There's not much about the Goldman Sachs summary that I would disagree with. Quite simply, with the way that Ofcom regulate the industry, there are exactly the same economic drivers at play, and there is no reason why it will change the investment decisions on any great level.

The point about g.fast wholesale pricing is going to be interesting. It's not obvious that there's any basis for Ofcom to regulate prices on that product anyway. Firstly, nobody has got the faintest idea what the takeup is likely to be. Secondly, it's clearly in direct competition with VM's products and. in much the same areas. It is therefore likely that pricing will find some natural level. Personally I doubt there's a market for much more than a modest premium over GEA-FTTC wholesale prices. This is more about market protection.

At base, Openreach is a £5bn a year turnover company with very limited prospects for growth, in large part, because of how it is regulated. That puts a limit on the capex as if it exceeds depreciation it will increase current account costs unless it leads to other sorts of efficiencies. The ownership of OR is irrelevant in those calculations.

In addition, there is only so much Ofcom can do by just interfering in the structure of BT given the twin issues that its dealing with privately owned assets and there are historical liabilities (namely the pension fund deficit). Without the government stumping up a lot of money, it had its hands tied and was faced with the very real prospect of legal action from shareholders and pension fund trustees. That''s not to mention a period of great uncertainty and a very possible drying up of investment.

Notably the German government has taken a different approach with huge wadges of public cash, dwarfing anything that the UK is prepared to do.

Ofcom have under delivered here, this is no where near a openreach seperation, BT still control the budget which was one of the main problems.

I also think they are taking a wrong path where they are helping CPs like sky and talktalk pretend openreach is not using BT infrastructure by removing the BT branding instead of doing the opposite which is having end users have a direct relationship with openreach. I think ofcom have lost it, just obsessed with competitors getting good access to openreach.

Edited by Chrysalis (Sat 11-Mar-17 20:28:28)

In reply to a post by Chrysalis:

Ofcom have under delivered here, this is no where near a openreach seperation, BT still control the budget which was one of the main problems.

After the many months of watching the debate concerning splitting Openreach from BT Group, I have yet to see a coherent argument explaining how such a split would improve broadband coverage and/or speeds for end users.

The same commercial drivers will still apply i.e. Is this ultimately profitable and worth doing.

I haven't seen any of the complainant ISPs suggest that they would be willing to commit any of their own capital to further the roll-out, but instead appear to want OR to take all the commercial risk with capital investment, so they can then offer a service over the top.

If it were to be found that OR have deployed in an unfavourable location and take-up is low or fails to recover the deployment costs, the competitors have lost nothing as they have made no investment.
I'm not aware of an agreements such as "If you deploy here, we will contribute (insert % of costs) if we don't buy X services within Y years). Instead they just shout loudly that OR are failing to deliver.

In reply to a post by Chrysalis:

I also think they are taking a wrong path where they are helping CPs like sky and talktalk pretend openreach is not using BT infrastructure by removing the BT branding instead of doing the opposite which is having end users have a direct relationship with openreach. I think ofcom have lost it, just obsessed with competitors getting good access to openreach.

My experience is that some competitors like to give the impression that they are able to deliver super-dooper-ultra-mega-fast services, unless they can't - Then it's Openreach's fault.

OR are far from blameless with their service levels and undoubtedly deserved a good kick to make improvements, but the constant cries from the pitchfork wielding mob appear to be more of an attempt at a punitive punishment rather than making improvements.

If somebody can explain to me how divesting OR will change the commercial criteria and make the unprofitable profitable, I'm happy to learn.

chrysalis most service provider don't want openreach anywhere near their end users (was frimly rebutted a whiles ago - Openreach Charter)-- and would rather not have any openreach branding at all

At base, Openreach is a £5bn a year turnover company with very limited prospects for growth, in large part, because of how it is regulated. That puts a limit on the capex as if it exceeds depreciation it will increase current account costs unless it leads to other sorts of efficiencies. The ownership of OR is irrelevant in those calculations.

By far the best post on here so far, I think you are 100% on the money.

In reply to a post by MrSaffron:

If the poster has proof of their accusations then they should take it to appropriate authorities, otherwise it just reads as random musings that could land the poster with libel claims.

Hey Ho...

Don't get Ofcom at all. This is a fudge at best. Ultimate power is still where it was before.

Would have made for more sense to tell BT that they have to sell off the retail side (broadband & phone) and make BT = openreach.

Please can you edit the Subject to Re: Openreach to separate from BT Group (not)

Else if someone replies to it without change we not only now propagate the untrue one but also its capitals and misspellings, with the *DELETED* stuck on to make it even worse.

I agree with your post content by the way . The problem there though is that it is Openreach revenue that fuels BT Retail's pension fund. There are also many other divisions, Global and Wholesale being only two. Wikipedia doesn't seem to have any of them listed and I can't fix that here and now.

Edit: Ah, found this. BT Consumer is of course what we usually call BT Retail. The final one in the list I think is usually called BT Operate, and it reads to me as if chunks of that but not all will form Openreach LoB.

Edited by RobertoS (Sun 12-Mar-17 10:35:50)

I know they dont hence my post.

But a proper regulator would be telling these providers what they want is irrelevant.

Now there is a story about ofcom wanting to reduce the money openreach get paid for FTTC ports, ofcom seem to have no clue. Just obsessed with hammering BT's wholesale operations thinking that will fix everything.

Ofcom is really coming across as a government sponsored bodyguard for all of BT's competitors and not much else.

In regards to ownership there is relevance as been part of BT group openreach will be contributing to things like dividend payments and also able to offset expenditures in other divisions such as football rights. I agree of course tho that openreach would never be able to invest more than it makes without borrowing.

Whilst I often come across as anti BT its more I just want more aggressive investment in better infrastructure and better access to the company that controls that infrastructure, the current middle man arrangement is extremely anti consumer.

Everything ofcom does seems to be with the aim of directly helping BT's competitiors and not much else.

Reduce openreach wholesale line rental whilst at same time no caps on retail line rental (maximises profit margin for retail operations whilst strangling openreach)
Intention to reduce wholesale cost of FTTC ports at dslam. Likely also with no intention to regulate retail pricing.
Honour the requests of BT's competitors to not allow openreach to communicate or have a commercial arrangement with end users, I dont even see how this benefits competition as ultimately there is still only one local loop provider.

When analysing ofcom, they dont act like a regulator, rather they act as some kind of competition enforcement officer. The only recent actions taken that directly manipulate the end user's agreements are the regulation that requires them to let people out of contracts penalty free on price increases and the ASA stuff, the ASA has been far more beneficial to end users on broadband than ofcom has. As its the ASA that has introduced things like speed estimates, unlimited usage guidelines and the changes to line rental advertising.

Where would we be without openreach?

Its easy to assume we might only have BT as the only xDSL supplier in the UK, but I dont think that would be the case. When I first got ADSL in the year 2000 it was with freeserve and it was before openreach existed, granted I never had a direct relationship with openreach, it still proves competition can exist 'without' the current openreach arrangement.

Also it would have been more likely not less that new infrastructure would have been laid e.g. without the current artificial arrangements sky have thanks to ofcom's intervention, they may have been forced to rollout their own local loop to get the operational margins they wanted, and at the same time BT would be getting more of the revenues from local loop revenues making a better business case for investment.

Before the split saga hit the press last year ofcom had supposedbly acknowledged the current system was no longer fit for purpose and some kind of big change was needed, this led to the speculation that a split was forthcoming or if not a split some other type of large change. In reality they have done what they said they wouldnt do which is to leave the system as is, the current changes are actually quite minor in the grand scheme of things, they have done what I consider to be the worst thing. I would have supported either a proper openreach split or dissolving openreach and having it simply revert back to BT (whilst removing regulated wholesale pricing). Ofcom ultimately did not have the balls to do either and simply chose the path with the least obstacles, the easy option.

To ask openreach to improve performance whilst at the same time reducing their revenue just shows how silly they have got, such a request is clearly just them doing what they told by BT's competitors.

Consumers can have a direct relationship with openreach by paying openreach directly for line rental, the call's and broadband delivery can then be provided by one of multiple companies as is now, so competition can still exist without this silly system and it would be better, unless of course you are a CP who wants to steal openreach's profit's and pretend you own a local loop.

Edited by Chrysalis (Sun 12-Mar-17 21:15:03)

Roberto

Technology, Service and Operations is the division that provides all the Design, Build and Operate of all the technology (*) for all the other divisions on a internal 'subcontract' basis. Except for the Openreach Plan, build and operations It also does all the research for all divisions on a subcontract basis ( including OR). Experts can move between projects for different parts of BT but there are information Firewalls (and NDAs) between each part with severe penalties for trying to break them.

* Includes PSTN, Interconnect, ADSL, Core, Transmission, VOIP, Ethernet, Data centres, software development and Call centres ( Not the people just the technology) etc.

Retail was split into Business and Consumer some time back.

I see this video on the bbc news site someone posted on kitz, where the boss of ofcom thinks somehow this will make FTTP more likely.

Misleading advertising? Maybe I should report ofcom to the ASA

http://www.bbc.co.uk/news/uk-36892461