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BT Seeks Ofcom Approval to Fold Wholesale Division into Openreach

Friday, November 14th, 2014 (11:10 am) - Score 3,448

Competition concerns are likely to be high on Ofcom’s list after BT reportedly asked the United Kingdom’s national telecoms regulator to let it fold their BTWholesale division, which last year reported sales of £2.4bn, into BTOpenreach.

Openreach is kept as an arms-length (semi-separate) organisation that maintains and upgrades BT’s national broadband and phone network which, as part of Ofcom’s regulatory framework to ensure fair competition, must operate under a stiffer regulatory regime. By contrast BTWholesale buys products from Openreach like other ISPs and also sells similar services to some of the same businesses.

But over the years Openreach has moved into many of the same areas that BTWholesale once occupied and so there could be cost savings in combining the two. However BT’s rivals, particular Sky Broadband and TalkTalk (plus smaller providers like Zen Internet etc.), might well fear that combining the two could risk giving BT’s own consumer and business (retail) services an unfair advantage.

A BT Spokesman said:

We are always looking at ways in which we can better meet the needs of our customers and reflect market changes. One question we are examining is how we can better serve our wholesale Communications Provider customers currently addressed by Openreach and BT Wholesale.”

According to The Telegraph, BT wants a deal to be reached within weeks rather than months, although Ofcom has also warned that such a major change would require a “full public consultation with interested parties and industry” and these are rarely swift.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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25 Responses
  1. Avatar Ignitionnet says:

    Separate Retail/Plusnet from Openreach/Wholesale so that BT Group no longer sell directly to end users as a first step.

    Works alright in Japan with NTT East/West.

    Have to be careful of pricing. Once Openreach and Wholesale are one entity makes it way easier for the combined entity to subsidise Wholesale via Openreach.

  2. BT spokesperson comment should be read as (in my humble opinion of course! 🙂 )

    “We are always looking at ways in which we can further abuse our dominant market position”

    1. Avatar bob says:

      I cannot see how this can work. Already there are indications in my view that Openreach are cross subsidising products . If you merge wholesale into Openreach then it become almost impossible to get proper separation

      The only real way it can work is if OFCOM stop BT selling to end users effectively making BT a wholesale business unit only

      BT Retail could still exist but it would have to be at very minimum a totally separate company wholly owned by BT

  3. Avatar Brian says:

    It’s been on the cards for a while to be honest.

    BT Wholesale is largely just a product engine and a layer which offers very little benefit. It doesn’t actually own anything. Its network for example is managed by another part of BT Group.

    The irony is the organisations which benefit from building up the capability of Openreach, which in turn decreases BT Wholesale’s relevance, will be go against this so they can continue to grow their position under the pre-text of BT Wholesale SMP.

  4. Avatar Andy says:

    Nationalise Openreach.

    1. Avatar gerarda says:

      Or at least hive it off into a separate company not owned or managed by BT

    2. Avatar Steve Jones says:

      So your expecting the government to stump up £25bn or so to buy Openreach? After all, it’s not as if there’s a huge national debt.

    3. Avatar bob says:

      It does not mean the government have to buy it. BT could just be required to divest it

      The other aproach is to allow the merger of Openreach & Wholsale but require BT retail to be divested or at least split off into a totally separate BT owned company

    4. Avatar Steve Jones says:

      Nationalising Openreach would require buying it, which is clearly the point I was replying to.

    5. Avatar Ignitionnet says:

      IMHO the only separation that would be adequate would be a complete spin-off of Retail into an entirely different company.

      Retail leave the BT Group and become BT Retail PLC or something, with existing shareholders given a proportionate number of shares in the new company relative to their current holding in the group.

      With Openreach and Wholesale a single entity it becomes even more difficult to ensure fair and equal access to the access network, alongside fair and equal access to the Wholesale platform.

      Wholesale already operate basically for and on behalf of Retail because that is overwhelmingly their largest customer – de facto vertical integration between the two. With Wholesale a part of Openreach extending that integration right through becomes even more of a risk.

      The issues with ensuring Openreach treat, err, themselves and OLOs equally are an entirely different one, however with the migration to Openreach operating active networks it makes perfect sense for this to happen.

    6. Avatar fastman2 says:

      you want to go back 30 years ?

    7. Avatar Bob says:

      A better idea would be to stop giving BT (a private company), tax payers money, which is technically fascism (also known as corporatism), and deregulate/de-tax so other providers can compete on a network infrastructure level.

    8. Avatar Adrian says:

      With all due respect Steve, the government (aka Taxpayer) has already bought most of BT Openreach’s new fibre network for them to profit from, and we don’t seem to complain enough about this adding to our national debt.

  5. Avatar Edd says:

    Cannot really object to this. Will make life a lot easier for Openreach engineers to be able to deal with Wholesale inside Openreach, and thus meaning that engineers can provide customers with the ‘getting it right first time’ that everyone wants.

    1. Avatar Ignitionnet says:

      Some might say that’s not entirely fair on those purchasing products directly from Openreach.

  6. Avatar fastman2 says:

    ignition openreach sells to all at the same price and terms

  7. Avatar fastman2 says:

    bob you never cease to amaze me —

  8. Avatar fastman2 says:

    cannot see how this can work. Already there are indications in my view that Openreach are cross subsidising products . – bob for the avodiance of doubt openreach deals with service providers using the same terms and conditions and prices as all other service providers — that what openreach does — now whether you like or agree with that – thats a fact — (so if that were the case what products

    1. Avatar Steve Jones says:

      What evidence do you have that Openreach are cross-subsidising their products? With the exception that FTTC is possibly not profitable at the moment (but that’s acceptable for the early stages of a long term investment), I’m not sure what there is to be suspicious about.

    2. Avatar bob says:

      I have been through the B T accounts and can see nothing to show the basis on which BT retail are being charged compared to other ISP’s

      The only sensible approach if this merger goes ahead is to disallow BT Openreach/Wholsale from supplying a service to end users and for BT Retail at minimum to be slit off into a separate listed company. It can remain BT owned but has to9 be a separate company to ensure proper separation

    3. Avatar Gadget says:

      bob – what did you expect in the report and accounts? Any issues should be taken up by Ofcom and the Equivalence of Access authority under Openreach’s undertakings.

    4. Avatar FibreFred says:


      So as you cannot find any evidence it isn’t happening it therefore must be happening? Is that the “logic” here

  9. Avatar terri says:

    buying openreach with the cowboys bad idea (anything to do with BT is a bad idea ) like Ofcom them idiots are as much use as a chocolate fireguard

    1. Avatar fastman2 says:

      so i assume your not with one of 530 + service providers that opentreach support then

  10. Avatar terri says:

    yes unfortunately have no other option to be with the bt/talktalk idiots for there superslow vdsl rubbish

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