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BT Make Progress on Legal Openreach Split, But FTTP Clarity Needed

Wednesday, July 3rd, 2019 (10:59 am) - Score 6,136
openreach 2017 van and fibre cable with engineer

Ofcom has today deemed Openreach to be making “real progress” in their on-going efforts to become a distinct “legally separate” company away from BT, although the UK telecoms regulator seeks more “transparency” around their efforts to increase independence and solid details on their future FTTP broadband plan beyond 2020.

The regulator’s Strategic Review of Digital Communications in 2016 (full summary) found that Openreach still had an “incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems” and that the BT had failed to “sufficiently” consult rival ISPs, such as those that piggyback off their network, on future “investment plans that affect them.” They were also deemed to have under-invested in their network to the tune of “hundreds of millions of pounds.”

In response BT and Ofcom eventually reached a voluntary agreement (here), which aimed to boost competition by giving rivals easier access to the operator’s infrastructure and fostering an independent governance structure for Openreach, as well as tougher minimum service quality standards, separate branding, new consumer protection measures and better information sharing etc.

On top of that Openreach recently raised their commitment to Gigabit speed capable “full fibre” technology (here), not least by pledging to rollout Fibre-to-the-Premises (FTTP) based “ultrafast broadband” services to cover 4 million homes and businesses by March 2021 (up from 3m). Furthermore they hold an ambition for 15 million by c.2025 (up from 10m).

openreach_2019_broadband_progress

Ofcom is required to monitor BT’s implementation progress on this agreement via their Openreach Monitoring Unit (OMU) and has today published their latest annual report. Overall the regulator found that “real progress” had been made but some issues remain.

What Ofcom Found – In Brief

Overall, real progress has been made implementing the new arrangements, but there is more to be done.

Continued focus is required by both BT and Openreach to strengthen Openreach’s strategic independence and engagement with its customers.

Openreach’s new Board, and financial and planning processes, are helping to increase independence.

Strategic independence has been bolstered by the creation of the Openreach Board, and by new strategy and financial planning processes that seek to balance Openreach independence with appropriate BT Group oversight. However, there is still more to do to improve transparency of how this balance is being struck, and to ensure that it is embedded and sustainable.

Openreach has increased the scale and pace of full-fibre broadband roll-out, though longer-term plans remain unclear.

Openreach continues to deploy ultrafast networks as part of its ‘Fibre First’ programme, and has increased its deployment rate during the past year. In May, Openreach’s target for full-fibre connections was raised from 3 million to 4 million premises by March 2021. BT also announced an ambition for Openreach fibre to reach 15 million premises by the mid-2020s – but this is not a firm commitment. We will continue to monitor Openreach’s fibre roll-out as an indicator of its contribution to the UK’s broadband needs. We will seek further clarity on how the ambition of reaching 15 million premises will be achieved, backed by BT investment.

Openreach has a vital role to play in working constructively with industry to deploy fibre networks for UK consumers.

In particular, Openreach is required to give competing network providers access to BT’s underground tunnels (known as ‘ducts’) and telegraph poles. New arrangements for access to these ‘ducts and poles’ came into effect on 1 April 2019. We expect to see Openreach working constructively with its competitors and we continue to closely monitor its behaviour and actions.

In general, feedback from industry and Openreach’s customers has been positive, but not always.

Overall, there have been positive steps towards improved engagement and collaboration. But not all feedback has been positive – for example, some providers still have concerns about the potential for confidential information to be shared between Openreach and BT. We expect to see further improvements in how Openreach demonstrates it is treating all its customers fairly and equally.

We are encouraged by early progress in implementing cultural change, but more focus is needed to make this sustainable.

Organisational culture at both BT and Openreach is fundamental to the success of the new arrangements. We have been encouraged by the indications of personal commitment from leadership in both organisations. BT and Openreach have taken steps to progress cultural change and embed the Commitments in the daily activities of staff. This change will require continued and concerted effort, and it will remain a focus for our monitoring.

On the subject of Openreach’s extended “full fibre” network rollout, the operator has repeatedly said that their plans for 2025 and beyond remain “subject to conditions being right.” This reflects their efforts to reach a supportive agreement with Ofcom / Government on several key areas (e.g. easier wayleaves and an extension of the 5 year business rate relief on new fibre – Scotland has already gone to 10 years).

Despite this we’ve yet to see a final agreement being reached in order to help to achieve their ambition for 2025 and beyond. Meanwhile rivals are starting to threaten their position within the market and Openreach wouldn’t be hiring so many extra engineers, or raising their long-term ambitions, if there wasn’t confidence in their future direction of travel.

An Openreach Spokesperson told ISPreview.co.uk:

“Ofcom’s report shows that we’re making real progress, but there’s always more to do.

We’re hugely ambitious and we’re determined to build on last year’s best-ever service performance. We’ll continue to invest heavily in our network and people as we build a new, future-proof digital platform which will be a catalyst for productivity and prosperity throughout the UK.”

Ofcom’s 2019 Openreach Progress Report (PDF)
https://www.ofcom.org.uk/../openreach-implementation-report-2019.pdf

UPDATE 1:30pm

Added a comment from Openreach above.

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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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18 Responses
  1. Avatar nga for all

    The EFRA select committee inquiry is the 7th Parliamentary inquiry into Broadband and there is still no published verified record of BT’s capital contribution to the BDUK programme. We need the timing and current location of contributions to allowable costs, including the plans needed to convert deferrals into coverage.

    If this ‘separation’ cannot support this simple level of transparency, then it is not really working.

    • Avatar CarlT

      Pretty much no-one else cares, NGA. Though most other people don’t have the emotional involvement with the whole thing you do.

      Most people comprehend the difference between operational expenditure and capital expenditure, which is useful here.

    • Avatar Please help rural broadband

      @CarlT: There are quite a few of us rural households who are still in the position of very slow internet. We really need those funds ‘NGA for all’ is referring to, in order to be ‘financially viable’ to BT/Openreach so we can join the rest of the UK population. Maybe you should remember what it was like in 2012 where Middleton needed BT/Openreach to do something to help your community, and they were stating that your area was not financially viable. Not everyone works for a “Broadband Leader” or has the same skills, confidence and influencing abilities with BT/Openreach to do what you did. It would be nice if you stopped picking on those who are supporting the release of funds to complete the rural broadband infrastructure.

    • Avatar Gadget

      @Please help – The point is that any money from gainshare is not within the gift of Openreach to spend.

      The onus is on the contracting authority to decide what to do, and as reported here, many do decide to use the gainshare monies to extend coverage, and it is to those local authorities that the arguments for not just receiving a refund “cheque” must be directed in the first instance.

    • Avatar NGA for all

      Gadget; as late as 2016, many LA’s were describing BT capital contribution as pots of gold . something they could not plan on. The release of clawback is no better, a bit if drip feed. it does not appear uniform but gamed by the relationship directors now in Openreach but using the same BT Group rule book.

      Another 60,000 now in Scotland and Somerset Devon considering another 50,000.

    • Avatar Gadget

      @NGA – which part of “it is not within the gift of BT to unilaterally extend a contract to consume gainshare” do you have difficulty with?

    • Avatar NGA for All

      Gadget, not so much BT’s gift but the information being available to LA’s to make informed decisions, which is under BT’s control.

      It is within BT’s gift to update folk on how much is now achievable, given funds available so folk can plan accordingly.

    • Avatar Gadget

      @NGA – The gainshare is owned by the authority, as is the OMR so if they (to be clear the local authority) decide to use any of the gainshare all they need to say to the contracting builder is using £xk from the gainshare how many of these yk OMR premises can you do?

  2. Avatar Barrie Greenwood

    Will these other companies let openreach use their ducts and super structure às well or is this only a one way street or are openreach going to charge a fee to use duct network .my last point who will protect existing plant against damage from these new workers who will not be trained and will work in an unsafe manner just to make a few quid having seen what happens when by bts own contractors were let loose on the network I can only imagine what damage a new set of workers Will wreek on the network when they have no vested interest in the existing plant and only care about making a quick quid who will be in charge of quality control as without it the duct network will fall into caos in no time

    • Avatar ProxyServer

      There is a charge for using BT’s ducts and poles but it’s not a large amount. However there’s nothing Openreach can do to prevent sabotage or damage. The only thing that is set in stone is if there is damage, Openreach have the first right access to fix their network before anyone else’s in that location. So ultimately any untrained or unsupervised workers could come along, damage cables and poles and end users would suffer from this with more than likely no consequences for the workers as they can argue out of it in court as they usually do.

  3. Avatar GNewton

    While the legal split is a first positive step it is still a long way to go for Openreach to become its own fully independent company.

    BT still owns Openreach, and controls Openreach’s annual budget. And the network assets are still owned by BT.

    • Avatar nga for all

      Indeed, BT Group create a Capital Deferral for Openreach of £712m for rural broadband but there is no indication that Openreach has a budget and resources to full-fill on £712m worth of rural work in any time soon. more like £50m a year. Yet, BT Group can now orchestrate cost recovery based on a number which has no bearing on their appetite to complete works in rural.

    • Avatar FibreFred

      I’m sure BT will keep the network assets, why wouldn’t they?

    • Avatar CarlT

      It’s not for rural broadband NGA. It’s for anywhere that’s NGA grey or black.

      Even then it’s only if contracts are agreed to progress it or contracts are in place to compel it.

      Man I really hope if I ever get fired from a job I don’t spend years pretending to be a whistle blower.

  4. Avatar NGA for all

    Carl T – Grey, Black and do not forget ‘Conditional’ but the objective is rural.

    The contracts and the supporting confidentiality clauses are the problem. Within the original constructs are gross misrepresentations on costs which needed to be unpicked. This is done. The impact is still to be fully reversed as the consequential impact on BT’s capital contribution has to be worked true.

    Contracts are supposed to be relationships of trust, not to support a process in support commercial rape and denial of service upgrades to those in need of upgrades.

    In my opinion the wrong doing (inflation of costs) was as obvious as witnessing a granny being mugged on pension by people you knew.

    • Avatar Gadget

      NGA – are they, to quote you, “a gross misrepresentation of costs” or prudent estimates made knowing that only actual money spend could be reclaimed? Other operators featured in articles in ispreview have found out to their cost (in more ways than one) that there can be some very nasty surprises, which under the current contract scheme would not be able to be recovered from the local authority.

    • Avatar TheFacts

      @NGA – do you believe all public procurement contracts and costings should be published?

    • Avatar GNewton

      In the case of BDUK contracts it certainly makes sense for more public scrutiny and transparency, including publishing the costings. We have seen it more than once how local authorities tend to hide behind dubious confidentiality clauses, just try a few requests under the FOI Act, to see what I mean.

      Anyway, the BDUK system has been a waste of taxpayers money, BT had no need for it, and the money would have been better spent on more urgent matters, like NHS etc, rather than tying up funds in obsolete BDUK contracts.

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