BT/OR Split!

BT and open reach have been told to legally separate from each other, just heard it on the Beeb.

Thing is will it make a difference?

*Edit to add*
I don't think it goes far enough, I think ofcom should get restructured also as they are completely untouchable from myself and the general public.

Edited by derekdel (Tue 29-Nov-16 08:06:22)

Anyone who thinks this legal separation will be easy and won't cost an absolute fortune should read this link. Specifically the bit about transfer of assets. It's from the union that represents BT staff and sums it up better than I ever could.

Union submission to Ofcom

Interesting.

The phrase engineering reality makes a point that must not be forgotten.

I think you'd be hard pressed after reading the document not to realise that you can't split off Openreach in any way without first merging Openreach, TSO and some of the functions of Wholesale. It just won't work from an engineering and R&D viewpoint.

I really hope Ofcom are properly listening to BT and the union's counter arguments rather than just ploughing on with their fingers in their ears or this will end up doing more harm than good.

If I was the pension regulator I would want a lot shorter period to remedy the pension deficit if the 2 parts are split as the risk increases significantly. ( I am surprised BT were allowed to go to 2030 to start with)

None of the documents I have seen seem to consider the splitting of the BT Debt between the two future parts. This too could get interesting as a significant anount would be OR as they get most of the asset value. All those recently provided Fibre assets, against the practically fully depeciated PSTN and ADSL networks. ( Football rights are paid each year so remain Retail liability but not debt) Only the EE aquisition on the balance for the rump.

Also have to consider the Business rates issue as the vast majority is OR and they will only get the proposed relief on future build NOT the existing fibre rollout.

Wwombat

And I thought splitting Scotland off would be 'interesting' in an engineering sense if they went independant!

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.

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.

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.

Forgive me if I say I don't think they have a clue

Technically, financially, politically

Waste of space

And our money

noone said it would be easy, is doing the easy thing always the best?

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.

In reply to a post by 961a:

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

No they're not. Sky and TT are retailers who want a wholesaler to supply them with products they can sell, not compete with them.

OR will have limits on the number of people they are prepared to employ (and train of course) as they still have cost limits that they have to work to. There's not an unlimited number. However, from the evidence that I've seen (partly on this board from would-be recruits), there isn't an overwhelming number of suitable applicants about. The Jointer in the local pub says as much - the junior member of his team is, from memory, Spanish, and is far from alone. Experience staff are in short supply and are under a lot of pressure. Almost universally the OR people I come across like the work. What they don't like is the constant management pressure to get more done without regard to circumstances. Many problems are much more complex to sort out than OR management (and Ofcom's) assumptions on the matter. All too easy when working at some distance to oversimplify and invent all sorts of procedures and metrics that don't fit neatly into a messy world.

Agreed, there's not many people in the company that don't like the actual work.

I can tell you what I want from openreach, but I know its not what ofcom wants, as it goes against the principle of why ofcom setup openreach in the first place.

My opinion is that openreach needs to deal direct with consumers, no middle men CP's this makes them accountable and also removes the fluff added by CPs onto line rental.

The CPs service would then be for actual calls only (for voice services) and data transit but nothing to do with xDSL openreach rental.

Of course openreach want us all to continue to have no direct contact with openreach to keep the CPs happy.

In terms of investment I think a cabinet only g.fast rollout is a insult, its also a insult that ECI cabinets have no g.inp and vectoring is not planned unless BDUK pays for it in BDUK areas.

To me the future should be a combination of vectored VDSL and FTTP. G.fast shouldnt have a place.

I also think there needs to be concentration on cities, instead of all the focus been on rural to satisfy political objectives. The UK market is really unbalanced right now with urban been under developed as the focus is always on rural. It is just really weird that rural has more FTTP than urban,

My ADSL lack of mention is no accident either, ADSL should be retired, which means also the power cutback can be removed from VDSL improving VDSL services and allowing VDSL to have same range as ADSL.

Edited by Chrysalis (Wed 30-Nov-16 16:36:45)

crysialis you might want that but CP's don't !!!! and have made that very clear
as ts easy to blame someone else

Almost universally the OR people I come across like the work. What they don't like is the constant management pressure to get more done without regard to circumstances. Many problems are much more complex to sort out than OR management (and Ofcom's) assumptions on the matter. All too easy when working at some distance to oversimplify and invent all sorts of procedures and metrics that don't fit neatly into a messy world.

Well said.

I couldn't comment on some of the proposals, but I suspect BT will have some wilder alternatives to ponder.

In reply to a post by TheEulerID:

but I'm not sure the government would like the prospects of the BT pension scheme not being tied into a very large company.

I get the feeling that this will now play a bigger part than ever predicted.

The most recent actuarial value has plummeted. Other valuations seem to have followed the pound down a cliff-face since Brexit.

It wouldn't surprise me if the trustees took one look at the risks, and period, and started asking for topups of a couple of £billion per year for 5 years, instead of the (roughly) £600m for the next 15 years. So much for upgrading anything then.

Very true , but most do hate the stat bods that pass for management . They find it hard to get good new guys as the new contract is so so if near London / SE . How do i know ? a OR trainer told me so.

Why should OR do the work of the SPs ? Taking calls and doing all the fluffy stuff is their work not ORs

In reply to a post by MC31:

Why should OR ... ?

There is one part of the worldwide internet that touches, enters, my house: the twisted pair supplied by Openreach. There's one company's engineers that I need to arrange appointments with: Openreach. Yet I cannot deal with them.

Sometimes, I tend to think that I should have the right to deal direct with Openreach regarding this little bit of metal.

Sometimes, it seems ridiculous to have to deal with Openreach at 2 steps removed, with a game of chinese whispers. It all feels backwards. That the ISPs just get in the way. That ISPs just delay things.

And ... the more that the service over the wire swaps away from separate voice and data services, and turns into one VULA bitstream ... the more I think we should give serious consideration to changing the way that OpenReach interfaces to end-users.

Compare with 1994. BT had responsibility for my phone line; my ISP dealt with what happened at the far end of the line - though the line was circuit-switched through the telephone network. Is it so hard to figure that BTOR should deal with my access line, and my ISP deals with what happens at the far end of that?

Yes, it would be a drastic change. No, it wouldn't be perfect. It wouldn't solve every issue.

When Openreach wanted to be able to contact end-users, the likes of Sky complained and the idea scrapped. If Openreach is forced to split, then that should be reversed.

Dreams, eh?

In reply to a post by MC31:

They find it hard to get good new guys

Is that good new engineers? Or good new management bods?

Absolutely, It's a perfect storm as far as pension fund managers go. BT has the largest deficit, but not by proportion of turnover. We are, of course, seeing the effects of central banks suppressing bind rates.

I don't even thing BT could afford £2bn a year. That would wipe out all but essential capex and pretty well all the dividends too. I do wonder if Sharon White has told her political masters the truth of all this. Even if she has, I suspect they aren't listening.

OR proposed that they should have a direct interface to customers. It was vetoed by the CPs (especially TalkTalk and Sky). So now there are mediating layers which will inevitable cause communication and delay problems

yep, I did typo in my post by the way, which I can no longer edit, I asked the mods to fix.

I meant to say its ofcom that dont want us communicating with openreach, to give the illusion of competition and to keep the CPs happy.

To me it has become very clear that CPs need removing from the contact between end user and openreach.

CPs shouldnt even be able to veto anything, who is regulating? them or ofcom.

Edited by Chrysalis (Thu 01-Dec-16 05:29:03)

The potential issue with direct contact with OR is then the blame game could become even more complex with the end user mediating between the two because they will both blame the other for any issues.

Most users wouldn't have a clue whether their Internet being down is due to the cable itself failing, something in the OR backhaul, their user authentication at the ISP, ISP backhaul to the Internet, ISP DNS services, ISP interlinks, IP address allocation, routing, etc, etc. If a user has to try and pinpoint whether it is OR or the ISP that is to blame for a problem then I personally think it would cause a lot of households serious headaches.

You may know who is to blame for a fault but most users don't and will not want to have to argue between 2 bodies to try and get one to take on the fix. At the moment they argue with the ISP and the ISP should sort it with OR if needed - it isn't working as well as it should but I think for most it is better than the alternative.

At the moment OR network is used by the likes of Sky and Talk Talk who seem to me to provide a very imperfect contact between the customer and the engineer if something goes wrong

Many times it may be something in the property that's causing the problem. But it is the job of the ISP to identify those and then get on to solve real problems outside the property. Too often there is delay and attempts to persuade the customer there is nothing wrong, especially where there is a working but totally unsatisfactory service.

Threats of "if we call an engineer and it turns out to be your fault it'll cost £150" or "wait for 10 days after a reboot and see if it's any better" are all too easy

In the meanwhile we see service standards being reduced by 3rd party ISPs

Ofcom not doing its job IMHO

The pension would not split. It stays with the BT Group. Existing Openrech staff would remmin frozen members of the BT group pensions scheme for new sercice they would become member of a new Openreach Pension scheme

It is not that difficult

� Who would own these shared exchange buildings? BT Group

� Which - TSO or Openreach (or indeed other Lines of Business: many buildings are occupied by employees from every BT Division) � would pay for their upkeep? BT Group


� What about the exchange equipment itself? BT Group except for specific Openrerewach plant


� How would BT partition the capital and running costs of this unified network? It would no longer be a unified network each company would pick up its own costs


� How would corporate overheads be partitioned between Openreach and BT? You dont. Each Company would hve its own corporate management and costs


� What about IT systems, which as an issue is potentially extremely significant? BT reports that it spent £1 billion on creating separate IT systems and processes (and, an even more complex exercise, migrating existing data and processes to them) as a result of the 2005 Undertakings. That separation exercise � which, eleven years after the Undertakings were signed, still has some residual elements ongoing due to its immense complexity � in the main �only� covered systems holding customer data. However, BT has many hundreds of �enterprise management� IT systems covering finance, HR, legal, resource management, procurement, supply chain, fleet management, internal communications, investor relations, etc. These are BT Group-wide systems, so do we have to go through a similar and extremely expensive exercise to that which was undertaken for systems holding customer data? Also, under the Undertakings BT is permitted, with appropriate safeguards, to host Openreach and Rest of BT systems in a single set of data centres. Would Openreach systems need to be moved to their own data centres? All of these

Each businss would have its own IT systems

I have a particularly illustrative story about the confusion in consumer's minds. My mother's next door neighbour, a (very active) widow in her mid-seventies was complaining to me about her BTinternet connection. She only does simple things like email and a bit of shopping and had been taught by her later husband how to turn the computer on. Basically press the silver (power) button on the PC and then turn the scree on.

Here complain was that she was having a lot of problem as, very often, when she went through this exercise she go an error message saying there was no signal, so she'd wondered what BT were up to. She'd also see a man working on a cabinet and thought that might have had something to do with her woes. A little questioning indicated that she wasn't using WiFi and that the lights on the BT box were all green.

Then, having been working on assumption that this error message had been output by the computer, it dawned on me that what she was seeing was the monitor reporting no signal on the video input. Essentially the computer (running WIndows 7) wasn't starting up properly. Most likely it was not waking up properly from a sleep (which I find is not unusual on desktops).

So, if you have users who can confuse a message from their monitor complaining about lack of a video input signal as a problem with their broadband, then almost anything is possible.

Indeed. That could easily have been a call to Openreach for her Internet being down if she didn't have access to someone who could help.

New engineers.

Bob-s2

If the scheme remains with BT Group with no split the pension regulator would likely insist that the historic deficit was made good as it would then be too high risk for the rump company.

Normal terms are 5 Years but at a split of a company the regulator can insist that the deficit is made good before the split happens to protect the pensioners. This is designed to stop management splitting a company into good and bad bits and leaving the pension fund with the bad bit to fail later and selling the good bit on a large profit.

Bob-s2

Apart from approx 150 buildings only the adsl kit is not OR ( Either BTW or CP) so 5200 buildings are Majority OR. The ADSL space is already rented from OR on LLU terms ( Transfer charged or actual for CPs) .

Oftel models the PSTN equipment as front ended OR and backended BTW but the defined split is somewhere within the firmware on the cards within the concentrator so it is not possible to split . The Processors are the only BTW 'owned' part and they control all the rest so it is NOT possible to split the PSTN network.

The IT systems would cost £2 to 3 billion to split apart completely ( including building/renting data centre space) Easiest is to duplicate each system and then wipe the data not wanted in each part, OR then rents the systems from BT Group.

This would all 'eat' the management time and capital for the next 5 years, ( It took more than 7 years to do the undertakings separation to 95% completion!)

This is like a VERY messy divorce with other interested parties trying to put spanners in the works to ensure an acrimonious settlement.

In reply to a post by Icaras:

I think you'd be hard pressed after reading the document not to realise that you can't split off Openreach in any way without first merging Openreach, TSO and some of the functions of Wholesale. It just won't work from an engineering and R&D viewpoint.

So could they split BT Retail from the rest of the group? Would this be easier and meet Ofcom's objections?

BT Consumer. EE and Global Services. However, I'm not sure that Ofcom would like that as the remaining rump of BT Group would have a relatively low turnover (maybe £7bn?) and landed with the great majority of the pension deficit to fund. It would also carry a lot of debt. That will really make investment difficult.

If the it came to forced separation, then that might be the route that BT Group would go. Ofcom would have to redo their sums and might have to change their tune on including historic pension deficits in the costs. This will be particularly so if the pension trustees demand a much faster rate of covering the pension deficit. As it is, they've allowed BT Group to spread it over a very long time.

And the costs of doing so should be added to ORs cost base and then passed on to their customers - It is a legitimate cost, enforced by OFCOM and thus recoverable. I wonder what Sky and TT will have to say when they are asked to contribute towards the bill!

OR IT systems (at least the operational support ones) are already separate, as are BTW's for that matter. However, they do run in shared data centres which inevitably means some share of IT infrastructure too. They also don't have their own IT operational and technical support staff. The only viable way to continue it without immense expense and disruption would be for some form of common IT operations service company which raises charges against the companies.

One thing the legal separation issue would have to resolve (both full and this half-baked Ofcom version) is the software vultures will be looking for opportunities. It would (depending on how its worded) blow holes in existing licensing contracts.

Also, I believe BT has a common internal network. That would be a nightmare to unpick and fully isolate different parts of the business in that respect.

In all, potentially hideously expensive.

nb. Don't assume that Ofcom will revise wholesale rates to reflect any increased costs. They've long gone from doing it that way to retrospectively justifying their decisions. Nobody can ever see all the figures they use as the relevant costs are, of course, confidential.

No way an IT system split costs billions unless the person issuing the bill is taking you for a ride.

As I said before something been difficult or even expensive should not be a valid reason for changing a regulatory decision.

I see one of 3 ways forward.

1 - keep the status quo, I think this is unacceptable, but I know many dont agree with me. BT are a very anti investment company. I predicted 2 years ago that g.fast would be cabinet only and was mocked for suggesting such a thing, but it was a given with BT's history.
2 - Keep openreach as part of BT but have it deal with consumers independently of CPs. This I would guess is cheaper and easier than #1, but has not been considered because ofcom allow CPs to tell it what to do.
3 - split off openreach, this we already know is not a proper split but just trying to make openreach untied from BT in terms of decision making and resources. As expected BT are extremely opposed to this which of course has led to scaremongering been spread in the press and a few people on forums.

In regards to the extra costs, there will be some in the short term, but of course no longer will BT retail be able to use openreach income to subsidise its operations and as such openreach will probably have a net cashflow gain. Tied up capex for 5 years? What have BT promised in that time? a very limited g.fast rollout, Hardly much to lose.

They're only separated in respect of permissions. You can only access systems appropriate to what you do, but they are all on the BT.com internal network and the server addresses show as such.

I had a 40 year career working on the most massive IT systems in the country in various industries. I don't think you've got the foggiest idea just how much major IT systems cost. I invite you to look at the NHS system. Of major IT users, the telco industry comes second only to finance. In a very real sense, telco companies are IT companies.

I'd invite you to work on moving computer centres with thousands of servers, many petabytes of storage without taking systems down, without imperilling services. Try creating a live mirror system and reflecting data to a new site without disrupting services.

In any event, this isn't just about the IT system. It's about the immense amount of untangling of overlapping services, headquarter functions, buildings, pension systems. The ownership of IPRs, software licenses, maintenance contracts. There are HR systems, HQ functions, procurement, research labs and much, much more. Then look at the hundreds of millions of pounds that the mergers and acquisitions industry charges for lawyers,financial services, consultancy and so on.

Perhaps go back and look how much the Y2K challenge cost and the testing round this.

The NHS IT system is reckoned to have cost £10bn. I don't think you have any idea of the scale of what might have to be done.

A full separation of OR and BT will have costs measured not in the hundreds of millions, but the billions to be born by shareholders. It will increase OR operating costs.

Or it could be spent on more FTTP ?

but of course no longer will BT retail be able to use openreach income to subsidise its operation -- this is false and incorrect

retail funds it self -- what utter rubbish to iintimate that retail is funded by opnreach

In reply to a post by TheEulerID:

I don't think you have any idea of the scale of what might have to be done.

Most people don't understand the scale behind telco systems in general. I'm reminded over the Douglas Adams quote from HHG:

In reference to en.wikiquote.org/wiki/Space:

Space is big. Really big. You just won't believe how vastly, hugely, mind-bogglingly big it is. I mean, you may think it's a long way down the road to the chemist, but that's just peanuts to space.

Now, the "ordinary" IS/IT systems probably aren't quite as vast as the operational, data-shifting systems. Though inbetween, there will be a lot of O&M and administration systems.

But a lot of those IS/IT systems are things that have existed for a long time, and have grown over decades, rather than merely been replaced. Dealing with the idiosyncrasies within these systems is probably a job akin to the y2k clock issue. There's probably a lot of Cobol programmers who would love BT to be forced to upgrade their internal systems

In reply to a post by Chrysalis:

I predicted 2 years ago that g.fast would be cabinet only and was mocked for suggesting such a thing, but it was a given with BT's history.

Does your prediction say that BT will stop at cab-only, and go no further?

You couldn't have any downtime either when the switch to separate data centres etc was being done. Occasionally when OR systems go down it's utter chaos. You end up with a massive backlog of jobs so the system just has to stay on.

State IT systems are a bad example, as government projects are a classic example of been able to rip a customer off.

Also developing a new IT system from scratch is not the same as splitting up an existing one.

It is well known in my business circle how easy it is to overcharge government/council customers, it is so easy to make them over pay for stuff. because they are entities that are not for profit and are effectively immune to going bankrupt they dont have the same cost controls as private companies.

Lets put things into perspective to give an idea.

For 10 billion pounds one can have e.g. 50 million enterprise class servers, does the NHS have one server for almost every UK resident? very doubtful.

it funds itself in simple terms, but the accepted profit margin is reduced because the BT shareholders take the profit margin for the entire group, so in other words BT retail can have a slim margin because its compensated by a larger margin from other areas of BT.

Its not rocket science, do you really think competing providers on high cost BT wholesale backhaul could pay the huge sums for sports rights, give the sports service to free to customers, and charge the prices BT do for broadband?

Sky is the closest example and their combined tv/sports package is nowhere near the price of what BT charge.

Openreach tried suggesting 2) but the CPs didn't want it http://www.ispreview.co.uk/index.php/2015/12/bt-open...

In reply to a post by Chrysalis:

2 - Keep openreach as part of BT

So the simple answer is..

BT is openreach and they are no longer allowed to supply internet access to the public.
So to put it simply they have to sell off the BT internet side.
BT/Openreach can still supply basic phone service to public, but nothing more.

This would be far, the cheapest and easiest option.

In reply to a post by Chrysalis:

Lets put things into perspective to give an idea.

For 10 billion pounds one can have e.g. 50 million enterprise class servers, does the NHS have one server for almost every UK resident? very doubtful.

I'm not quite convinced that I can get an enterprise class server, setup with always-on power, HVAC and networking devices, with complete storage and backup system, for £200. Never mind adding the duplication for truly high availability.

I'm pretty sure that this particular perspective is rather wrong.

As I said previously, most people don't understand scale. Attempting to relate a sum of money back to a single computer entirely misses the point about what it actually costs to achieve high availability at scale, merely perpetuates that lack of understanding.

I have an issue with that in that BT tend to not invest well , and my issue is that it keeps BT holding onto openreach, why not the same idea but swapped round? Why the urge to keep BT in control of openreach?

Your idea still has the downsides of a split been mentioned in this thread.

In reply to a post by JohnR:

In reply to a post by Chrysalis:

2 - Keep openreach as part of BT

So the simple answer is..

BT is openreach and they are no longer allowed to supply internet access to the public.
So to put it simply they have to sell off the BT internet side.
BT/Openreach can still supply basic phone service to public, but nothing more.

This would be far, the cheapest and easiest option.

I think this is exactly what will happen in 10 years time when they're sick of all of this. It'll be the reverse of what the press are reporting now in some ways.

Openreach, TSO and BT Wholesale stay together under the current stock market listing. BT Consumer, EE, Plusnet and BT Global Services would be spun off under a different listing.

And you think that taking Openreach out of BT's hands will see a increase in funding.

TBH. Any infrastructure such as this should not be in any private hands. They need to be brought back into the public domain.

Any change in this structure is going to take years and cost a lot of money. Better spent on getting the infrastructure where it should be.

There is no easy way to do what Ofcom want. And they have always had a downer on BT (only company that ever had limits on their pricing set by Ofcom)

All I can see coming out of this is a lot of wasted money and Joe Public getting shafted again, just so a Quango can pretend it has some real power.

I see a recurring theme on this.

Supporters of BT love to give reasons as to why it should not be split.

But they give no specific reasons as to why BT should keep control of openreach.

It is sort of like the last election where the victors won by telling people why to not vote for the opposition instead of why to vote for themselves, a fear propoganda machine.

As I said before you cannot see past the short term, yes it will cost money in the "short term" but so what.

You mentioned infrastructure, but the plan is to do a cheap g.fast cabinet based rollout, no vectoring for commercial vdsl and no mass FTTP rollout project announced. What is this infrastructure you speak off?

Aside from the lack of vectoring it took them 4 years to enable g.inp on hauwei (sky have had g.inp on adsl for 10 years), and there is still no g.inp on ECI. What is going on at that company?

Edited by Chrysalis (Mon 05-Dec-16 14:54:08)

I am neither a supporter of BT or any other company in this case.

The reason not to split is it's a waste of money that can be better spent in whatever infrastructure upgrade they feel will give the best bang for buck.
Of course as a public traded co, this will also include making sure that shareholders get a good divvy

So in this split. Just who is going to own OpenReach and how are they to be funded?

I've given reasons, I think an independent Openreach would have less money available to it. Projects to increase speed would suffer.

In reply to a post by Chrysalis:

You mentioned infrastructure, but the plan is to do a cheap g.fast cabinet based rollout, no vectoring for commercial vdsl and no mass FTTP rollout project announced. What is this infrastructure you speak off?

No mass FTTP rollout? I guess you missed that BT will deploy superfast speeds to 12 million premises by 2020 and 2 million of those will be native FTTP.

When combined with VM's deployment (and others), the vast majority of the UK will have access to superfast speeds in the next few years.

It's amazing the number of people criticising G.fast before it's even been deployed. From a business viewpoint, what % of FTTC customers do you think would actually upgrade and pay the additional premium for superfast speeds now? I would be shocked if it's higher than 10%.

In reply to a post by Chrysalis:

Aside from the lack of vectoring it took them 4 years to enable g.inp on hauwei (sky have had g.inp on adsl for 10 years), and there is still no g.inp on ECI. What is going on at that company?

G.INP has only been rolled out for VDSL2 in the last couple of years. Nothing to do with BT/Openreach, this is worldwide as it's developed by the hardware manufacturers.

Of course it's to do with Openreach. G.INP isn't forced on anyone. Openreach have decided to use it.

Openreach can not implement something that their hardware providers have not developed and made available.

The G.998.4 standard was only approved back in 2010 and it began to appear on VDSL from 2014. The implementation took longer due to the fact there needed to be software changes at the line card and end user level.

With vectoring, I assume that the benefits of g.fast have outweighed the cost/benefits of implementing network wide vectoring.

Yes I understand all that but that's not how your original post reads at all. I understand what you mean now though.

Edited by deleted (Tue 06-Dec-16 11:59:27)

ahh andy you are back now there is a PR battle to be won.

what makes you think this money will be spent on infrastructure? because BT have not made any public plans to bring fibre closer to the home, so I am curious what you have to back up what you saying.

Its hard to divert money from infrastructure when there is no such money, as things stand there is no budget in place for what you said.

so to clarify you think investment would be lower than the amount we have now?

1.4 billion capital expenditure out of 5.1 billion revenue.

Nope, just here to correct what you say.

You're saying their CF/CapEX ratio is low?

Interesting to see how you think they compare to their global peers....

Do we need fibre to the home?
Sure it would be nice, but never going to happen for a long time.

We can't fund healthcare, so getting faster speeds is not a priority.

How any money is spent is not down, to me or you. It's down to the bean counters. But face it, money not spent on the split, can be spent elsewhere.

If Ofcom really thought about what was best for the public. They should split Virgin as well as BT. Then merge the infrastructure of Virgin & Openreach together. Virgin have the makings of a fibre to home network (but only have to do it where they can make money) unlike Openreach/Bt who are expected to bring it to the masses regardless of the cost & return on this.

The best option all round is that the infrastructure is run by someone that has no dealing with the public in terms of product sales.
But to get to that ideal. Really needs the government to take the lead and go the way that has been announced today about the railways.
Not some un-elected Quango who think they know what is best, but have no real idea of what they really want.