In reply to a post by Icaras:

Does it make anyone else think that maybe Ofcom are bluffing? There's too much that doesn't make sense isn't there? When you really think about all the fine details anyway.

Yes and no:

From July, I always thought Ofcom were bluffing about keeping "full split" on the table. Their action today, I think, confirms this ...
a) Ofcom themselves argue that it is a step too far, and have done so multiple times
b) I think, politically, the step towards the EU was a singular choice: pick the split type, and go for it. No second chances without looking very foolish, very publicly.

So, yes, I think the "full split" fallback is a bluff. I agree fully with the unions that leaving it hanging indefinitely is utterly unworkable for future investment, and I believe it remains in place as something that Ofcom can "give up" in negotiations.

The language used today, on the "legal split" seems closer to:
- Ofcom: "Hey, ho. No agreement yet. This is the next step. We're still talking though."
- BT: We're continuing with the steps we can do unilaterally. We're still talking."

With that language, it seems more like some subtle statement of "we're not waiting forever," rather than a final divorce (I think MSM has that interpretation wrong).

Combined, it feels more like Ofcom believe they're not millions of miles apart, but need to push BT to cave on something quite unpalatable but not utterly poisonous. Or that they already are near agreement, but it is something that isn't palatable enough to the audience (Sky, government, public et al) ... and they need it to *look* like it was hard-won. Or they need BT to offer a bit more "quid" for the "quo".

So, not really a bluff. But not an ultimatum either.

In reply to a post by MrSaffron:

Don't believe they are bluffing - if they don't go ahead with at least a half way house their jobs would be going elsewhere as Government tried to find others that will do what is the desired course.

This isn't your normal case of "stuck between a rock and a hard place", is it?

There's a third player in there: an unmovable audience. Unfortunately, one that is as knowledgeable as Donald Trump, with the same propensity to outbursts on Twitter.

Reason and sense seem to be in short supply.

No rock and a hard place, prolonged campaigning and posturing is likely to do more damage than any of the proposed solutions.

What I do very much believe is that the public have a very different concept of what the split will produce, and resolving the final 8% issue is NOT one of them.

What TalkTalk and Sky want in my view is a wholesale service that can go head to head and beat DOCSIS 3.1 and thus it has to beat pricing of £18 to £27/month while offering speeds a lot higher than the entry level Virgin Media service.

Alas none of the public posturing ever talks about how this will be achieved or what sort of time scale Ofcom would want for say 50%,75%,90%,95% FTTP. A short time scale would mean a massive short term increase in Openreach employees (or every fibre splicing team from Europe moving to the UK and that might be about to get harder to achieve) and as you ramp up demand salaries of course rise, or at least the money that the contracted firms charge, i.e. just like how construction firms see HS2 as a great thing as its decades of work.

As you say, Ofcom never seem to go into the investment numbers or what the wholesale costs would be for this FTTP service. At the moment GEA-FTTP pricing in no way reflects the extra costs of the fibre vs FTTC deployment. The price of the former is essentially pinned to the latter (at least at the same speed). There is some hint that OR are going to break with that principle in that we may not see GEA-G.FAST product speeds mirrored by equivalent GEA-FTTP ones.

The logistics point you make about the resources available for a full scale FTTP roll-out are, of course, extremely relevant. There is precisely no way that OR will add several tens of thousands of new employees. It would create a massive problem when the build-out ran down and OR found itself with several tens of thousands of staff on its payroll and all the costs and potential industrial relations issues of that many compulsory redundancies. They would have to do it with contract staff, and where are the trained workforce for that sort of exercise?

Then there is the issue of who is going to stump up the cash for all this. OR in the last year invested about £1.3bn from memory (up from about £1bn or so). It's conceivable that OR cashflow could fund perhaps £1.5bn or so and that would mean cutting dividend payments markedly unless borrowing was increased. However, a full FTTP rollout would probably demand another £2bn a year on top of that, even if given the best part of a decade to implement it. That means going to the markets (banks, bonds or shareholders) for finance - certainly for £15bn, and perhaps for £20bn+ over the period. Given that the prospects of raising extra wholesale revenue are limited given VM will clean up should the full wholesale cost of GEA-FTTP (including line) be more than perhaps £14-£15 a year, then how many will be prepared to put that much money up? It has to be born in mind that the marginal increase in revenue is only about £6 over the basic copper pair and scarcely any at all over GEA-FTTC.

As to this solving the last 5% issue, then people can forget it.

The thing is both a split and staying as per now have advantages, but it needs Ofcom to make it clear what it wants from its decision (that keeps being stalled or called negotiation).

It also needs to approach potential investors to feel them out and maybe get a firm commitment to investing ahead of the full split. Put another way boardroom coups don't happen without those behind the coup being sure of backing.

Worst case would be split happens, people continue to moan but no-one stumps up more investment capital so Openreach is constrained by its revenue and thus raises prices or sweats copper even more to fund the roll-outs.

Though some days I think this is actually something people want, i.e. to fail and Openreach wither so that a new entrant can rise without all the baggage of being a regulated Telco. Maybe it will be Liberty Global for the next century.

I do wonder if the BT Board has their own nuclear option they could trigger, roughly along the lines of floating off EE, BT Consumer, GS and as much of the unregulated stuff they can manage and leave what's left with all the debts and pension liability (albeit that there would have to be a one-off payment too break free of their share of the pension liability). That latter would be expensive, but it would remove the uncertainty of the level of that historic liability, Ofcom would have to deal with the issues of the sustainability of the remaining bit of BT Group.

Clearly this floated off outfit will need some form of network capability roughly along the lines of what BTW provide for business purposes, but for internal use only.. Given much of GS relies on these sort of virtual network services for their international offerings then it's not that new. It would also help that OR are being compelled to provide dark-fibre services.

It's a little unclear what powers Ofcom have in this scenario, but I'm not sure the government would like the prospects of the BT pension scheme not being tied into a very large company. The remaining bit of BT Group in this scenario would be fairly small and purely domestic.

In reply to a post by TheEulerID:

As you say, Ofcom never seem to go into the investment numbers or what the wholesale costs would be for this FTTP service. At the moment GEA-FTTP pricing in no way reflects the extra costs of the fibre vs FTTC deployment. The price of the former is essentially pinned to the latter (at least at the same speed). There is some hint that OR are going to break with that principle in that we may not see GEA-G.FAST product speeds mirrored by equivalent GEA-FTTP ones.

The logistics point you make about the resources available for a full scale FTTP roll-out are, of course, extremely relevant. There is precisely no way that OR will add several tens of thousands of new employees. It would create a massive problem when the build-out ran down and OR found itself with several tens of thousands of staff on its payroll and all the costs and potential industrial relations issues of that many compulsory redundancies. They would have to do it with contract staff, and where are the trained workforce for that sort of exercise?

Then there is the issue of who is going to stump up the cash for all this. OR in the last year invested about £1.3bn from memory (up from about £1bn or so). It's conceivable that OR cashflow could fund perhaps £1.5bn or so and that would mean cutting dividend payments markedly unless borrowing was increased. However, a full FTTP rollout would probably demand another £2bn a year on top of that, even if given the best part of a decade to implement it. That means going to the markets (banks, bonds or shareholders) for finance - certainly for £15bn, and perhaps for £20bn+ over the period. Given that the prospects of raising extra wholesale revenue are limited given VM will clean up should the full wholesale cost of GEA-FTTP (including line) be more than perhaps £14-£15 a year, then how many will be prepared to put that much money up? It has to be born in mind that the marginal increase in revenue is only about £6 over the basic copper pair and scarcely any at all over GEA-FTTC.

As to this solving the last 5% issue, then people can forget it.

Much sense in this, especially last sentence (which is what concerns many)

Nobody has yet convinced me that OR are not recruiting and training just as fast as they can find suitable applicants

Sky and TalkTalk are really just mithering on without bringing anything constructive to the party. And Ofcom are falling for it

Sky and TalkTalk are really just mithering on without bringing anything constructive to the party. And Ofcom are falling for it

+1 (although only guessing at the meaning of 'mithering')

Edited by Zarjaz (Wed 30-Nov-16 11:54:52)

In reply to a post by Zarjaz:

Sky and TalkTalk are really just mithering on without bringing anything constructive to the party. And Ofcom are falling for it

+1 (although only guessing at the meaning of 'mothering')

Sorry.

Mithering = northern/Scottish
"moaning, making a fuss" "whinging" "persistently complain in an irritating way"

No need to apologise, I love language, and that's some I'd not come across before, thank you.