Skip Navigation


With the Battle of Openreach over it is time to enjoy the peace dividend
Friday 10 March 2017 09:08:30 by Andrew Ferguson

BT and Ofcom have been at logger heads over the once a decade review on the communications market but that is now all over and today may be seen as day 1 of the race from just 2.36% of full fibre coverage from all operators to coverage in the 80 to 90% region by 2027.

"This is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT.

We welcome BT’s decision to make these reforms, which means they can be implemented much more quickly. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies."

Sharon White, Ofcom Chief Executive

"I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.

This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future."

Gavin Patterson, BT Chief Executive

So what is changing? Well some of the requirements have already been met with the creation of the Openreach board, but there is more to do.

  • BT to be dropped from all Openreach branding
  • 32,000 staff to be undergo TUPE and be directly employed by Openreach. This is set to to be one of the largest corporate TUPE shifts ever, and will start once pension arrangements are in place. TUPE means employees retain their years of service and other rights.
  • Openreach will be a legally separate company within BT Group and will have its own 'articles of association'.
  • Openreach Chief Executive to be appointed by the Openreach Board and accountable to the board. BT Group will retain a veto on the appointment, but to use that it would require approval from Ofcom.
  • The physical assets such as the local loop will be controlled by Openreach alone
  • Requirement to have confidential consultations (i.e. not disclosed to BT Group) with customers (e.g. Sky, TalkTalk and Vodafone)
  • Control over budget allocation and strategy direction

For those who want to read the full announcement a copy is available at www.btplc.com/UKDigitalFuture

So at last we have some certainty back in the UK telecoms market and the work of rolling out more FTTP and shifting to delivering G.fast in volume can begin, plus the work on PIA2 will hopefully start to bear visible changes as other operators start to deploy more full fibre. It may turn out that PIA2 is more useful in cities allowing operators to join new business premises to existing networks but with a lot less roadworks.

On the aspect of customer service and fault and install times, we hope that Openreach who has been meeting the Ofcom metrics will now move quickly to constantly outpace any metrics Ofcom sets. For the average consumer this means that installs will happen quicker and faults once through the Chinese whisper support systems and in the hands of Openreach will be dealt with quickly and fixed first time a lot more often. For those people in the Openreach recruitment train, we know some have been waiting for a long time for their contract, hopefully today will see those recruits getting good news and the workforce increase to a size where very few or hopefully no third party contractors are needed.

For the operators such as TalkTalk and Sky, they have now got the Openreach PLC they pushed hard for, but now is the time to knuckle down and make things work and work quickly. If once Openreach completes all the changes, things just settle down into business as usual then all the campaigning and PR battles will have achieved little beyond creating uncertainty and diverting attention from the task of more full fibre roll-outs.

"The real story here is the UK’s shocking ‘fibre gap’. Whilst it is welcome that these time-consuming negotiations seem to be at an end, there is nothing in this announcement to suggest Openreach will now start to build the fibre infrastructure this country needs. Ofcom’s focus needs to shift to encouraging alternative fibre builders to do the things Openreach can’t or won’t do – whatever its legal status.

CityFibre is well placed to take on that challenge and to meet Ofcom’s strategic objective of reducing the UK’s reliance on Openreach to get the job done. The substantial Government funding for fibre announced in the budget this week will help to accelerate our own full fibre rollout programme."

Mark Collins, Director Strategy & Policy at CityFibre (added at 11:05am)

Comments

Posted by TheEulerID 20 days ago
What is missed off this summary is that BT Group will still be setting the overall financial targets for Openreach. That will include cashflow contributions towards dividends, the historical pension deficit. There are also issues about any responsibility for financing of any debt allocated to OR. (Also, will OR borrow from the parent or go to the financial markets direct).

In reality it changes nothing about the financial case for and against any particular investment strategy.
Posted by TheEulerID 20 days ago
Worth going through the commitments.

9.A.9.1

"BT plc will retain legal ownership of the assets (including intellectual property)"

9.A.9.4

"Openreach Limited is not permitted to acquire assets and liabilities for its own balance sheet. Where Openreach Limited acquires, sells and otherwise deals with Openreach LoB assets, it shall do so on behalf of BT plc and for the account of BT plc and the necessary actions will be taken to ensure those assets are owned by BT plc."

This seems to place OR as some form of management/operation group, not an asset owner.
Posted by themanstan 20 days ago
"Pension arrangements" are mentioned a lot in the document, i wonder if this extends to Openreach deficit contributions being apportioned to historical employment.
Posted by TheEulerID 20 days ago
themanstan

Who knows, but logic would suggest historical employment patterns should surely be the basis for any contribution to the historical deficit.

What might also be an issue that might be raised again is that Ofcom have never allowed any element of the historic pension deficit to be included in the calculation for wholesale rates (unlike some other regulators).
Posted by themanstan 20 days ago
That should change as now the budget for OR is their own and as a separate entity with responsibility for their own costs. All other utlities are able to allow pension costs.
Posted by themanstan 20 days ago
Deficit repair costs that is...
Posted by TheEulerID 20 days ago
@themanstan

What may be made rather more clear by all this is that OR doesn't have billions of extra pounds available for network investment unless there's some change to the regulatory regime. Ofcom's policy of minimising wholesale pricing might have to change, albeit, possibly, with some caveats attached on NGA investment.

Or, maybe nothing will change...
Posted by uniquename 20 days ago
I think on a single reading of the agreement with a Ofcom that Openreach Ltd will be able to use finance from businesses like Sky/TT/Vodafone for network expansion and any assets so acquired will not form part of LoB as defined.

As I read it on that single runthrough, it is only messing with the existing LoB assets that the clause quoted above apply to. Not any acquired in the future. Except probably any wholly financed by the Group.
Posted by themanstan 20 days ago
Read througha again.

OR manages and operates the assets, which remain the property of BT group.

If OR acquire any assets, they are on behalf of BT group. 9.A.9.4. makes that crystal clear.
Posted by meldrew 20 days ago
It will not make one iota of difference to people who still have to connect to the internet at 256k.
Posted by andrew (Favicon staff member) 20 days ago
Tomorrow, yes no difference, but in a few years yes, but then most of the work has been going on anyway just not as fast as people would like.

For the stories making the rounds today, you'd think Openreach was to grow to a workforce of 1 million and deliver FTTP every where by the summer.
Posted by TheEulerID 20 days ago
@uniquename

Read again. OR can work with other investors to put in their own network. Perhaps another network operator will install an FTTP network into the BT passive network (ducts, poles and so on) and, maybe, even put in some new stuff. Alternative a Wireless operator. OR could design/plan it in part or in whole and even operate it. However, they will never own it, and insofar as there is any investment requires in the BT network to facilitate it, those network assets will become BT Group assets. (For example, if OR invested in some BT-owned backhaul network to connect it up).
Posted by AndrueC 20 days ago
"For the stories making the rounds today, you'd think Openreach was to grow to a workforce of 1 million and deliver FTTP every where by the summer."

Absolutely, it's all part of the Brexit strategy. We leave the EU and gain 100% FTTP coverage all before the end of 2017.

Hurrah!
Posted by AndyCZ 20 days ago
What I find quite strange, is how the government/TT/Sky talk about improved service standards now coming. I really struggle to follow this seeing as OFCOM sets the service standards that Openreach should meet (which is does, repeatedly).

If your gripe is with the service standards, then why not look at the regulator that sets those standards? It would be a much simpler process for OFCOM to set tougher standards with penalties for not meeting them.
Posted by AndyCZ 20 days ago
Nothing will change with respect to investment in FTTP (which some people have repeatedly seem to claim will happen with an independent Openreach). There is a bold target of 16 million premises to have ultrafast speeds by 2020. I think if this is achieved, then it will be quite an impressive achievement in the timescale.
Posted by TheEulerID 20 days ago
In the meantime, the German federal government has is going to be bankrolling a national gigabit network in a state/private consortium called Netzallianz Digitales Deutschland. They already invest €4bn a year in under-served areas and are going to raise that by another €3bn. The total project cost will be €100bn by 2025.

Compare and contrast with the position in the UK with regards to state and private investment...

https://www.out-law.com/en/articles/2017/march/germany-to-roll-out-100-billion-gigabit-internet-network/

nb. this seems to include 5G as well as fixed line.
Posted by WWWombat 20 days ago
To me, it looks like a "separate" Openreach in name only. Just enough to get Ofcom off the hook.

The thing about the new company being owned by BT Group, and the assets owned by BT Group, and the finances set by BT Group, all seem like the kind of control that BT always intended to keep.
Posted by WWWombat 20 days ago
@Euler
On that German comparison...

Up until now, while Sky and TT are in a constant anti-BT fight, there has been no environment where the UK Government could get away with such an investment.

If things are now all sweetness and light, you might find more people happy to accept such an investment.

All, except VM. I wonder what they think?
Posted by AndyCZ 20 days ago
I would immediately question, why has Sky not taken part in the G.fast trials? Why does Sky not offer native FTTP?

Come the end of 2017, we should see close to 1,000,000 premises passed with ultrafast broadband (G.fast/FTTP mix). This might be even higher if Openreach begin to commercially rollout G.fast later this year.

It wouldn't surprise me if Sky do not offer ultrafast broadband for some time. If memory serves me correctly, Sky didn't launch FTTC until nearly 2 years after the commercial launch.
Posted by wittgenfrog 20 days ago
It seems that OpenReach has become (loosely)a wholly-owned subsidiary of BT. As has been pointed-out its Financial & Business goals will continue to be set by BT.

As a cynic, this strikes me as being (excuse the cliche) a re-arrangement of the Titanic's deckchairs.

Recently I've have had FTTH installed (it's brilliant), but there were several false starts & delays.
These were caused variously by incompetent OpenReach "Engineers", and by cumbersome & ineffectual liaison between BT & OpenReach. I don't see how this wil resolve any of those issues.
Posted by themanstan 20 days ago
@wittgenfrog

isn't the cumbersome ineffectual liaison part of the existing separation of BT and OR imposed by OFCOM?
i.e. BT and OR have completely separate systems of work, no links, so that BT has the same issues as other suppliers.

I would expect it to get worse with a full separation... then get better... maybe...
Posted by TheEulerID 20 days ago
wittgenfrog

It's not loosely a wholly-owned subsidiary. It is exactly a wholly-owned subsidiary. (A subsidiary is a company where a controlling proportion of voting shares is owned by another - the wholly owned part is self-explanatory).
However, it's a slightly odd beast in the way the board will be configured, and its articles of association allied with the fact it will manage, operate and make investment decisions on an asset legally owned by its parent.
Posted by Blackmamba 20 days ago
Hi Broadband Watchers.
All they have done is changed the logo and take the pressure of BT broadband and it is up to the Other ISP to clear the faults and give better speeds and services.
Posted by zyborg47 20 days ago
It don't go far enough, it still belongs to BT, it should be sold off.
Posted by fastman 20 days ago
Hi Broadband Watchers.
All they have done is changed the logo and take the pressure of BT broadband and it is up to the Other ISP to clear the faults and give better speeds and services

more dis/mis information again I see
Posted by fastman 20 days ago
zyborg the proof now will be how forthcoming the other service providers are investing in openreach or investing full stop !!!!
Posted by TheEulerID 20 days ago
@fastmen

The regime doesn't allow other service providers to invest in OR. In effect, they have to invest in their own network with OR, perhaps, investing in the BT network on behalf of BT Group to come up with solutions. Perhaps by extending a (dark) fibre backhaul for a local wireless or fibre operator.

However, I suspect the reality is it's mostly just a vehicle for the hoped-for exploitation of the PIA by altnets.
Posted by fastman 20 days ago
PIA been around for around 4/5 years almost no interest - - it still involves spending some money - that the unknown -- so we will see over the coming months
Posted by chrysalis 20 days ago
BT still have overall control of the budget, however the difference appears to be they can no longer dictate how that budget is spent. (at least officially). It will be interesting to see that now they have lost a degree of control will this budget magically start shrinking. With them maintaining control of the budget and no requirement for openreach e.g. to have a budget at least the size of its profits will much change? Money likely can still be siphoned of to subsidise other parts of BT.
Posted by AndyCZ 19 days ago
Capex greater than £100mm needs to be approved by the BT board, so it will have effective control on OR's investments. Commitments have already been made on G.fast, so there will be no significant change to capex through to 2020.
Posted by comnut 19 days ago
AndyCZ: G.fast is STILL on trial..

Sky *already* has 60Mbps *unlimited* downloads for 35 a month..
http://www.sky.com/shop/broadband-talk/fibre-optic/

FTTP / FTTC only means Fiber To The Premises / Fiber To The Cabinet..
And is still as BASIC as saying 'side road ' / 'motorway'

It is what goes on those roads that matters...

If by 'ultrafast' you mean up to 100Mbps, there are only a few that do this **right now** and it very much depends on your location / luck! :)
Posted by AndyCZ 19 days ago
@ comnut

G.fast is in pilot (135,000+ premises passed).

Sky offers 60Mbps for £35 a month - relevance?

Most people on here know what FTTC/P stand for.

Ultrafast means speeds of 100Mbps and higher. Openreach will not sell G.fast to those people who receive an estimate between 80-99Mbps.
Posted by Desmond 19 days ago
We can expect that exchange only lines will still be at the back of the queue even when they can see these new Openreach employees walking around in the exchange on the other side of the road?

Unless this solves this then it is completely pointless to me.
Posted by chrysalis 19 days ago
Something me and Andy finally agree on, I agree the man who controls the purse strings ultimately has control, essentially ofcom seem to have massively under delivered on what seemed an ambitious promise. Sky and talktalk seem to have been appeased by the removal of BT branding on openreach and them been involved more in meetings and such, but this is nowhere near a independent openreach..
Posted by fastman 19 days ago
desmond -- so if you are exchange only line you are in one of 2 postions either close to the exchange on an ADSL2 connection and greater than 10 / 12 meg so above the proposed USO and likely to be on a lLU line (portably) and you are not in a BDUK area the commercials to do something with would be poor and the tske up wont be great - ior you a long way from the exchange and either codl get a new cabinet (though that still a value for money conversation and has to be viewed against other considerations or you do something with your community as other in London and Yorkshire have done
Posted by fastman 19 days ago
careful what you wish for because you just might get it comes to mind !!!! -- your comment Sky and talktalk is telling as I assume that might have been their end game - a fully independant openreaach would have no money , no anchor CP, and no investment and no one wanting to make investment (assume the they don't want investment they want a better margin and bigger share !!!! of the market - disrupt tactics) Ofcom - you change something and you could spend the next 2 / 3 years unpicking it - assuming you could and then find out its in a worse place
Posted by andrew (Favicon staff member) 19 days ago
I've maintained for sometime one of the stumbling blocks over TalkTalk/Sky selling GEA-FTTP was the branding (plus the GEA-link costs which can now share with FTTC).
Posted by comnut 19 days ago
AndyCZ: so have you anything to say except paraphrase my comment?????:)
Posted by comnut 19 days ago
G.fast is all promises, promises... I will believe it when I see all the people moaning about it, and the ads on TV..

Just like the SKY ads saying it is 'super fast' (small print saying 60Mpbs not guaranteed..)

VM 300 is ready NOW..
https://www.uswitch.com/broadband/news/2016/05/virgin_media_names_the_ten_places_to_receive_300mbps_broadband_upgrade/

Well if you want 300M, go ahead, and I wish you luck finding some place to download at that speed...

When I can download those files at 150M, not 35M , I will believe...

Even youtube will download at 45Mbps :)
Posted by AndyCZ 19 days ago
@ comnut - I was correcting what you said, not paraphrasing. The 60Mbps offer by Sky is a typo?

@ andrew - Openreach have always aggregated PON/DSLAM traffic on the same L2S no? On the branding, I take the point here although Sky have been using Ultra Fibre Optic for some time.
Posted by fastman 19 days ago
sky have no ultrafast -- only on the city fibre in York on a few trial
Posted by fastman 19 days ago
Andy PON and DSLAM traffic is no on the same fibre cct
Posted by fastman 19 days ago
ultrafast is determined as over 100M
Posted by AndyCZ 19 days ago
@ fastman - fibre cct? This is on the OR site from back in 2013, "Data from multiple Digital Subscriber Line Access Multiplexers (DSLAMs) or Passive Optical Networks (PONs) on the same L2S at a PoH will be aggregated to your GEA Cablelink(s). Each L2S at a PoH will require a GEA Cablelink."
Posted by AndyCZ 19 days ago
Actually, it's hard to know whether that means whether they combine FTTC and FTTP traffic on the same L2S.
Posted by comnut 19 days ago
NO I do not mean the converter box the cable company gives you!
Posted by fastman 19 days ago
adcyz that how its presented the service provider -- usually what happens is service provider doesn't buy enough calble link and they complains that there is no Capacity !!!! -- not how its delivered in the field Passive Optical Networks (PONs) on the same L2S at a PoH will be aggregated to your GEA Cablelink(s). Each L2S at a PoH will require a GEA Cablelink."
Posted by WWWombat 19 days ago
@AndyCZ, @fastman
Yes, Openreach terminate both PON and P2P DSLAM circuits on the same L2s. At least in some locations.

As pictured by @andrew... Images 20, 22 and 23 here
http://www.coolwebhome.co.uk/fibre-cornwall/
which is ECI.

However, I recall some places where it isn't true. I wonder if they do think differently for Huawei L2S's.
Posted by comnut 19 days ago
wireless cable AND fibre router here!!! LOLOL
look at the connectors...
http://www.currys.co.uk/gbuk/computing-accessories/networking/network-routers-and-switches/routers/tp-link-tl-wr841n-wireless-cable-fibre-router-n300-single-band-10991880-pdt.html
Posted by andrew (Favicon staff member) 19 days ago
@comnut Sky Fibre Max their up to 76 Mbps VDSL2 service http://www.thinkbroadband.com/isp/sky/package/1704.html Your other link removed given we have the packages on the site here.
Posted by andrew (Favicon staff member) 19 days ago
@Comnut Not sure if you are trolling or confused, but the TP Link you linked to only has an Ethernet WAN port, and this highlights as your comment might lead some to think it will directly terminate a FTTP, Cable and VDSL2 line, which it does not but requires a ONT, or cable modem or VDSL2 modem in addition.

Posted by Oldjim 19 days ago
and look what was in the Times - hype
Millions of British families could get cheaper and faster internet services after BT agreed legally to separate from its broadband division, the industry watchdog Ofcom claimed yesterday.
Posted by chrysalis 19 days ago
ofcom have joined the misleading advertising bandwagon, maybe I should report them to the ASA ;)
Posted by comnut 18 days ago
Andrew , I am pointing out the fact that many salesmen, and thus normal people, are confused by the terminology, thus the rather idiotic labeling of products!!! :)

Did you not notice the laugh??

Posted by andrew (Favicon staff member) 18 days ago
There was a LOL but you did not make it clear if this was a lol at Currys or a LOL at people here as you thought this was a box that did everything
Posted by comnut 18 days ago
{groan} please stop wrongly 'guessing' my thought.. :)

THINK about the customer, what would happen if you sold them a box that does *everything*...

If they say 'i want a box for my google thingy' and say 'FTTP, Cable and VDSL2 line' they will say ' Um, is there an English speaker here???'
Posted by andrew (Favicon staff member) 18 days ago
So what is your solution?

And how is this relevant to the Openreach/Ofcom decision
Posted by TheEulerID 18 days ago
The more I read about all this stuff, the more I puzzle about what this actual peace dividend might be. There's no more money (indeed, it will surely cost money to implement), it doesn't change the economics, the network will still be owned by BT Group and I can't for the life of me see why it will make any substantial difference to OR investment decisions.

At best it means a bit of organisation stability for a few years, but I predict the grumbles from Sky, TalkTalk, Vodafone and various politicians will be just the same in a year's time.
Posted by AndyCZ 18 days ago
It's a bit of a double edged sword though because on the one hand, OFCOM pushes for investment in newer technologies and on the other hand, OFCOM looks set to further cut wholesale costs. More investment and lower costs are mutually exclusive, they cannot both happen together.

PIA2 is an interesting concept, but we have not seen a single large player indicate their intentions to develop a nationwide fibre network. Where is the incentive for them to invest though (especially when you can buy wholesale FTTx from Openreach at such a low cost)?
Posted by TheEulerID 18 days ago
@AndyCZ

The key problem is that GEA-FTTC makes business sense at current wholesale pricing and take-up levels whilst, new-builds apart, GEA-FTTP generally does not. GEA-FTTC was also fast to roll out and GEA-G.FAST should be even faster to deploy, albeit with more limited coverage. Time to implement matters - it brings in revenue faster.

It's also probably true that OR could cut the cost of GEA-FTTC (and might even be forced too).
Posted by TheEulerID 18 days ago
The one thing that alternative operators going the PIA2 route will have is the option to run closed networks which means the business case can look very different. Personally I suspect that PIA2 is more likely to be used for servicing businesses rather than for large scale residential customers. That is the likes of CityFibre and WarwickNet. It might also attract the fibre-to-the-building operators and wireless operators.
Posted by slackshoe 17 days ago
As happy as I am to see the crooked BT finally getting a much needed kick up the arse from Ofcom, nothing much is going to change. The UK's telecoms network will still be outdated and unfit fit purpose 10 years from now, and we'll still be getting ripped off by the same ISPs who won't put their money where their mouth is.
Posted by KarlAustin 17 days ago
Not fit for whose purpose?
Posted by mabibby 17 days ago
Taking a step back from the detail, it's essentially just "operational" change to create a new engagement model for competing providers. The financial governance is still tightly coupled to BT Group Plc so doesn't present new opportunities for collaborative investment.

So what about the poor consumer? Hopefully after all this has been completed this lot get back to actually delivery an improved service as planned?

Only success for the management consultancies and legal firms involved I'd say.
Posted by AndyCZ 17 days ago
@ slackshoe - You mean not fit for purpose because we don't have nationwide FTTP to every premises?

I certainly wouldn't say the UK telecoms network is outdated or not fit for purpose. In terms of NGA speed coverage %, the UK is one of the leading countries in the world.
Posted by AndyCZ 17 days ago
@ TheEulerID - I think it's almost certain, given the words from the government and OFCOM recently, that wholesale FTTC prices are cut. I also cannot see how G.fast will not be price regulated given the anticipated coverage.

Other than BT and VM, I don't think anyone else has the nationwide objective for the full fibre future that OFCOM is pushing for at the moment. PIA2 will make sense for smaller operators in specific locations (business parks/MDUs etc.) but these will not give the nationwide coverage that OFCOM aspires.
Posted by TheEulerID 16 days ago
@AndyCZ

I can't see the justification for regulating the price of g.fast yet given nobody has any idea just what the take-up rate will be. It's impossible to set an economic price without knowing that given the fixed costs are moderately high and marginal per-line comparatively low.

With GEA-FTTC there is now at least some basis to make those calculations.

Then there's the lifetime of the technology. If, as some claim, FTTC & G.FAST are short-term stop-gaps, the price would have to be higher for the short pay-back period.
Posted by rtho782 16 days ago
So what stops BT Retail using PIA2 to deploy it's own fibre in Openreach's ducts and not let Sky/TT use it?
Posted by TheEulerID 16 days ago
@rtho782

Even if BT Retail had the kind of money to do that, Ofcom would instantly jump in to prevent BT operating a private network.
Posted by JNeuhoff 16 days ago
@TheEulerID: "Even if BT Retail had the kind of money to do that, Ofcom would instantly jump in to prevent BT operating a private network."

What about Plusnet? Could it use PIA?

Posted by CarlThomas 15 days ago
They'd get the same treatment as BT Consumer.
Posted by TheEulerID 14 days ago
@JNeuhoff

If the idea that BT Retail were to embark on deploying its own optical network were not unlikely enough, the idea that Plusnet would have the resources or the will is in the world of fantasy. Plusnet is positioned as a low-cost operator, and there's no possibility that they will have any access to funding, especially for a network which would compete with that of OpenReach. The issue doesn't arise (and I suspect Ofcom would get very agitated if it did).
You must be logged in to post comments. Click here to login.