them. How would you cross roads? You'd also still have the cost to get from pavement to front door.
How do you run in a new cable when someone's parked a range rover on the stone you need access to?
Might have legs - needs more work!
Its entirely separate if I can buy shares in it separately to the bt shares I can buy.
Can I ?
If I could then the carriers like Vodafone et al. Could be allowed to buy up to 2 percent each too (allowing for others to enter the market). Then they could influence it as owners, and share in the profits they themselves help generate by using it.
"If I could then the carriers like Vodafone et al. Could be allowed to buy up to 2 percent each too (allowing for others to enter the market). Then they could influence it as owners, and share in the profits they themselves help generate by using it."
I think the arrangement you describe - a combined monopoly and cartel - is illegal in the UK.
"Its entirely separate if I can buy shares in it separately to the bt shares I can buy.
Can I ?"
No.
You could if the New Zealand model was followed - and remember the NZ model was picked specifically because the BTOR model being proposed by the incumbent telco there was studied here and discovered to be massively abused by BT to maintain its monopoly.
When it suits BT: BT and OpenReach are one company - for example when BT tries to sell you Broadband and they are spelling out the advantages of dealing with them rather than a competitor it is implicit within their sales pitch that you are dealing with one company, rather than two. When there's a fault then it is two separate companies.
"In the last review, Ofcom stipulated that Openreach should be run as a separate organisation to the rest of BT. Vodafone, Sky and TalkTalk have lobbied for a more complete separation of the two organisations"
It should be borne in mind that after studying the studying the UK market and the overall effects of BT separating (but not divesting) Openreach, New Zealand regulators recommended that the line side part of Telecom NZ be completely cleaved off into a separate company in order to prevent the incumbent from further anti-competitve activity, as BT was observed to be doing.(*)
Telecom NZ was so keen to adopt the BT/Openreach model that it had already rearranged itself along those lines(**) and was pushing the regulator quite hard to accept the new status quo. That alone was suspicious for a company which had run a 25+ year abusive monopoly on line supply....
(*) retail/wholesale/isp sides may not talk much between each other, but head office looks over all the walls and operates the puppet strings. What BT pulled in Ewhurst in order to gazump competition wasn't uncommon activity at all and is still happening in various parts of the UK - see http://www.ewhurst-broadband.org.uk/?p=1893
(**)TCNZ renamed itself "Spark" and the lineside division "Chorus".
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