I agree that BT and it's CEO - for the sake of shareholders - have done nothing wrong. That doesn't mean I agree with the actions taken, but they are right for BT. Ultimately a company is there to make profit for its shareholders.

Gavin Patterson has thrown a tantrum in refusing to invest in Openreach whilst the review takes place, but ultimately that's what he's required to do by law - he has to act in the best interests of the current company and this is what he feels he has to do to do that. This is what officers of a company are required to do.

Ultimately, BT as a group is better off with Openreach - they can run a less than perfect service. Every company offering phone and data services over the network has to use. This limits competition, and limits Openreach having to perform, because whilst BT Retail have to use the network and services, so does everyone else.

Now the crux is that it's best for BT to take money generated from Openreach and invest it to the benefit of other parts of the business. BT's aim is to make the group as a whole the most profitable, and the best way to do that is in areas where there's less competition.

BT Retail has a lot of competition from a phone and broadband perspective, but there's much less competition on the TV front, and especially the sports front. Instead of being a race to the bottom with hundreds of providers that they have to give equal access to their services for, with TV there's much less competition and their platform is their platform - they don't have to allow competitors to re-sell it.

I think this has led to Openreach and its network being somewhat neglected. From a BT shareholder perspective though, it makes absolute sense to take money from Openreach and use it to improve other offerings from the group as a whole. It's not so rosy from the perspective of a consumer of phone and data across the Openreach network though.

If you were to spin Openreach out, so it has a separate set of shareholders and was a standalone company - not just ring fenced in operations but actually a separate company - then it means that the officers of the company would need to operate in the best interests of Openreach. That would most likely be to invest in its own infrastructure.

The problem that it would create is that there would still be little to no real external competition - which means that either the company would need to be re-nationalised and run properly, or something like a levy or tax charged of the new separate company and then passed to competitors to build out alternative infrastructure. I don't think either solution is perfect, but I think both would be better than the current situation.

In the case of a levy or tax charged to a new spun-out Openreach, this could be used to create grants that VM, Hyperoptic, et al could apply for (a la BDUK but with Openreach excluded) to build alternative infrastructures alongside Openreach's and increase competition?

Of course, a tax could be applied to those services provided by the winners of these grants to create a circular investment into the country's infrastructure - maybe these "secondary" levies or taxes could be ring fenced for grants to provide infrastructure to areas without a minimum level of connectivity (e.g. rural, etc) until we have a decent national infrastructure?

In reply to a post by edwincluck:

BT is now minded not to invest any further in fibre roll-out, while Ofcom reviews its wider business. Someone please explain how that non-accountability of a private business is better for UK plc?

BT is accountable to its shareholders and of course it will continue to invest - if only as the BDUK contracts make it a legal obligation.

BT have always said they would continue to invest if there was a stable regulatory environment - they are not the ones changing this.

In addition, BT management could be potentially breaking the law/face lawsuits if they invested lots of money into Openreach while facing the risk of separation.

Cough £3bn underwritten by Government that is behind the Virgin Media lightning expansion and that is with VM in its current form to give UK 70% ultrafast

Openreach is far from perfect but not sold on the other scenarios as there seems no guarantees they will be better. Certainly no overnight fix is possible, so remedies that are needed in the short term might be better addressed via existing Openreach rather than a massive upheaval and uncertainty.

In reply to a post by MrSaffron:

Cough £3bn underwritten by Government that is behind the Virgin Media lightning expansion and that is with VM in its current form to give UK 70% ultrafast

Openreach is far from perfect but not sold on the other scenarios as there seems no guarantees they will be better. Certainly no overnight fix is possible, so remedies that are needed in the short term might be better addressed via existing Openreach rather than a massive upheaval and uncertainty.

The only way I think you could improve things under the current Openreach would be to not just ring fence operations but ring fence all revenues, profit and loss... In which case for both Openreach and BT Group's future prospects you may as well formalise the split with two sets of shares?

Decisions for Openreach could and would then be made in Openreach's favour and not those of the wider BT Group - which would still be the case even if you just ring fenced anything monetary within the group as there would still be the same set of officers calling the shots.

In reply to a post by MrSaffron:

Cough £3bn underwritten by Government that is behind the Virgin Media lightning expansion and that is with VM in its current form to give UK 70% ultrafast

Sorry meant to address this too. This is a very good point - but this isn't entirely what I was proposing (In know that the £3bn has already been underwritten).

I meant a levy and grants that were created specifically to fund infrastructure directly creating competition in the first instance via a levy of Openreach... Then a levy from this new infrastructure to provide grants for infrastructure to support poorly connected areas....

Edited by MrBukey (Tue 21-Jul-15 13:59:06)

Bizarre! We lived a few doors from Sir Clive, bless him! In *his* own words he admitted to running a Black Propaganda Unit tasked with demonizing publicly-owned industry including the GPO; ultimately loosening it up for privatisation. Was Sir Clive lying? Surely not; why would he?

Party landlines are a funny old legacy thing. Though it's only by putting them in context with the era that any comparison with today is insightful.

Landline ownership in the 1970s, like motorcar ownership, was way below the saturation we enjoy today. We had a party line in the early 1970s. It wasn't ideal, but we made do. We only really used the phone for emergencies and for brief voice calls to arrange appointments. Putting in a dedicated line for us eventually happened by c.1978; still pre-privatisation. The work must have cost thousands (all underground urban cabling).

It would be years before the GPO recouped its expenditure on us. But the GPO still did long-term planning; that's something you don't see very often with privately-owned BT. Today, it's all about gouging a quick buck to assauge the shareholders.

So, what relevance today in the prevalence of party lines in the 1970s, other than as Black Corporatist Propaganda, to fool us into thinking that privatisation has served us well?

We could just as easily say that data rates in the 70s under the GPO were 300 baud at best, therefore the megabit rates we enjoy today are thanks to privatisation, rather than natural technological progress.

Cheers, Edwin

In reply to a post by MrSaffron:

I guess party lines were all a conspiracy too.

What is interesting is to look at the number of staff that were employed by GPO one presumes to keep Strowger running

They were very noisy places, when racks and racks of selectors were banging away on a weekday, ear defenders would not be out of the question.

In all fairness, shared service lines were not unique to the GPO, they were more to do with an inability of many telecom company's, both private and state owned to keep pace with an every increasing demand, but the GPO along with other state providers was hamstrung by lack of investment from government. There was always more pressing demands for taxpayers cash.

I would point out the expected life span of a VDSL2 cabinet, the architecture used on the fibre splines that means G.Fast and FTTP is possible and that the exchange handovers are capable for well into the future when g.fast and FTTP is common.

The technology may naturally progress, but electronics are not sentient enough to upgrade themselves yet.

At the end of the day one side says investment is happening commercially and on the other side there are those campaigning for Government taking back Openreach as a national local loop as that will guarantee investment. The chances of that with a Conservative government is NIL, under Labour it might happen, but at five years or more for that to be an opportunity.

In reply to a post by edwincluck:

Bizarre! We lived a few doors from Sir Clive, bless him! In *his* own words he admitted to running a Black Propaganda Unit tasked with demonizing publicly-owned industry including the GPO; ultimately loosening it up for privatisation. Was Sir Clive lying? Surely not; why would he?

Somehow that doesn't ring true for this person. He would be much too aware of the consequences of such a statement becoming public knowledge to say such a thing, unless in context and in obvious jest.

(Reads ...)

He's a fascinating chap . Thanks for mentioning him. I really do think, after reading that, noo_^oo.

In reply to a post by MrSaffron:

I would point out the expected life span of a VDSL2 cabinet, the architecture used on the fibre splines that means G.Fast and FTTP is possible and that the exchange handovers are capable for well into the future when g.fast and FTTP is common.

The technology may naturally progress, but electronics are not sentient enough to upgrade themselves yet.

At the end of the day one side says investment is happening commercially and on the other side there are those campaigning for Government taking back Openreach as a national local loop as that will guarantee investment. The chances of that with a Conservative government is NIL, under Labour it might happen, but at five years or more for that to be an opportunity.

With demands for money from education, defence, the NHS, DWP and an ever increasing ageing population why on earth would government of any colour want to bring Openreach into public ownership? they may wish to regulate its operation but that is a different thing.