There been many reports about HS2 & better use of the cash & private funding.
One reported quoted the following.
London School of Economics estimated costs for 90% high-speed broadband and 100% coverage at £3.7bn
Every 10% increase in broadband penetration results in additional 1.3% growth GDP.

There was this article' Fiber Broadband: A Foundation for Social and
Economic Growth' by Sean williams (BT), from 2013, not sure where I found it.

http://www3.weforum.org/docs/GITR/2013/GITR_Chapter1...

Edited by Nightglow (Mon 20-Jul-15 09:51:20)

Yesterday's Sunday Telegraph (July 19) carries an interview with Gavin Patterson, the current CEO of BT Group.

See: http://www.telegraph.co.uk/finance/newsbysector/medi...

Patterson is threatening to delay investment in "fibre broadband" while there is uncertainty over the future of Openreach.

The difficulty with any spin-off is assigning the correct asset-value to the spun-off component of a business; in this case Openreach. For the party performing that valuation, there's a temptation to undervalue the newly-created stock to ensure a successful IPO. Historically, that is especially true with privatisations; Royal Mail's asset value was probably undervalued by many billions of pounds. If the Openreach spin-off goes ahead, shareholders in BT Group plc will naturally be demanding appropriate remuneration, for their loss of revenues.

In the week in which Ofcom formally acknowledged it was considering splitting BT, Mr Patterson said in a Sunday Telegraph interview that he would respond by stopping investment in the network and turning to the courts.

Mr Patterson said: �This is a commercial enterprise and if there�s uncertainty we will defend the rights of our shareholders, undoubtedly. It puts that investment very much at risk. At the end of it, and if we�re meant to be looking at the next ten years, what do you want to look back on? Do you want to look back at 10 years of litigation and arguments?�

BT is delaying plans for a multi-billion-pound upgrade to �ultrafast� broadband until it gets a decision on the future of the company. A split is the most radical of four options under consideration in a once-in-a-decade review.

As well as threatening to cut investment, Mr Patterson highlighted the £7bn black hole in the BT pension fund, which taxpayers would have to cover if an independent Openreach was unable to make top-up payments.

The chief executive admitted that some shareholders might prefer to cash in on Openreach with a sale but claimed his stance was supported by the majority.

All this talk of break-ups, spin-offs, re-structuring of BT Group and suspended network investment, must be giving City investors the Hebe-Jeebies. Eventually this uncertainty will reflect in the share-price of BT Group plc.

Not necessarily bad all round, though. Potentially good news for those pre-positioned in the futures market; for those investors holding put options in BT Group. Those put options purchased, fortuitously, prior to Ofcom's controversial once-in-a-decade review of BT Group.

Put options are one of the simplest ways to profit from a falling stock price. A put option is an agreement, but not an obligation, to sell shares in a stock at a pre-agreed price (the strike price) at some date in the future.

A profit is made if the stock price subsequently slumps in the time between acquiring the put option and its maturity date. The longer the uncertainty surrounds the future of BT Group, the more bearish the market; the more the stock falls, but ultimately the greater the profit made by those invested in the put futures trade on BT's stock.

Forget it. There are so many state aid and regulatory issues that it will never happen. It runs hard up against competing with privately owned investments in over half the country. Not to mention Openreach is privately owned (worth. perhaps, £15-20bn).

Ofcom and the government would spend their time better on how to work out a regulatory framework which can provide national coverage without the need for great wads of public money, even if that involves explicit levies on operators in "low cost" areas to cross-subsidise "high cost" areas. (Something which the phone USO provides for, but only because of a historical monopoly on copper pairs that doesn't exist in broadband as such).

Urm just to say I posted pointing out that the HS2 money is spread over many years, rather than a single pot.

What does high-speed broadband mean? 15 Mbps is a figure most associated with that wording, but no EU/UK formal definition.

As for ROI - most of these are actually demonstrating that the case for public money investment from Government is high, since the ROI is often NOT to the Telco building the network but many other areas. Also a lot of that paper is not based on FTTP but a mixture of C/P (just like we have) and future gazing of G.Fast

Is that supposed to be the cost of going from 90% to 100%?

If so, it certainly won't be by FTTC or FTTP from OR, Virgin or other. Nor do I believe the final 10% would have anything like that impact on GDP. The relationship will be nothing like a straight-line graph.

I admit I've only skimmed the first few pages of the link, but not seen any ifs or buts. Maybe they come later, but if not then only one side of the argument is being put.

Why would it need to be an IPO?

If it came to it then BT Group could decide to just "split the company in two" creating BT New Group and Openreach with existing shareholders having exactly the same number of shares in each. The market would then value them accordingly. Go back to when Cellnet was separated out.

IF it happens and I don't think it will or if it does it will be a long time coming - shareholders will take every form of legal action they can which would stall any separation, then conditions of ownership should be impoosed. NO overseas investors to hold more than say 0.1% and total overseas to be less than10%, Sky, TalkTalk, Virgin and others can not own ANY shares directly or indirectly ...

Very true; any spin-off need not be done as an IPO. Though BT could potentially use an IPO to relieve itself of (all?) its £13bn debt mountain; the price it will pay to acquire mobile operator EE.

Perhaps ideally, the two operations - new BT Group and Openreach - should have divergent pools of shareholders; to prevent them from acting as one again.

Is the hiving-off of Openreach that logistically difficult? Patterson reckons it is. But BT Group has supposedly been running Openreach in a ring-fenced manner any way. The banks likewise are supposedly ring-fencing their speculative investment arms from their retail banking business (so-called Glass-Steagall Lite). So, it can be done, and has been done fairly recently with, for example, Railtrack/Network Rail and the Train Operating Companies (TOCs) that were carved out of the former British Rail.

Edited by deleted (Mon 20-Jul-15 15:17:32)

The fun starts with all the continuity of service, pension funds and setting up new dedicated R&D resources. Suspect a good few staff would abandon ship too

It is possible, but so many questions and unknowns, for all we know no-one might want to invest beyond existing major BT shareholders, which would give them the largest say once again.

The Ofcom document does go through all the options, and compares to what has happened overseas, but the real thing is whether the split will make certain the new Openreach does ultrafast to NOT just match the Virgin Media coverage (expected 70% with their expansion) but will the change ensure even wider coverage.

Two ways of viewing this if you are an investor with millions to spend on FTTH roll-out, hurry up and gain a foothold now, before a new dominate independent Openreach can squeeze you out - OR wait a few years and invest in the new Openreach itself.

In reply to a post by edwincluck:

the reality for Openreach is that it needs to be re-nationalised, like Railtrack was, to facilitate the massive injection of public funds to update our telecoms network for the 21st century...

I'm not sure that Railtrack came with too many competition issues.

Unfortunately, Openreach does not own 100% of the access network in this country. Virgin has a huge amount, and is investing to expand. Other companies have cherry-picked their own plots, whether that is somewhere like B4RN for remote residences, Gigaclear likewise, Hyperoptic targeting MDUs, CityFibre targetting businesses with a residential offshoot - feeding into Sky and TalkTalk. I'm sure companies like KC, COLT and Vodafone have something of an interest too, and probably many others.

If you want the government to directly inject public funds into one part of a competitive picture, you probably need to be prepared for a fight. both the EC and all those companies.

I don't expect you have much respect for what those other companies are doing, and will aim to just run roughshod over them, but it'll be interesting to see just how you intend to do that.

In reply to a post by alext05:

BT signs up 266,000 new fibre broadband customers in last quarter - article from the Guardian

BT still has a massive advantage over the other players simply because of the "Openreach, a BT Group Company" connection and the immeasurable value of history - I come across people EVERY DAY who are with BT and when you ask them why, they say "because that's the only choice around here" - they have absolutely no idea there's any other choice, think that the cables coming to the premises are BT and therefore BT is the choice - they don't know, or know to look, or even consider anything else.

The "only" provider by default is still very much a big deal - and BT do know it.

A very obvious example, last week I spent the day with an OR engineer working on a particularly awkward line fault, in our travels we came across 6-7 other people who spotted he was "BT" (as they put it) and then asked about broadband improvements - he was actually very good and did hold the openreach line on there being lots of people and he wasn't BT etc, but they all said "well you're part of BT, the van says so" (or rough words to the effect) and when I asked why BT... they gave the same old answer.

On that basis, even without the ridiculous marketing and incentives, they'll get a good chunk of the business without even trying.

To compete with that costs billions - and BT know it.