Thursday, 17 December 2015

Splitting up BT?

One of the questions being considered at the moment is whether BT should be somehow split up, e.g. Openreach, BT Wholesale, BT Retail, all separate actual entities somehow. People have asked my views on this many times.

Sadly I do not think I can provide a concrete answer. For a start, BT "operate" as if they were separate companies - a sort of corporate schizophrenia - so would splitting them for real change the way they operate - possibly not.

The issues come down to the money - at the moment, as a BT shareholder, it makes no odds how much BT Retail pay BT Wholesale or how much BT Wholesale pay Openreach. Such prices can be set as high as they can get away with as moving money within one entity does not really change the company as a whole but gets more money from the other telcos also paying the same price. However, I suspect that is a very simplistic view.

Personally I am not convinced the logical split we have now is in the right place. I can see merit in a near monopoly infrastructure provider if they work for the general good of the telecommunications industry - perhaps as a non-profit organisation even. But should that be at a level that charges for duct space, or for copper pairs, or what? I really do not know.

However, we do have some fun with the current situation. A case that crops up rather a lot where someone in BT Wholesale needs to have some work done to get a fault fixed, and that work is done by "their suppliers", Openreach. But even though BT Wholesale has a service level agreement with us, they have a "contract" with their "suppliers" that does not match that and allows their suppliers to take way longer to fix the fault than has been agreed with us.

They hide behind this as if saying "the contract with our suppliers does not allow us to get the work done any quicker" was actually a valid excuse, and they will even outright say "Openreach is a separate entity"!

Now, if their suppliers were a separate company, you have a situation where they have agreed a service level agreement with us, but then agreed with subcontractors a service level agreement which means they cannot meet the agreement with us. Selling us a service with an unattainable service level agreement would surely be some sort of fraud? Or at the very least a shady business practice.

For example, we sell the "7 hour guaranteed fix" service to our customers for a fee, and even pass on the relatively small pay out from BT for failing to meet that time scale. We buy the "7 hour guaranteed fix" service from BT. But if you do the maths you find that actually we would be better not buying the "7 hour fix" from BT. This is because the pay out is so low that even if BT always miss the 7 hour target we have with our customer, we still make more profit. On top of which BT will sometimes either fix within a short time anyway (if not needing an engineer) so we don't have to pay out, or miss the 20 to 40 hour SLA we have with them normally and so pay us anyway. I would not do that as I think it would be a dodgy and dishonest practice. But it seems like BT think it is quite acceptable as long as they pay the small amount of compensation agreed for missing the target.

However, at present, they are contracting with themselves not a real subcontractor or supplier. I do wonder if legally one can in fact contract with oneself at all anyway?

This means that the engineers and people working for "their suppliers" (Openreach) have agreed a service level with us directly - they are contractually bound to try and fix within the SLA agreed with us, not some fictitious SLA agreed with themselves trading as BT Wholesale.

Trying to get that through to them is really quite hard - the staff have been brainwashed in to thinking they are actually separate entities when they are not. They are simply operating as if they are separate entities. British Telecommunications plc (company 1800000) and Andrews & Arnold Ltd (company 3342760) have a contract and they should adhere to it, whichever part of company 1800000 they represent!

6 comments:

  1. > staff have been brainwashed in to thinking they are actually separate entities when they are not

    To be fair to BT, this structural separation is exactly what Ofcom required of them, in the form of a number of undertakings, in lieu of a reference to the Competition Commission:

    http://www.ofcom.org.uk/static/telecoms_review/final_statement.htm

    (Undertaking 5 at page 60 of http://stakeholders.ofcom.org.uk/binaries/consultations/752417/statement/statement.pdf)

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    1. Indeed, but it does not change the fact that we have a contract with the legal entity that they call "their suppliers" and they have to adhere to that contract.

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  2. Hear hear. The last thing I ever want to hear from any company (telecoms or otherwise) when there's a problem is "Our suppliers...

    Granted you can use it as a reason, but not an excuse. I was fobbed off by another ISP with "Because Openreach". Can I call Openreach and talk to someone there? In that case I don't want to be told that they're the only people that can do something to fix it. Everyone talks about "breaking up BT" and making everything even more silo'd, but the real answer should be making everything more integrated. Half of the problems ISPs seem to have with Openreach is the lack of realtime communication and only getting daily updates on things. The technology is there now that within 5 minutes of him leaving the house, my ISPs system should be able to see the notes of the engineer. If he's reported a problem then it can be logged in their ticketing system for someone to pick up straight away. None of this "well it's not showing here and it won't until tomorrow morning".

    This integration is entirely independent of who owns what. Not to mention that if BT are actually giving the same excuses (because of our suppliers) as everyone else then we're already in that situation, and splitting up the company isn't going to make that any better, it's just going to validate their excuse! When Openreach was... created to try and treat all telcos equally, I think the ethos should have been to improve the system to make the telcos on the same level as BT, not cripple the system so that BT was on the same level as the rest of the telcos!

    Rant over :)

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    1. I disagree. It should be compelled to split properly, so A&A are contacting and, indeed, contracting, directly with the people doing the actual repair work.

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    2. While that would be nice, fully splitting off Openreach would not achieve that, which I saw as one of Adrian's points. A&A are not an LLU operator - they go through another company who contract with Openreach (be that BT Wholesale or TalkTalk or whoever).

      There's limited observable difference between contracting with Wholesale who contract with Openreach and doing exactly the same thing only that Openreach now has a separate company number rather than the split just being a regulatory fiction.

      Unless you're talking about hiving both Wholesale & Openreach off from BT Retail, Business & Global and then reintegrating them into a single company which is a whole other argument with other complications on the LLU market.

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    3. Even now, A&A do buy some services directly from the Openreach bit - the Wholesale Line Rental 3 service for providing basic phone service.

      They also buy Openreach's GEA FTTC service in two different ways - usually via BT Wholesale, bundled with some backhaul capacity supplied by BT, sometimes via TalkTalk Wholesale, where only the Openreach bit of BT is involved.

      At the very least, it would be nice to reconcile the two conflicting sets of terms involved: right now, Wholesale make promises that Openreach don't even try to fulfil, which is silly and damaging all round.

      One problem with the current fictitious separation is it can lead to spurious cost-shifting - as with a fault last year, where Openreach recommended replacing part of the line (a "lift and shift"), which could either be done as part of a "repair" (where Openreach eat the cost themselves) or if Wholesale ordered it as a service (where Openreach would charge the cost to Wholesale). Of course it doesn't matter whether BT charges itself for doing the job or not - but multiple levels of management on both sides still got involved fighting over the issue!

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