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UPD7 Ofcom Confirm NO Openreach Split from BT, But Change is Coming

Thursday, February 25th, 2016 (7:42 am) - Score 3,658

The telecoms regulator has today published its preliminary proposals as part of a major Strategic Review of the United Kingdom’s Digital Communications market, but the big news is they’ve decided NOT to completely split BT from its national broadband and phone network (Openreach).

Openreach was setup a decade ago after Ofcom’s original review in 2005, which among other things forced BT to open part of their network to competition (“functional separation“) and introduced Local Loop Unbundling (i.e. allowing rival ISPs to install their own kit in BT’s telephone exchanges, giving them more control over ADSL broadband and phone).

Since then the market has evolved and the new “fibre broadband” (FTTC) services don’t offer the same kind of control or price flexibility as the older LLU ADSL solutions. Meanwhile many of BT’s rivals feel as if the operator still has too much control over Openreach and aren’t investing enough in their infrastructure, which they claim has damaged competition and performance.

By comparison BT say they’ve invested billions into the national infrastructure, are delivering a good level of service (i.e. meeting Ofcom’s targets) and claim that their rivals seek a free ride off the back of all their hard work. BT has also warned that splitting Openreach could damage their plans to invest in future “ultrafastG.fast broadband upgrades and the 10Mbps USO (details).

Furthermore there were also fears about the risk from a protracted legal battle, concerns over how BT’s huge pension deficit and group debt would be split and uncertainty over who would provide Openreach’s future investment. On the other hand BT’s rivals believe that an independent Openreach could have fostered investment into superior FTTH/P technology and made the market more open and fair for everybody.

Ofcom’s job in all this was to navigate the maze of conflicting claims and decide what the market should look like for the next 10 years. The result is a compromise rather than total separation. Not that the outcome is good news for BT and indeed some of the measures look like painful medicine.

Ofcom’s Decision

In the end Ofcom’s review did find “evidence” to show that Openreach “still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems“. It also said that “other telecoms companies have not been consulted sufficiently on investment plans that affect them“, which they believe is something that needs to change.

Summary of Key Changes (inc. non BT areas)

* A new strategy has been proposed to promote the large-scale roll-out of new ultrafast broadband networks, based on cable and fibre optic lines, as an “alternative to the partly copper-based technologies” (e.g. FTTC). Openreach will be required to open up its telegraph poles and cable ducts, which must also be made “much easier for competitors to access.”

* Openreach must provide comprehensive data on the nature and location of its ducts and poles. Using these, rival ISPs will be able to build their own fibre networks, connected directly to homes and offices.

* Ofcom claims that Openreach’s governance lacks independence from BT Group and as a result they will overhaul it, which should allow Openreach to take its own decisions on budget, investment and strategy. The new management would be required to “serve all wholesale customers equally, and consult them on its investment plans“. There will also be greater transparency over how costs and assets are allocated between Openreach and the rest of BT.

* Ofcom will introduce even tougher minimum service requirements to push Openreach into repairing faults and install new lines more quickly.

* The regulator will also introduce new performance tables on quality of service, identifying the best and worst operators on a range of performance measures “so that customers can shop around with confidence“.

* Consumer broadband, phone and mobile operators will also have to introduce “automatic compensation” when things go wrong, such as due to a “loss or reduction of service” (this is a feature that used to only be offered alongside business products).

* Future auctions of radio spectrum, specifically those that will go to mobile network operators, will include new obligations to help improve rural mobile coverage.

* Ofcom will also work to make switching mobile operators easier and will soon publish a new consultation.

* Ofcom also said they would work to help the Government design a 10Mbps Universal Service Obligation for broadband, but then we already knew they would.

The regulator claims that the new model of Openreach governance (detailed proposals on this are expected to surface later in the year) might require the company to “become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members“.

Ofcom also said that they would reserve the right to “spin-off” Openreach “as an entirely separate legal entity, with its own shareholders,” albeit only if BT doesn’t play ball with their proposals. But first the regulator will need to address this proposal with the European Commission (EC) and no doubt BT will object.

Sharon White, Ofcom Chief Executive, said:

“People across the UK today need affordable, reliable phone and broadband services. Coverage and quality are improving, but not fast enough to meet the growing expectations of consumers and businesses.

So today we’ve announced fundamental reform of the telecoms market – more competition, a new structure for Openreach, tougher performance targets, and a range of measures to boost service quality.

Together, this means a better deal for telecoms users, which will improve the services and networks that underpin how we live and work.”

The result is unlikely to please everybody and indeed we could well be back here again in the future because the issue of BT’s status in the market is a bit like the playground pinata; every now and then a group gets together to take a bite out of the seemingly unmovable object, such is the reality of being an incumbent Telco in today’s market.

Meanwhile there’s the question of what impact Ofcom’s changes will have upon the market, assuming all of their proposals survive the inevitable bickering match between warring operators. History tends to show that big changes need a year or so to solidify before ISPs start to take advantage of them, but some (e.g. greater access to Openreach’s network) may simply be too attractive to go unused for that long; assuming they can get the prices right (that’s a big question).

At this point we’d say that BT can already grant access to their cable ducts and poles through the Physical Infrastructure Access (PIA) solution, but this can’t be used for connecting businesses and suffers from other limitations that have limited its uptake. Hence Ofcom are proposing something much more significant.

Similarly there’s the other question of how all this will affect the price that consumers pay, particularly in regards to the impact of Ofcom’s new quality standards and a move towards automatic compensation. Both could add extra costs on to both ISPs and Openreach, which may end up being passed on to consumers (it will be difficult to do this on the cheapest ISPs without raising prices). No doubt ISPs will also want Openreach to help cover the cost of compensating for any related service outage, which in the past has often been a big bone of contention.

At this point we’ve only had a chance to glance at the report and will come back to highlight other details as the day continues. In the meantime the big question mark is over how BT will react and indeed whether or not they might find the adjustment so tough as to prefer a spin-off, but we view the latter outcome as being very unlikely. We expect their response to come at around 9am.

Finally, it’s worth saying that the changes will all be introduced gradually through Ofcom’s periodic reviews (e.g. the next Wholesale Local Access and Wholesale Broadband Market Reviews) and not in one big bang. In other words it could take a couple of years before all of today’s proposed changes are fleshed out and become real for the market.

Ofcom’s Strategic Review (Initial Conclusions)

UPDATE 8:13am

Reading through the document we note that Ofcom are not yet proposing to make any firm changes to the pricing of Openreach’s FTTC (VDSL) “fibre broadband” service, which will disappoint TalkTalk and Sky Broadband. Ofcom reasons that this could happen in the future, but it also wants to encourage rival ISPs to build their own alternatives.

Competing providers should be incentivised to build their own networks where this is viable. It must not be too ‘easy’ for competitors to rely on ‘buying’ access to another’s network when there is the potential to invest in their own,” said Ofcom’s report.

However Ofcom’s notes that their position may change, particularly when they come to begin their next wholesale local access review that will cover the 2017-2020 period. “By 2020 superfast broadband services are predicted to account for the vast majority of broadband connections. Pricing flexibility will have been applied to BT’s FTTC investment for 10 years. For this market review, there will be a variety of arguments in favour of reduced pricing flexibility, including potentially reaching the original date for expected payback. In this context, we may be coming toward the end of the fair bet, which could result in a transition to some form of charge controls,” concluded Ofcom.

UPDATE 8:26am

BT has now given their response and it appears to include a proposal for Openreach’s new governance structure, although we’re not given any detail and thus can’t see how it compares with Ofcom’s approach.

Gavin Patterson, CEO of BT Group, said:

“The UK is ahead of its European peers when it comes to superfast broadband and we want it to maintain that position. That is why BT is keen to make significant additional investments over the next five years and beyond.

We want to build an even faster network and we also plan to address slow speeds in the final five per cent of the country. It is also important that we give small businesses further options aside from dedicated lines, which suit many but not all. Customer expectations have increased dramatically in recent years and we are keen to work with Ofcom and industry to meet those expectations. We all want to improve service. Openreach is already subject to regulated service standards and we are happy to work with Ofcom to improve them.

Our plans would help ensure the UK remains the leading digital nation in the G20 and we are keen to get on with the job. They involve large scale investment however and that requires a high degree of regulatory clarity and certainty, something that is missing at present.

Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort. We welcome those comments. The focus now needs to be on a strengthened but proportionate form of the current model and we have put forward a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.

Our proposal includes a new governance structure for Openreach as well a clear commitment on investment. Openreach is already one of the most heavily regulated businesses in the world but we have volunteered to accept tighter regulation to bring matters to a clear and speedy conclusion.

We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes.

We are keen to understand and address Ofcom’s concerns so we will review their paper in detail. A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated. A voluntary, binding settlement is in everyone’s interests and we will work hard to ensure one is reached.”

The Independent Networks Co-operative Association, which represents a number of alternative network operators, has also given their feedback.

Malcolm Corbett, INCA’s Chief Executive, said:

“We are disappointed that Ofcom hasn’t gone further to challenge the control BT exercises over the communications market, but pleased that Sharon White and her team have recognised the need for significant changes. INCA members build new fibre and wireless networks, often in the most challenging areas of the UK. For too long they have struggled to make sense of the rules and restrictions surrounding access to BT’s ducts and poles.

A few stout-hearted companies are having a go – notably Warwicknet, Callflow Solutions and Hyperoptic – so steps to make it it easier for competitors to use the existing infrastructure are welcome. It means faster deployment of the high speed, affordable broadband services that consumers and businesses need.”

Oh and here’s one from rival ISP Hyperoptic.

A Hyperoptic spokesperson told ISPreview.co.uk:

“Hyperoptic, the U.K’s leading 1 Gb provider, welcomes Ofcoms decision to force Openreach to properly open its duct and pole network to allow other operators to rollout competing infrastructure services. Having already trialled using those ducts to offer our 1 Gb service, we will be able to reliably and affordably offer our market leading 1 Gb service to even more consumers.

We also advise Ofcom to ensure that all customers of Openreach have a voice in future network decisions and not just those that resell the plain old vanilla FTTC services – it is those that are truly innovating that offer the UK the best chance at a digital future.”

UPDATE 8:53am

Now a statement from Sky UK.

A Sky Spokesperson said:

“We welcome Ofcom’s recognition that the current Openreach model is not working and that fundamental change is required. BT must now be held to account for improving service and enabling delivery of fibre to Britain’s homes and businesses.

Ofcom’s actions today are not the end of the debate but a staging post towards delivering the network and service that Britain needs. We believe the simplest and most effective way to fix the current broken market structure is for Openreach to be completely independent. We are pleased to see that separation is still on the table.

We will work with Ofcom to deliver change at Openreach and we look forward to playing a positive role in helping make Britain a digital world leader.”

UPDATE 9:41am

Look out, more comments from the industry. Meanwhile BT’s share price is currently hovering up by +2-3% today.

Dido Harding, CEO of TalkTalk, said:

“Ofcom has done well in identifying many of the worst problems, including recognising, finally, that BT’s control of Openreach creates a fundamental conflict of interest which hurts customers.

But having accepted all this, Ofcom has produced 100 pages of consultation with little concrete action behind it. The risk is that we end up with 10 more years of debate and delays, rather than facing into the problems and delivering improvements for frustrated customers now.”

Matthew Hare, CEO of Gigaclear, added:

“The focus on quality and performance underlying the conclusions in the Ofcom SDR are welcome. Gigaclear continues to invest in building new FTTP networks, and regardless of whether Openreach stays within the BT Group, intends to bring Gigabit Internet to tens of thousands more rural homes and businesses this year. The support for a stable investment climate will help us reach hundreds of thousands in the years ahead.”

Eli Katz, Chair of ITSPA, said:

“This once in a decade review has confirmed ITSPA members’ views that Openreach has not delivered the performance that the communications industry or the UK needs. We believe that Ofcom’s proposals for further scrutiny and an increased focus on service quality will ensure a fairer marketplace for all Openreach customers whilst also supporting vital investment in faster broadband services.

We also support the proposals to encourage the roll out of new ‘fibre to the premise’ networks by ensuring competitors have better access to BT’s mast and duct infrastructure. This will improve competition, drive up performance and service levels as well as reduce costs for both individuals and businesses in the UK.”

UPDATE 10am:

Now it’s Vodafone’s turn.

A Vodafone Spokesperson said:

“We welcome Ofcom’s move to tighten its regulation and governance of BT Openreach and leave structural separation on the table. We also welcome the move to open up BT’s ducts and poles, which we have successfully used in other countries such as Portugal to provide customers with fibre to premises.

However, BT still remains a monopoly provider with a regulated business running at a 28% profit margin. Therefore, we urge Ofcom to ensure BT reinvests the £4 billion in excess profits Openreach has generated over the last decade in bringing fibre to millions of premises across the country, and not just make half-promises to spend an unsubstantiated amount on more old copper cable: we agree with Ofcom that fibre is the future.

We look forward to engaging with Ofcom as they implement these important regulatory changes.”

UPDATE 10:15am:

Another one..

A CityFibre spokesperson said:

“It is clear from Ofcom’s key strategic proposals that Openreach cannot and will not be allowed to remain solely responsible for delivering the fit-for-purpose infrastructure essential to fulfil the UK’s digital potential. Healthy competition and continued investment in fibre from multiple companies is vital.

Ofcom’s strategy to encourage fibre investment, improve competition, and to ensure meaningful and usable access to BT’s physical infrastructure, creates a unique opportunity for alternative providers, such as CityFibre, to accelerate and extend new and existing roll-outs of next generation, ultrafast, fibre to the premises infrastructure projects nationwide.

Alternative infrastructure providers, such as CityFibre, play an increasingly crucial part in the landscape and we are encouraged to see the report explicitly reference its support for the large-scale deployment of ultrafast networks. Innovative infrastructure builders are already responding to demand from businesses and consumers for ever increasing demands for pure fibre infrastructure and companies like ours are central to a shared goal of enabling the UK to compete and succeed in a digital age.

Ofcom also recognises that at a technological level, BT’s continued strategic reliance on and investment in copper-based infrastructure – often masquerading as fibre – is inadequate to meet the soaring demand driven by new services and increased usage habits that the market continues to observe.

With major metro fibre networks in 36 UK towns and cities as well as our York project rolling out fibre to the home with Sky and TalkTalk, CityFibre is the only wholesale competitor to Openreach. We will continue to respond to market demand and play a vital role in addressing the fibre connectivity needs for mobile operators, ISPs, the public sector and consumers. The recommendations put forward in Ofcom’s strategic review today only serve to strengthen our position and ability to respond to demand for our services across the UK in the near term.”

UPDATE 11:22am:

Finally we have a comment from Virgin Media and by “finally” we mean there’s already enough commentary above and this will be the last one we add.

Tom Mockridge, Virgin Media CEO, said:

“The best way to provide competition against BT and its inherited advantages is to support infrastructure investors like Virgin Media. We are challenging the incumbent with £3bn of investment in new network and providing choice.

Ofcom has done the right thing by resisting separating Openreach, which would have sent a negative signal to infrastructure investors.”

UPDATE 12:34pm:

Ok fine.. just fine, have some more comments, but truly this is the last lot.

Giles Phelps, Managing director of Spectrum Internet, said:

“I broadly welcome the review – the industry has dramatically changed over the past ten years and so it was in much need. However, I would certainly say that the devil is in the detail. The 112 page review outlines OfCom’s plans but nothing has yet been confirmed about the key issues and actions that will be taken that the industry faces.

For example, Openreach does need reforming, which OfCom acknowledges. It’s very positive to read that it will undertake a review of 8 possible models of separation – these range from improving the governance up to a complete structural separation from the rest of BT.

I would have liked OfCom to have gone further into the quality of service that communication providers should expect from Openreach too. I believe we need to move away from copper infrastructure as much as possible in order to see an improvement. Copper lines are just outdated and not fit for customers’ needs of broadband today.”

James Blessing, Chair of the ISPA UK, said:

ISPA is pleased that Ofcom has an ambitious vision and proposals on how the UK connectivity needs can be transformed over the next decade. With ISPA members investing heavily in their networks across the country – locally and nationally utilising a range of technologies – ISPA supports the report’s objectives to improve performance, enhance competition and investment and make rolling out networks easier in this data-driven age.”

Leave a Comment
72 Responses
  1. FibreFred says:

    * A new strategy has been proposed to promote large-scale roll-out of new ultrafast broadband networks, based on cable and fibre optic lines, as an “alternative to the partly copper-based technologies” (e.g. FTTC). Openreach will be required to open up its telegraph poles and cable ducts, which must also be made “much easier for competitors to access.”

    * Openreach must provide comprehensive data on the nature and location of its ducts and poles. Using these, rival ISPs will be able to build their own fibre networks, connected directly to homes and offices.


    So will they be making PIA cheaper?

    I said ages ago, even if PIA was dirt cheap rivals wouldn’t build their own wide spread fibre networks

    Let’s see if I’m right, anyone want to run a book, Ignition?

    1. Steve Jones says:

      I suspect they want PIA to be as easy to use as MPF with predictable pricing, single point ordering and so on. If that’s the case, then good luck with whoever gets that job given what I’d guess is a massively complex historical legacy. Alternatively, is Ofcom expecting that alternative operators will have full responsibility for all the necessary works, planning and so on? Not cheap I imagine and it will surely require lots of access to internal OR infrastructure systems. Lots of integration work there.

    2. Ignition says:

      @Steve Given Sky spend enough to build FTTP to every premises in Leeds on Premier League rights every 6 weeks I’m sure they could manage.

    3. FibreFred says:

      It won’t satisfy the rivals because what they actually want it for bt to fttp all homes and then to be able to take over the service themselves

      All the gain none of the pain

    4. Steve Jones says:


      But with the football rights Sky at least know they will get a relatively quick return as they get the subscriptions every month. Fibre infrastructure would be a completely new game for them If they did fibre up Leeds, what would the takeup be? How long would the ROI be? Would they wholesale it? Putting up lots of capital for a return over 20 or 30 years would be a big ask.

      I suppose we might get some of the answers from the York trial.

      One thing that’s not obvious to me is how this will help the rural communities. It might make things a bit cheaper for the likes of Gigaclear of course, but they tend to target clusters of relatively affluent households.

    5. Ignition says:

      Indeed Steve, however the key point I’m making is that they have the funds, they are making a choice to be risk averse.

      TalkTalk don’t have the funds. Vodafone are having their on-off relationship with Liberty Global so doesn’t make sense for them. Sky have exactly zero reason beyond that they want others to do the work, build the networks, and take on the risk.

  2. Bob says:

    Whilst the report is somwhat vague it does seem to indicate that Openreach will be split from the main BT Group of companies and the only real way of doing that is to set up BT Openreach as a wholly owned subsidiary of the BT Group. This should not be that difficult to do as at least in theory BT Openreach operates as an arms length company

  3. MikeW says:

    Good to see the focus they give on “A strategic shift to large-scale fibre deployment”.

    The main way to achieve this looks like PIA++

    “we want to see one or more new providers enter the market, competing head-to-head with BT and existing network operators such as Virgin Media. ”

    It certainly looks like a message to Sky, TT (or someone new) to seriously up their game, and start deploying fibre. Is PIA++ really going to be attractive to someone like Sky or TT? Something to assuage their inability to make the York trial cost-effective?

    There is interesting language to act as a carrot too. “We will make it easier for telecoms providers to invest in advanced, competing infrastructure, while protecting those who have already made investments.” I wonder what protection that means?

    There is a twist on the expected stick: mention of BT wholesaling “active access” in uncompetitive areas, followed by a mention of removing regulation where things work. Could this make for the removal of requirements for BT wholesaling access where there is a third network?

    1. Bob says:

      At the moment BT priced PIA so high it was not viable

    2. TheManStan says:

      Is it high though, maybe more along the lines of both leasing and having to field a new engineering workforce/contractor base isn’t “seen” as viable in the short term?

      Initially costs are high and all the businesses in the market are so short term with their goals!

      The arrangement works in France, but all the ISPs have their own networks so have a decent last mile workforce in place… TalkTalk and Sky don’t have a last mile workforce, so have they been risk averse instead…

      It certainly seems so from their language, i.e. split off the OR and we’ll invest in the network, rather than let us have access cheaper and we’ll build our own.

    3. Steve Jones says:


      The expensive bit is all about the same sort of stuff which makes it expensive for OR to install fibre. The whole thing about surveys, clearing blockages, streetworks, chambers for aggregation points and so on. That stuff is highly unpredictable until the survey is done. Of course what OR might do is just provide the alternative network builders with the plans and let them do all the engineering work (presumably with some NICC agreed standards). That’s quite a big ask.

      I can see some network operators using this to install their own dark fibre to their own aggregation points though (especially if OR have recently cleared out all the ducts for FTTC/FTTP). That way it avoids a lot of rectification work. I’m less convinced that they will want the job of extending across the last mile of the network though.

      In any event, installing networks is a long term commitment with an extended payback period, whoever does it. It will be the money men that decide.

    4. TheManStan says:

      Will compensation be fully regulated for PIA too?

      Where a 3rd party knocks out service, will they be liable for compensating customers and suppliers who have been disrupted?

      e.g. contractor for ISP X kills the service for suppliers Y and Z, affecting N customers.

      Presumably OFCOM will put in strict rules about registered works, unregistered works would result in hefty fines.

    5. Steve Jones says:

      Clearly there would have to be a whole set of financial and responsibility considerations for any company licensed to work on BT’s PIA. My guess is that there would also have to be some form of passive infrastructure standards body roughly along the lines of the NICC not to mention processes for capacity and infrastructure planning.

      I imagine a big row over the (inevitable) cost of rectification work. There aren’t going to be many companies volunteering to be first down a duct to sort that sort of stuff out if the benefit will accrue to other companies later. Sorting out a financial model for that sort of thing is going to be tricky. A lot of the capex spent on the commercial FTTC rollout will have covered that sort of work, and I imagine that expenditure would now have to be dumped into some centralised pot so it counts against PIA infrastructure, not BB as such.

      In any event, this is going to be expensive.

      nb. I’m going to make a prediction now that OR will consider a wholesale price reduction on the GEA-FTTC and GEA-FTTP products. There’s probably quite a lot of potential for that, especially if it increases penetration and cements OR’s position. Any new network builder is going to find themselves putting in a network in parallel with one with a “sunk cost”. Unless Ofcom regulated the GEA-FTTC prices to keep them higher than is necessary it would be a disincentive to invest (and I can’t imagine VM would be happy either if GEA-FTTC prices were to be reduced).

  4. NGA for all says:

    They outline what needs to be done, but are uncertain how to go about it.

    We should start at BT Groups written evidence to CMS Select Committee Feb 9th claiming they will have contributed £330m capital. If you have no additional invoices to show the NAO or BDUK it does not count.

    1. Steve Jones says:

      Uhmm. Count as what? This isn’t primarily about BDUK. As far as capex is concerned, then the total amount is in the accounts. Just how it is split and allocated will be deep in the finance systems, but I suspect it will have been against particular internal budget lines.

    2. Ignition says:

      The BDUK thing is done. 90% of the country now don’t care either way. Let’s worry about the future.

    3. NGA for all says:

      @steve, that’s the point, it is not in accounts, and we are a long way from being done. 20,000 cabs for £750m – less clawback is still > £44k a cab on average where total average cost is no more than £25k ish before bT contribute.

      We are not done by a long way. The BT Gambit is stilling running high.

      Monies owed in addition to clawback need to acknowledged and the job finished including in-fill.
      3 year battle to reveal abuse on cost needs another two to get the truth on the capital contribution and the monies returned or invested.

      It is not done, about half done in terms of the monies owed.

    4. MikeW says:

      Whatever comes out of this strategic review, the ongoing consultations will take a year to negotiate, a year to implement, and another year to figure out any feedback.

      Over that time, BDUK coverage will have reached 95%, 96% and perhaps more. If there is any more to be done, it will already be embodied within contracts and plan.

      For the intents and purposes of a strategic review focussed on 10 years time, BDUK is indeed done.

      Everything else you say might well need to come out in the wash. Be tidied up, completed and rectified. Or ignored.

      The one exception is the USO. But that is a matter for all providers, not just BT.

    5. NGA for all says:

      @mikeW the USO could be substantially paid by 1) recovering the overpayments in the proxy costs in the early contacts, 2) independent verification of the BT capital contribution .. if not pay it, 3) early repayment of clawback, and a true up on underspends in each county.

      None of this should be brushed under the carpet. What better way for Ofcom to prove its intent?

      There is currently £179m sitting in BT accounts acknowledge as owed to BDUK. If the capital claim is examined I am certain this will also be owed. The invoice and the allowable cost allocation cupboard is all dry as the state has paid all the bills.

      FTT dp deep in rural for in fill is needed, why not crack on even if demand aggregation is needed to trigger the event. The money is there to do it.

    6. New_Londoner says:

      Mike, without rehashing old ground about not understanding accounting, your comment that “USO could be substantially paid by …” also overlooks a pretty basic issue, which is that there are numerous state aid issues to be resolved before any USO could be implemented.

      And that’s before you consider that the proposals are in any case very high level, with an industry consultation on USO due to start in the Spring. Hard to know what eth cost will be before you know what the USO might look like, so impossible to say whether it could be paid for in the way you indicate, even if the state aid issues can be resolved.

    7. NGA for all says:

      @New_Londoner What has accounting to do with pretending something costs £500 (DEc9th) a premise passed or £100k a cabinet/fibre path and the reality discovered and the accruals in your accounts.

      The intervention areas declared, c6m premises in the original notification and the supporting budget means it could have been done without the need for another round of state aid.

      Your not re-hashing anything because the matters are only beginning to be dealt with. If there are no additional invoices, then the claim you have contributed £230m or £330m capital for phase 1 is misleading Parliament.

      What could the £230m to September be? Happy to be wrong but you denying a lot of people service improvements.

  5. Patrick Cosgrove says:

    “Competing providers should be incentivised to build their own networks where this is viable. It must not be too ‘easy’ for competitors to rely on ‘buying’ access to another’s network when there is the potential to invest in their own,” said Ofcom’s report.

    Sensible, because that way competitors can not only establish themselves where Openreach asn’t yet got to, but can then eat into Openreach territory by offering a superior service – genuine competition.

    1. Bob says:

      It is not really viable though to overlay a second local loop particularly when outside of the Cabled areas BT has a 100% of the market. It would take decades to recover that investment which is what happened with Cable

  6. John Miles says:

    I’ve never understood why splitting the BT/Openreach pension deficit is said to be such a problem. BT is currently paying billions into the pension fund, payments which presumably are already split between Openreach and the rest of BT (otherwise they would be unfairly loading costs on one of the businesses). So why can’t the same split be used if the companies were separated? ( P.S. They faced and solved a similar problem when the original BT mobile business was split off many years ago)

    1. Bob says:

      It is not that difficult. BT don’t want it to happen though. Openreach is already supposed to operate at arms length. The current BT pension schemes is a money purchase scheme. The pension liabilities do not have to transfer to the news company

    2. Somerset says:

      Why should they not transfer, how many staff in each division?

    3. Steve Jones says:

      @John Miles

      That’s not the way it is. Payments against the pension deficit (rather than current employees) is paid centrally. There is no point in ascribing a particular portion of the pension deficit to Openreach as Ofcom do not allow any such costs to be included in calculating regulated pricing.

      That’s in contrast with Ofwat and Ofgem who do allow historic pension deficits to be used in the calculation of regulated charges.

      In the case of the BT pension scheme, I believe there are something like 300,000 who are either in receipt of a pension or are deferred recipients. It’s how many of them that would have been deemed to have been in what corresponds to OR that will be the interesting question should a split happen (or, even if the accounts have to be further separated). There’s a parallel issue with debt.

    4. Steve Jones says:


      The issue is not about current employees, but the historic debt related to the 300,000 or so currently receiving a pension or what are called deferred pensioners on the older schemes.

    5. Steve Jones says:


      I also ought to say you are wrong on a couple of points. Firstly the current BT pension scheme is manifestly not money purchase (or defined contribution as it is termed). It’s still a defined benefit, but a far less generous career average pay based system with higher contributions. Not that this is really relevant, as that’s covered.

      The other thing you are wrong about is about responsibility for pension deficit on existing and deferred pensioners from the old scheme (including any current employees who have accrued benefits on the older schemes). I believe there are around 300,000 people in that category. That’s not something that can be walked away from, it’s a contractual liability which applies to the entire BT group. There is precisely zero way that a separated OR would be created without some of that liability accruing to OpenReach. It will be the job of accountants, actuaries and lawyers (and possibly the courts) to work out how the responsibility will be allocated. In any event, the trustees of the BT Pension scheme have a legal responsibility to protect their member’s interests and they would be duty bound not to agree to any arrangement which prejudice that. This is not theory, it is not a triviality, it’s serious stuff. There is, I believe, about £7bn at stake on the last review (and if people continue to live longer and returns go down) it could yet worsen. This is no small matter.

    6. MikeW says:

      What is the justification for not including the pension when calculating the regulated prices?

    7. Steve Jones says:


      Have a good read. As a shareholder I take a keen interest in such stuff as it’s material to the market value of the company. Note that this is a report which was produced on behalf of the UKCTA (ie all the fixed line companies that aren’t BT), so it’s not Ofcom’s official statement, but it seems to have been pretty well what Ofcom decided.

      I suspect the real issue is that Ofcom wanted to minimise wholesale prices and it suited them not to include any of the historic deficit.


    8. Steve Jones says:

      This is a summary statement by Ofcom in 2010. I’m not sure if there is a later one (Ofcom’s document organisation leaves a little to be desired).


  7. Bob says:

    The only way you can really get the degree of separation needed and a level playing field is the Wholly owned BT Company approach for OPenreach. Any other BT Group company would then be treated the same as an external company ie they would be a customer of BT Openreach

    1. MikeW says:

      Which level playing field would you rather have?

      One where BT plays level with other network operators, like VM, who are currently building and operating their own networks as a vertically-integrated operation? One that Ofcom wants some new entrants to replicate?

      Or one where BT is brought down to play level with the worst leaches, with no investment plans?

      I happen to think the network is too much of a strategic national asset for the latter.

      If the leaches really want to be serious at national telecoms, let them put their stake money into the pot, and step up to the other level instead.

  8. Ignition says:

    Something that for me says it all is that Hyperoptic, who are actually investing money in delivering services via their own access network, are pleased while Sky, who happily spend nearly £27 million a week on Premier League rights but haven’t built any commercial access network, are complaining.

    1. Oggy says:

      I think it is quite telling that the bashers have ignored your point ignition.

  9. GNewton says:

    “allow Openreach to take its own decisions on budget, investment and strategy. The new management would be required to “serve all wholesale customers equally, and consult them on its investment plans“.”

    This will be the key failure point. Ofcom and BT will be muddling along as they always have in the past. If Openreach really was to manage its own budget and investment strategy then what’s the difference between a fully independent Openreach and this?

    1. Ignition says:

      A massive pile of legal and operational issues to make it happen initially, followed by extreme risk in the longer term.

    2. FibreFred says:

      So hopefully once poles and ducts are open Mr Newton will be spending his precious time geeing up Sky and talk talk, I certainly hope so so we don’t have 10 years of whinging about bt

  10. Dave says:

    Oh what a waste of time and money.
    Still no firm commitment for the USO.
    This means there will still be rural areas with no broadband and no mobile coverage until year 2020 and beyond.

    Thanks OFCOM

    1. Mark Jackson says:

      The Government are the ones consulting on the USO (this is imminent), but Ofcom will help with the direction they take.

    2. MikeW says:

      Remember this was a strategy document, with a long view. It was only ever going to end up with further consultations to make things happen.

      It *is* the firmest I’ve seen Ofcom be over the USO.

      The bargaining going on to “persuade” Ofcom has also resulted in BT talking about the money they have for the remaining rural areas.

      The consultation might not end up with BT being the main provider/beneficiary, but at least negotiations shouldn’t break down because no company at all was willing to do something. It means other companies will have to come in with positive counter-offers, at least.

    3. Al says:

      Well there was something about when they sell off the next bandwith for what 6G do something about mobile coverage in more rural areas, no doubt they’ll get some vague promise about 3G.

      And even if rivals build a network to compete with BT it onlt be in the more commercially viable areas once again leaving the less commercailly viable areas behind as for competition Ofcom really need to do something about the BT monopoly on Market A exchanges where there is NO competition, isn’t the regulator supposed to step in when it comes to monoplies.

      Just think how much more FTTP coverage we could get if they everyone pooled their money rather than potentially overbuilding each other.

    4. Ignition says:

      Understood but what do you suggest? The regulator can’t force other providers to build out or invest in Market A exchanges. Their whole point is to regulate where BT have monopoly and deregulate where they don’t, which is why there are such things as Market A exchanges in the first place.

  11. DTMark says:

    “Competing providers should be incentivised to build their own networks where this is viable. It must not be too ‘easy’ for competitors to rely on ‘buying’ access to another’s network when there is the potential to invest in their own,” said Ofcom’s report.”

    ‘We’re going to give a billion or more pounds of taxpayer’s money to BT, prop up its pensions, and enable other operators to sit back and use the network we mandated, indeed, the structure set up means that local bodies benefit from take-up on that network, and generally dis-incentivize private investment, competition and new network building as far as we can, minimising the number of players either directly or indirectly with our approach’ – the thrust of the BDUK project.

    It’s a bit late now. Even two factions of the government don’t agree on a way forward.

    1. Ignition says:

      So you’d have preferred no BDUK programme happen at all?

      That’d have just left people complaining about the ‘digital divide’.

      Your own quote mentions building of networks when there is potential. There was no prospect of commercial investment in those areas, no-one responded to the Open Market Reviews.

      Whether you, I, or anyone else likes it or not there are areas that are a few hundred quid per premises to pass with FTTP, that can and should have competing networks, and there are those that cost closer to a couple of grand and will, necessarily, have a single publicly supported network and in some cases perhaps a community/municipal network.

    2. DTMark says:

      “So you’d have preferred no BDUK programme happen at all?”

      I’d have preferred the original DCMS programme to have been pursued:

      1.Create a level playing field between incumbents and new providers

      2.Open up access to infrastructure to facilitate super-fast broadband in many areas

      3.Facilitate the introduction of super-fast broadband in remote areas at the same time as in more populated areas

      .. as opposed to the BTUK programme which presumably came into being after the above was discussed with BT. Indeed, the OFCOM review is closely related to those goals above. And here we are all those years later..

    3. TheFacts says:

      1. – incumbents – you include Virgin Media

      2. – access – PIA exists

      3. – same time – no, do in the most cost effective way

    4. GNewton says:


      “do in the most cost effective way”

      For someone who has no objection against a nationwide government-funded (that’s us taxpayers) fibre broadband this sounds a bit hypocritical, doesn’t it?

      “incumbents – you include Virgin Media”

      Virgin Media is not an incumbent!

    5. TheFacts says:

      DT used the plural.

  12. dragoneast says:

    I’m glad that Ofcom didn’t try and whip out the magic wand, and pretend there was some magic solution.

    Rather map out a direction of travel. The devil will be as always in the detail. You simply can’t mandate co-operation, which is what it needs. So hopefully BT and the rest of the industry can coalesce around some sensible and effective proposals and behave like mature adults. And leave the bawling babies on the sidelines. Ofcom has banged the table. Now the rest of you get on with it. But there is no way of avoiding the lawyers and accountants dotting every i and crossing every t. There are too many potential slips ‘twixt cup and lip. It is easy to come up with an expensive mess, much harder an effective solution and nigh impossible to impose one. The consumers will have to pay, but hopefully not too much, save for those that want it. At best steady progress. Not Big Bang.

  13. Sledgehammer says:

    With all this talk and discussion it will not speed up BT/OR making my cab active, the FTTC has been installed since Dec/Jan 2013. If it is made active by the proposed date June 2016 it will only be 2.5 years wait.

    So I don’t expect any speedy improvement in new companies installing FTTH.

    1. Ignition says:

      Communications reviews, carried out by the regulator once a decade and deciding the investment environment and regulation over the country’s telecomms aren’t geared towards expediting a single cabinet unfortunately.

      The experience with one cabinet isn’t really indicative of the experience of the 10s of thousands that have been enabled on or ahead of schedule.

    2. fastman says:

      sledge so that means there is either a power or civils challenge to get to your cab — a cab funded by 2.5bn commercial investment — so what cab are you referring to

    3. Sledgehammer says:

      As far as I know the old cab P 38 is on one side of the road and the new FTTC is on the other. While the cab has a power warning sticker on it I was told that BT are waiting to have the power connected to it? It just seems to me that not enough people have contacted BT and the date for activation keeps getting delayed, it also seems odd that it has been sited on the other side of the road and could entail a trench across the road for new ducting to complete the job.

    4. dragoneast says:

      From what I can see it’s a common arrangements to have cabs and the fibre twin on opposite sides of the road in residential areas, especially where there are amenity or space constraints. Not a problem. But there is a great difficulty sometimes when utilities have to liaise together. There is no national mechanism to do so. So the power companies can be incompetent or just plan awkward. It’s clearly not a priority for them, BT is just another customer, not a priority. And, probably, it’s not financially rewarding and just a b… nuisance. I doubt Ofcom even know anyone at Ofgem, apart perhaps from the accountants. When the regulatory regime was set up, local fibre didn’t exist.

  14. bob says:

    Having competing local Multiple local loops will certainly not work other than in large cities. If you have fibre you could take Broadband from one provider. TV from another or even take TV from two providers

    1. Ignition says:

      It’s either infrastructure competition with heavily regulated services outside of there, a complete free for all, or the taxpayer steps in.

      Rural areas would be shafted by the second of those, urban areas by the third.

      The Netherlands is considered to be in good shape for broadband. Guess what got it there? Spain is rolling FTTP apace. Guess why? Ireland is seeing a great gigabit rollout. How’d that happen?

      Hint – it’s not due to their taxpayers, or to a totally deregulated free market.

  15. FibreFred says:

    So its the calling of bluffs now.

    More access to poles and ducts (whatever that means PIA happened years back)

    Let’s see sky and tt start their country wide fttp rollout, I look forward to reading how sky and tt have fibred 60% of the UK and are starting on their rural fibre rollout

    1. TheFacts says:

      Maybe Sky and TT could start with the final 1%, those really difficult and expensive to reach.

    2. FibreFred says:

      Yes please right that wrong of under investment starting with those that need it most. Exciting times

    3. wirelesspacman says:

      If usage of the poles and ducts was relaxed such that other operators could use the fibre they deploy for any usage (business customers, local backhaul links etc) then I suspect that PIA would start to get a lot more attractive.

    4. FibreFred says:

      Hmm I don’t think a lot more attractive, sure it would get more customers without a doubt. But what about what Sky and TT have been barking on about? FTTP across the board, do you think someone is going to come in and do that, do you think Sky and TT will?

      Because that is what they are asking for, now Ofcom have said, ok we’ll make that easier for you by making duct/pole access easier. Do you think they’ll crack on with it now?

    5. wireless pacman says:

      Lol, no Fred I don’t.

      It might though help a few medium sized ISPS think outside the box a bit. Not much in the overall scheme of things, I agree, but Tesco rules apply. 🙂

      [Every little helps!]

    6. FibreFred says:

      Yes hopefully so, the likes of gigaclear and maybe even hyperoptic it would be great if they could start hitting regular homes instead of mdus but even with this the numbers might not work

  16. GNewton says:

    There is one positive point in Ofcom’s review list, namely:

    “Ofcom will introduce even tougher minimum service requirements to push Openreach into repairing faults and install new lines more quickly.”

    Only two nights ago there was a news item on BBC 1 about a customer who had to wait for more than 12 months to get connected to a simple copper line, while her next door neighbours had working lines going into the same building.

    There is a reason why BT is one of the worst-rated companies in the UK. A quick look at trustpilot illustrates not just the issues with BT Retail, but also how Openreach has frequently been responsible for the various issues, too. Hopefully Ofcom will be able to force BT and Openreach to do better. This really needs to be sorted out!

    1. DTMark says:

      I’m not sure why BT “should do better”.

      If the council ran the network then people would just have to wait until they’re ready. No competition. No incentive to do better.

      If a privatised monopoly runs it then it’s exactly the same, with the identical drivers for performance – namely, none, apart from a small amount of line rental loss which can be ignored in the grand scheme of things.

  17. dragoneast says:

    Does any other country have PIA operating successfully, in similar circumstances to us over a large scale network which is run over old and patched infrastructure? In theory it’s easy, all you need is permission to access the ducts and poles; in practice I suspect there are more problems than solutions. Even OR sometimes break their own infrastructure.

    Our local loop cables are now run in recent ducts, but when the gasmen replaced their pipes it was amazing how often you could see the telephone duct disturbed in their excavated holes. I put a local one back together, but I’m not sure that any one else bothered. Over time I suspected a disturbed duct makes for a blocked duct. The poles aren’t immune either. As with so much else, the infinitely variable British weather might keep life interesting, but it doesn’t make it easy.

    1. FibreFred says:

      The main problem will be that sky and talktalk don’t really want this. They want openreach to do it for them really cheap. They don’t want to worry about planning routes, surveys, training engineers to work on ducts and poles they want openreach to do all of that for them and only then might the figures work in some cherry picked areas of the UK

      I think ofcom are calling their bluff here, sky and talktalk talk of under investment and ofcom are saying here you go, invest.

    2. dragoneast says:

      I suspect that TT and Sky are pretty well irrelevant to this. It’s just part of their marketing strategy, as it is for BT Retail. Hence the pantomime.

      This is directed to the infrastructure providers. But, as with every regulator, they can’t create a business or make it viable.

  18. dragoneast says:

    Can’t help thinking the pantomime season has come late this year.

    Widow Twanky is doin’ her nut, having lost her fibres (equivalent to clothes, geddit?) and wants to hang out to dry; and blaming Aladin, engaging in an “Oh yes you will”/”oh no he won’t” argument with the audience on opening up the Cave; with bit parts for the Wicked Uncle after the gold for himself, and the rusty old lamp. Perhaps a virgin keeping mum, rather than a genie. And like in the panto Aladin gives in, but just maybe BT have stolen her lines about giving everyone a hard time. Once you have to dot all the i’s and cross all the t’s it’s going to be horrendously complicated, whoever nominally owns the network. That’s the Anglo-Saxon way: anyone ever had dealings with property?

    It still resonates with me as the sort of communication I have with the dog. It’s hard to force him to do what I want when “no” is the only common word we share in the vocabulary.

  19. yang says:

    we want rid of the openreach cowboys altogether and there shit copper lines . fibre ive seen faster dial up 😀 heap of crap

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