Tuesday, 29 November 2016

Openreach/BT Split

As reported by BBC, OFCOM are getting Openreach split off as a separate legal entity from the rest of BT plc.

What do we think of that?

To be honest it is tricky - A&A deal with BT plc for both BT Wholesale and Openreach departments. The latter is for phone lines to support the broadband services we sell. Mostly we are dealing with the BT Wholesale part.

A lot of the reasons behind this are coming from some of the larger operators who have to deal with the Openreach part of BT much more. They are concerned that BT Retail get some preference of some sort. There are concerns over whether BT are investing enough in infrastructure.

I am not at all convinced by some of the arguments, as Openreach had 86% coverage of UK premises for VDSL (FTTC) back in April, and are pushing hard on this. So there seems to be quite a lot of investment in infrastructure. Also, we don't really see much in the way of preferrential dealing with BT Retail at all - it seems they, and Plus net, have as much hassle with Openreach as anyone else.

But the devil is in the detail, and it looks like the new Openreach will be owned by BT Group plc, so there is a source of investment via that route. But this also means one of the big issues still exists - if BT Retail pay lots to Openreach, that has no impact on my BT Group plc shares.

In practice, Openreach is already operated like a separate company - annoyingly so on occasions. This split will actually remove one useful aspect of being one company. At present, when dealing with BT Wholesale they will often blame Openreach (or "their suppliers") for a failure. Legally that could be force majeure (matters beyond their reasonable control) if they were not in fact the same company and in fact blaming themselves. Being able to throw that back at them can be useful and force them to do their job and not just blame someone else.

But otherwise I would be surprised if we see any difference at all from this move - apart from new contracts which gives them a chance to screw us over somehow.

8 comments:

  1. I don't see it making much of a difference until Openreach can test a line for more than DC continuity.

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    1. Who is responsible for the modem (different for ADSL and VDSL) and what tests apply, are key things and nothing to do with Openreach split - so this won't help.

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    2. Hasn't VDSL gone pretty universally "wires only" much like ADSL these days (with all the same issues revolving around diagnosing faults with customer owned modems)?

      I've still got a BT VDSL modem on my connection, although the OR installer did make me boggle a bit when he mentioned that everything between the exchange and the ethernet cable connected to the modem was BT's responsibility, *except* the microfilter built into the NTE5 faceplate!

      On infrastructure investments, has it really been cheaper for them to do ADSL for a few years, then FTTC, then FTTdp, then FTTP instead of just biting the bullet and doing FTTP from the start? Seems like replacing all the equipment every few years would be a massive money sink.

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    3. The main differences is Openreach are selling a VDSL service not just a metallic path, so (IMHO) have to take responsibility for that.

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  2. As a consumer, I have a couple of worries, that are possibly baseless.

    1) BT Group has a hefty pension deficit in it's final salary scheme. My understanding is that the majority of this is to engineering staff, which would seem to mean it will stay with Openreach. Openreach is then a much smaller business to carry such heavy obligations, which may hamper investment, or force it to increase charges.

    2) The argument is that this will make more investment happen, but I'm unclear as to where this will come from. Sky, TT, etc have been free for years to lay fibre in BT's ducts but have been reluctant to do so. In many ways, the best interests of Sky/TT/etc is for zero additional investment, and to continue to sell the same products at the same prices. Do Sky and TT even support native FTTP now? Nope.

    3) Who knows, the uncertainty may make Openreach put plans such as G.Fast on hold for 2 years while everything is sorted out. This would be a massive blow to the UK.

    4) Doing this perhaps also risks alternative networks holding off on investment - e.g. Virgin Media.

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  3. It will be bad for everyone if Openreach is split from BT. Yes BT need to do better though!

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  4. The quality of Openreach's work is in my experience awful. In my experience, they screw up my broadband 50% of the time they touch it, and then they won't fix it without a long wait or an argument or both. They can't do any worse out from under BT retail's thumb.

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  5. This response from the BT unions raises some good points and is worth a read.

    http://www.cwu.org/media/8624/cwu-prospect-joint-submission-to-ofcom-dcr-sept-2016.doc

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