UPD3 Uncertainty Grips O2 and BE Broadband UK After ISP Sale Rumours
Mobile operator and ISP O2 UK (BE Broadband) has refused to “comment on rumour or speculation” concerning an alleged plan to offload its unbundled (LLU) fixed line Home Broadband business to another provider (possibly Sky Broadband [BSkyB]).
Last year was a difficult one for O2′s Home Broadband service, which reported several consecutive and widening quarterly declines in its fixed line broadband subscriber base (falling from 620,300 in December 2011 to 579,500 in September 2012). The issue has been fuelled by recent price hikes, confusion over O2′s usage policy and further delays to its plans for a new superfast broadband (FTTC) service (O2/BE is now the only major ISP without a superfast option).
Chris Stenning, BE’s Managing Director, admitted last September 2012 that they weren’t “making very good progress on fibre” and couldn’t even confirm whether or not the launch would happen in 2013 (here). This is crucial because O2′s fixed line broadband platform is also based off BE’s infrastructure.
At least part of the reason for the FTTC delay is because O2/BE has yet to complete its migration over to a new core network, which only began around the middle of 2012 (it was originally supposed to start in February 2012) and is expected to take 50 weeks to complete (i.e. completion around the middle of 2013).
BEBroadband’s June 2012 Statement
“For some time now, we’ve been working on a major project to overhaul BE’s ‘core’ network (the bit that we own, as opposed to the part we rent from BT), principally to enable the introduction of more advanced services, increase the bandwidth (across the core part of our network) and help prepare us for transition to IPV6. It will also increase the resiliency of our network, helping to minimise the number of customers affected when, from time to time, we experience service outages.”
But sources cited by The Register have suggested that O2 might be “squeezing all it could out of the fixed line service before potentially selling it off to the highest bidder“, which is something that the ISP has refused to categorically deny. El Reg further claims that BSkyB (Sky Broadband) have recently paid a visit to O2 but probably wouldn’t be ready to take over until after the current migration.
O2′s apparent unwillingness to establish a clear plan for its superfast broadband product, combined with their ever increasing focus on a new 4G (LTE) Mobile Broadband service, has left many customers to question the ISPs direction. As a result we would not be surprised if they chose to off-load their home broadband base, although it’s unclear whether this would be a complete divestment of the asset or a platform management change.
It’s worth remembering that O2′s home broadband service is still reasonably well rated, especially when compared with some of the markets biggest players, yet at the same time they seem to be struggling to stay competitive. O2′s main rivals now have both faster and cheaper services. The choice is thus a simple one, adapt or..
UPDATE 12th January 2013
A spokesperson for O2 has told ISPreview.co.uk that they’re unwilling to “add anything more” to the report and reaffirmed again that “this is rumour and we simply do not comment on rumours“. In the meantime we’ve been chatting to a former BE employee whom had some additional insight but we’ll need to explore it further before posting and most people have now given up work until after the weekend.
In our opinion a flat out sale seems less likely but if it did occur then O2 are surely one of the better candidates, although equally the operator might be exploring a platform change or it could all come to nothing. We are continuing to investigate through our various sources and hope to have more next week, if anything surfaces.
UPDATE 14th January 2013
Several O2 Wholesale customers (ISPs) confirm that there has been no indication of a pending sale at any of their recent meetings with the operator, one of which involved mapping out a strategy for the next 12 months. But big firms often keep early discussions, which may or may not amount to something, tightly under wraps until there’s something official to announce.
ISPreview.co.uk also queried the situation with Dana Pressman Tobak, Managing Director of new ISP Hyperoptic and an ex-BE Founder, whom said the situation was “interesting“, before adding a little more.
Dana Pressman Tobak, MD of Hyperoptic, said:
“We had heard that O2′s Broadband wasn’t fulfilling the internal expectations numbers wise and it certainly hasn’t improved. So we aren’t at all surprised by the rumour.”
Meanwhile a Sky Broadband (BSkyB) spokesperson has unsurprisingly confirmed that they “don’t comment on market speculation or rumour.” The feedback leads us to believe that any discussions, if they even existed, have not yet been taken seriously. None the less O2’s fixed line broadband platform is undoubtedly vulnerable and most likely open to interest from other ISPs.
UPDATE 14th Jan @ 8:49am
A source within BE/O2′s customer support has informed us that an announcement about the ISPs position on superfast broadband (FTTC) is expected to be made around late spring or summer 2013. The context suggested that an FTTC service would be launched but we must stress that this is unofficial and based on information that is still subject to change.
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“In the future, the only ISPs will be BT, Virgin, Sky and Talk Talk”
Believe I said that at some point in 2011.
Bye, Orange. Bye O2.
Thanks, BDUK.
Except Orange still exists, its Home Broadband is just called EE
.
Orange LLU doesn’t exist any more, it’s just another BT Wholesale supplier, no?
Message from BDUK to companies who might invest in UK broadband: put your wallet back in your pocket, you’ll only get shafted later on.
LLU was still a miserable offering because it did not address the main issue, that being the lack of a network to connect the exchange with the end user, relying on old phone lines. In this respect it was what I’d call “faux competition”.
But, “in the middle”, it did keep costs down, and so gave providers a chance to invest, install their equipment, and look to offer some USPs to compete. It also meant smaller ISPs had a choice of backhaul providers. Competition = lower prices and better services, and so the opposite is true.
The choice faced now is: give the (extra) money to BT, or don’t bother, exit the market.
And I suspected some would conclude that the latter option is preferable.
Ah you mean the network/wholesale/management side, fair point. I was talking retail.
At the wholesale level isn’t there still TalkTalk, Sky and Cable and Wireless (now owned by Vodaphone)?
I don’t understand this discussion unless the facts are ignored in favour of theories. However much you dislike FTTC or BT they are investing to roll out FTTC/P and investment costs money and has to generate a return to whoever provides the finance – so to bemoan that VDSL costs more than ADSL . . . well I’d be happy to receive some investment from these people who are so keen on a negative return – or are they just happy when it’s other people’s money? And as far as packages, speeds and prices to end users are concerned I’d hardly call Plusnet (who operate as a separate ISP to BT) or Sky (and even TT) uncompetitive but, of course, we’re all free to make up our own story.
I know you’ll try but I’m not sure you can blame everything on BDUK, BE’s problems started quite a while ago with their dilly dallying around what will succeed their ADSL service
@Dragoneast – answered those points in reply to FibreFred further down.
Utter complacency. No other word sums up the reason for O2′s failings in its fixed-line offerings.
If Sky do get hold of o2 then I’m jumping ship!
Trouble is who do you go to? The choices really are quite limited.
The reason I went with BE was for the unlimited bandwidth (which turns out it’s not actually unlimited if you watch a lot of Netflix) and reliability.
EE, Talk Talk, BT and PlusNet are all that’s left unless you want caps and traffic shaping.
As far as I know, BT, PlusNet and Talk Talk all have some form of shaping or throttling in place. Don’t know about EE.
Virgin Media’s cable service is also notionally “unlimited usage”, but caps speeds for users who use “too much”. We can thank the ASA for the redefinition of the word “unlimited”, so that providers can claim something that is not what it says on the tin.
Truly unlimited usage means the provider is going to be subsidising the usage of some with the profit made from others.
Providers make less money from FTTC than they did with ADSL, partly because of the increased costs (more Wholesale in the mix, no LLU) and also partly because ADSL was so slow there was a natural limit on how much anyone could download anyway, with even more pitiable upstream speeds capping much activity in that direction.
So with no LLU, I think people are going to have a much harder time finding “unlimited” providers in the future because there’s less, in fact, no competition at the exchange > user level any more. There’s a “middleman” who has to be paid as well.
Sky seems to be prepared to cross-subsidise the heavy users at the moment with an “unlimited” offer, but I wonder how long that will be sustainable for.
There’s the claims and then there’s the reality. BE shout from the rooftops about how they are truly unlimited, but they’re not, sending out emails telling you to restrict “heavy use” apps from 1am til 5am.
I could understand this if I was running P2P stuff 24/7 but I’m not. I do a lot of streaming however (and usually several big downloads a month with Xbox and PS3 stuff) – so apparently this is affecting the exchange.
So really, who do you go with? They’re all crap to some extent.
DTMark
“Providers make less money from FTTC than they did with ADSL, partly because of the increased costs (more Wholesale in the mix, no LLU) ”
That is always going to be the problem, until ISP’s starting building their own networks they are always going to be paying BT. I know its yet another sore point but unless providers are going to put in their own ducting then they would be better off starting to invest in the long game use use PIA to start putting in their own fibre. Still paying BT of course but they can offer what packages they want then , they are only renting space in ducts.
I don’t see PIA as workable. If it were about leasing ready-to-use ducting, then that would be a start, but that isn’t what it means.
Other ISPs (than BT) have appeared to me, throughout, to be like rabbits in the headlights (hence, in part, my slightly provocative comments about them). On the one hand, it’s much easier to sit back, wait for someone else to pay up, and then still expect the luxury of being allowed to continue to have a business model piggybacking off of someone elses investment.
On the other hand, there was no means of most of them investing anything under the BDUK framework. So it becomes a moot point.
I posted a while back about Harlow in Essex which has always had FTTC from cable companies. Not to every cab, sure, but the overwhelming majority of the town has always had access to modern speeds and services from the outset.
It may also now have some much-needed competition from BT’s network if FTTC has been/is being deployed.
Now, what do those two networks have in common as regards the ducting in terms of who put it in and paid for it, and who owns the equipment, state/private in each case?
Big clue as to how BDUK could and IMO should have tackled this so as to overcome the single biggest obstacle.
I know what you are getting at DTMark but we have to move on, those assets (BT ducts, exchanges, poles blah blah) like any other have been bought and paid for and expanded and built on.
Its like if the Royal Mail gets sold off, 20yrs down the line we can’t start going on about fair access by other delivery companies to the post boxes just because tax payers money paid for them in the first place, they’d have been sold plain and simple.
Hmm maybe fair access is the wrong word, that could be allowed but not at the same rates as the owner, that is what some expect
I quite agree. Government one sells off public utilities paid for with public money to private company. Some Ministers even get places on the Board of said private companies. Some quick cash brought in to buy some more votes.
Ten years later the folly of most of these privatisations is evident, as unless a market exists or can be created, all you do is turn a state monopoly into a private one with no benefit for the customer. The trains are another example. The factors that make private companies work – especially competition – aren’t there. So only the profit was privatised.
It’s about time someone decided whether BT is a state or a private company. The pension risk is still with the taxpayer. At the moment it’s a sort of hybrid, which never works for anyone except BT, with “regulation” and “price controls” – all that worked so well in the 1970s. If someone were trying to create a situation which stifles investment, they couldn’t possibly have done better.
O2 Gave away their broadband for too long, offsetting the losses against it’s mobile profits
Then you have it’s owner Telefonica who has for year failed to invest enough into fixed broadband,
Should the day ever come where only BT,SKY,Virgin cable ,talktalk left, it will be a very sad day for the broadband industry,and the customer, as all of them suck screw your tripple play bullshit, were not interested
Good riddance to BE. The poor performing, stuff wrongly blocked, badly peered, terrible routed, hand out customer details willy nilly (Ben Dover as one example, BE giving my email and mobile number to O2 as another for their email spam and damn text messages) no fibre, contradictory staff (fibre is coming the new network is coming… HONEST {repeat and daydream}, useless poor quality telephone call ‘support’ line cack!
May they rot like a maggot infested apple left in a giant cow pat in a field.
Looking at posts in forums I see O2 customers getting unlimited, unshaped retention packages for a fiver a month, no line rental to O2, and in some cases 6 months of the year for the new contract free of charge. Utterly, utterly desperate to try and retain what customers they have left.
As far as new customers go they only allow you to order the lowest 20GB/month cap service online, you have to phone up or arrange a call back to order the higher two tiers, presumably so that they can try and sell you a mobile contract and offer a deal if you take all at once.
The penetration rates on Sky, TalkTalk and O2′s LLU networks are very noticeably different. The Sky and TalkTalk LLU networks only pass about 1/3rd more homes yet they have over 6 times the customer base each.
O2/Be have the heaviest users of any ISP of any real size in the UK.
Why would Telefonica hand O2/Be another 7-figure sum to get fibre services available over their LLU network so that they can then spend a load more cash upgrading backhauls while their customer base thrash the living hell out of their newly increased bandwidth?
The backhaul from the exchanges is the part that these network upgrades aren’t making any difference to. Sky had the cash to throw at the backhaul upgrades and, thanks to a wide range of usage across their customer base, have a relatively reasonable customer usage profile.
People who phone in for retention deals and bargain down to paying 30-60 quid a year for unlimited services aren’t going to be that interested in paying the kind of price premiums necessary to make unshaped, uncapped FTTC work. People from the more technical userbase will tend to be those who, while they will pay a price premium, will absolutely hammer the bandwidth.
I really do struggle to see the business case for Telefonica here. The new core network is for the profitable mobile broadband network and happens to also accommodate the fixed line broadband but I’m not convinced that a debt laden telco shedding assets to pay the bills would see a business case in keeping the current broadband platform going let alone the investment needed to deliver fibre services to a bandwidth hungry userbase.
Wow, so much moaning about Be, who’s customer service is in a different realm than the big companies like BT, Virgin or Sky, Who don’t throttle the life out of your connection as soon as you use it during waking hours (Virgin), Who’s offering is not extortionate (BT) Who don’t have low usage caps (SKY).
I’m happy with Be and would rather use them than any of the large competition, I never heard a word when I downloaded hundreds of gigs per month, the connection always works well, I look forwards to seeing their fibre offering, they may not be perfect, but none of the ISPs are (they should have known better re the ‘ben dover’ saga).
O2 i have had no problems with there broadband great customer service hope the rumours are false
I am on the original Legacy package. Total cost phone line+BB about £13.00 pm.
My Wife has a mobile phone package that is unbelievably cheap.
I am totally happy with O2.
A couple of months ago I was talking to one of their higher qualified techs and asked him when would O2 be getting fibre. He answered, Never!
I am on an O2 legacy package and have been for around 5 years and my broadband is ace. £14.50 a month and way better than BT’s offering. I am very happy with my product.
THe problem comes down to a lack of competition in the UK. With FTTC you basically have just BT. The other few players are just reselling the BT product
I am disturbed to here o2 are selling out broadband/homephone to sky. I’ve enjoyed a good service from o2 and i’m not happy about this. You can guarantee that the reasonable prices we have enjoyed through o2 will no longer happen through sky that’s why i left them in the first place. I’m a disabled person who relies on broadband and landline for daily communication and fear that under sky as with the other available providers i will be unable to afford to keep my package. Its a shame o2 have done this lots of people like me are going to be cut off.