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Openreach, better as part of BT Group PLC or go it alone?
Wednesday 13 May 2015 11:19:02 by Andrew Ferguson

Just under a week ago the BT Group released its last financial results and a few selected journalists were invited to meet with Joe Garner CEO of Openreach to ask any pertinent questions. We were amongst the 8 or 9 invited and while we don't have the short hand skills of some we have some notes worth sharing.

The financial results for Openreach are a mixture of regulation reducing revenue balanced by the growth in fibre broadband connections and a pretty full Ethernet order book, as it seems businesses have woken up to this option as a way of getting a business grade connection which should ensure reliable and fast 24/7 operation. The growth of fibre based service volume means they will become increasingly more important.

Fibre on Demand (FoD, FTTP you can order for a custom price if already served by a fibre cabinet) has been on hold for sometime, and as the original 30th April deadline had passed we asked whether new orders were being taken and it unfortunately for those looking to turn some savings into an ultrafast connection it seems FoD is not coming back just yet. The problems as reported by the few we have seen have it installed centre around multiple site visits for surveys and slow installation, mean that changes to the FTTP roll-out which are part of the G.Fast trials this summer will be assessed and used to re-jig the product - though we would urge caution as some may expect lower pricing and we get the feeling this is not likely. The sort of changes under evaluation are ways of blowing the fibre, connectors to reduce the need for splicing, pretty much all aimed at reducing the amount of labour needed.

The issue of a full split of Openreach away from BT came up, and given the General Election polls were open purdah was in full effect this was a difficult question to field, but Joe Garner does not see this likely but then one can never say never. What is clear is that even if someone with the power was to decide to split Openreach away we are not looking at a few months, but possible a number of years before it actually happened, and given the pace of the telecoms market that is an eternity. One point raised by Joe, is that the current equivalence rules mean that the large number of small providers are served by Openreach the same way as the big ones, but a pure standalone unit might need to be less equivalent and lean towards favouring just the biggest providers.

The issue of Tech City broadband speeds and the City of London went around the table and looking at Tech City itself the download speed test average of 9.8 Mbps is lower than across the Islington Borough the postcode falls within, but the upload of 3.2 Mbps suggests people are finding connectivity. Of course while a 1 person start-up may be fine with a FTTC connection, if you are an office of a few people making heavy use or uploading lots of media then dedicated Ethernet/leased lines are the way to go and some of the newer buildings are addressing that, but at a price that is in line with nice modern offices.

The City of London is famously the least served part of London in terms of FTTC, but shows that people are getting good speeds, a factor of the availability of the alternate options like 4G and/or Relish and others (the Borough comprises of just a few thousand households, but many more businesses). The City of London has a high proportion of Exchange Only lines, but the density of exchanges means that only 1.2% are estimated to get below 5 Mbps which may also help (NOTE: A slight caution on this figure, as for apartment blocks the vertical distance has not been taken into account). It needs to be pointed out that while we see large academic institutions using our speed test we do not include these in our speed test analysis unlike some other testers with the result that averages can be skewed, and similarly for the large companies with leased lines.

Comments

Posted by ValueforMoney about 1 year ago
Thanks - did he discuss the impact of £392m of state aid and Openreach capital contribution?
Did he provide any note continued commerical rollout.

BTW - I saw a FTTC cab just inside City wall near Clerkenwell - near St John Ambulance. Not noted any others.

Years to split Openreach, but the principles agreed sooner perhaps. I could never have seen that sticking until BT Goup decision making on the rural broadband contracts - what a shame. Let's see what the new state aid notification says, it might add some more fixes to the work done on costs by the NAO.
Posted by andrew (Favicon staff member) about 1 year ago
Purdah would have stopped any decent discussion.
Posted by TheEulerID about 1 year ago
Purdah only applies to local and central government projects, so clearly BDUK would come under that (hence little on progress immediately before the election).

However, purdah would not prevent BT from expressing opinions about industry structure, regulation and similar matters. Indeed, the Q&A session on the results webcast dealt with the mooted Openreach split (and it was in the press too).

Most likely, BT would not want to rock the boat in the election period as they would have to deal with the winners. So they may have called it purdah, but I think it was just discretion.
Posted by WWWombat about 1 year ago
On the FTTP/FOD rollout, you can see some of the changes being evaluated in a presentation by Neil McCrae of BT, at the recent UKNOF meeting.

https://m.youtube.com/watch?v=LLpk2dz6nBQ

It appears later, after the G.Fast update.
Posted by ValueforMoney about 1 year ago
Thanks, treating Fibre access as a premium needs to be challenged, it is a just a medium.
I hope as soon as a fibre is available from a manifold, G.FAST presence is not used to inhibit FTTP.
Posted by WWWombat about 1 year ago
@vfm
Agree with that sentiment.

I think that the BT problem is that they don't have the civil engineering techniques sorted out for fibre to be nearing the "mass market" scale, so it gets treated (and charged) nearer the premium, bespoke side.

NM's aside, early in that video, suggests another couple of years.
Posted by fastman about 1 year ago
why would do 330 to the home with extensive civils and hard to when you could do 500 to the DP and forget about the DP to premises challenges
Posted by fastman about 1 year ago
FTTP is hard , complicated and challenging esepecially in a brownfield situation, expect more FTTP primarily in Greenfield areas
Posted by Somerset about 1 year ago
@WWW - does anyone 'have the civil engineering techniques sorted out for fibre to be nearing the "mass market" scale'?
Posted by GMAN99 about 1 year ago
"Years to split Openreach, but the principles agreed sooner perhaps."

Did you miss this bit:-

"but Joe Garner does not see this likely"

Why would they agree principles when its unlikely.
Posted by ValueforMoney about 1 year ago
@Fastman - I think appetite for unproven G.Gast as a panacea appears and repositionong of ..p.. is lazy.
Sure FTTP is tough, but the effort to double BDUK pot with LA match was to permit a once in a generation upgrade - an actual best in Europe.
Most FTTC was always £20-£25k - but 30,000 of those is less than £1bn.
Posted by ValueforMoney about 1 year ago
@Fastman Sorry G.FAST is a tool. BT has done a brillant proving FTTC rollout is cheaper and faster and better than anyone imagined.
Your cannot divorce..p.. from the incentives on cost recovery for copper, just as the atitude to G.Fast could change if as an item it was not an allowable cost in state aid terms.
Posted by ValueforMoney about 1 year ago
@Fastman - the state aid rules could be re-written to exclude active equipment and it is likely BT would change its position.
Posted by ValueforMoney about 1 year ago
@GMAN99 - As a shareholder I would prefer a strong BT, but the 44 LA confidentiality agreements for rural broadband, and the evidence relied upon at PAC are 44 discrete requests by BT Group for BT to be split up.
NAO report II mitigates against this, but the lack of verifiable investment needs to be dealt with transparently.. I suggest. A note in the accounts to the capital contribution expected would seem appropriate.
Posted by ValueforMoney about 1 year ago
@GMAN99 - One question - are you planning to hand the money back (or not take the LA money) or use the opportunity to transfrom the network by pushing further?
Posted by fastman about 1 year ago
value as per my previous View there will be less FTTP as this painful and expensive and the majority of subscriver / service providers dont want it / see a case for it -- i think eventually if will be superced by Gfast as that does not require the work between the DP and Premisew which is the hardest peice in a brownfield deployment -- thats just common sense and good economics -- cots less so deploy more against cost more deploy less
Posted by GMAN99 about 1 year ago
"44 discrete requests by BT Group for BT to be split up."

?? Are you saying BT Group want shut of Openreach?
Posted by ValueforMoney about 1 year ago
@Fastman I understand the pragmatism or being less kind expediency. I think the thinking is reinforcing the steps Ofcom are now proposing.
Posted by ValueforMoney about 1 year ago
@GMAN 99 - No, but those agreements and the manner of their use could be suicide notes. 'We are a monopoly and we can only think and work like a monopoly.' Perhaps next quarters free cash flow is all that matters or can matter.
Posted by mpellatt about 1 year ago
As the former comms manager of a small business formerly at the northern edge of the square mile, I have to say that whilst "on-paper' line lengths may be short, in reality ours certainly weren't. Our nominal connected exchange was Wood Street, which is of course no longer there, at least at that physical location. I believe the lines were extended on to Baynard House as part of the closure process - certainly something like that, as the loss on both ADSL lines was equivalent to a 3Km+ line length
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