Once the agreement is implemented around 32,000 employees will transfer to the new Openreach Limited following TUPE consultation, and once pension arrangements are in place.

Openreach Limited will have its own branding, which will not feature the BT logo.

The Openreach CEO will report to the Openreach Chairman with accountability to the BT Group Chief Executive with regards to certain legal and fiduciary duties that are consistent with BT’s responsibilities as a listed company.

Gavin Patterson, BT Chief Executive, said: “I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.

“This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.”

The transfer of around 32,000 employees, under TUPE regulations, will be one of the largest such transfers in UK corporate history. It will take place once the agreement has been implemented and pension arrangements are in place for these employees. Under the agreement, Openreach will manage and operate its assets and trading but ownership of those assets and trading will remain with BT.

The agreement builds on changes that BT has already made to the governance of Openreach in recent months. These include the creation of an Openreach Board with a majority of independent members.

This Board will set Openreach’s medium term and annual operating plans and determine which technologies are deployed, within a strategic and financial framework defined by BT. Openreach will be free to explore alternative co-investment models in private with third parties.

The post BT and Ofcom agree deal to legally separate Openreach appeared first on United Networks.

Openreach was setup a decade ago after Ofcom’s original review in 2005, which among other things forced BT to open part of their network to competition (“functional separation“) and introduced Local Loop Unbundling (i.e. allowing rival ISPs to install their own kit in BT’s telephone exchanges, giving them more control over ADSL broadband and phone).

Since then the market has evolved and the new “fibre broadband” (FTTC) services don’t offer the same kind of control or price flexibility as the older LLU ADSL solutions. Meanwhile many of BT’s rivals feel as if the operator still has too much control over Openreach and aren’t investing enough in their infrastructure, which they claim has damaged competition and performance.

By comparison BT say they’ve invested billions into the national infrastructure, are delivering a good level of service (i.e. meeting Ofcom’s targets) and claim that their rivals seek a free ride off the back of all their hard work. BT has also warned that splitting Openreach could damage their plans to invest in future “ultrafast” G.fast broadband upgrades and the 10Mbps USO (details).

Furthermore there were also fears about the risk from a protracted legal battle, concerns over how BT’s huge pension deficit and group debt would be split and uncertainty over who would provide Openreach’s future investment. On the other hand BT’s rivals believe that an independent Openreach could have fostered investment into superior FTTH/P technology and made the market more open and fair for everybody.

Ofcom’s job in all this was to navigate the maze of conflicting claims and decide what the market should look like for the next 10 years. The result is a compromise rather than total separation. Not that the outcome is good news for BT and indeed some of the measures look like painful medicine.

Ofcom’s Decision

In the end Ofcom’s review did find “evidence” to show that Openreach “still has an incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems“. It also said that “other telecoms companies have not been consulted sufficiently on investment plans that affect them“, which they believe is something that needs to change.

Summary of Key Changes (inc. non BT areas)

* A new strategy has been proposed to promote the large-scale roll-out of new ultrafast broadband networks, based on cable and fibre optic lines, as an “alternative to the partly copper-based technologies” (e.g. FTTC). Openreach will be required to open up its telegraph poles and cable ducts, which must also be made “much easier for competitors to access.”

* Openreach must provide comprehensive data on the nature and location of its ducts and poles. Using these, rival ISPs will be able to build their own fibre networks, connected directly to homes and offices.

* Ofcom claims that Openreach’s governance lacks independence from BT Group and as a result they will overhaul it, which should allow Openreach to take its own decisions on budget, investment and strategy. The new management would be required to “serve all wholesale customers equally, and consult them on its investment plans“. There will also be greater transparency over how costs and assets are allocated between Openreach and the rest of BT.

* Ofcom will introduce even tougher minimum service requirements to push Openreach into repairing faults and install new lines more quickly.

* The regulator will also introduce new performance tables on quality of service, identifying the best and worst operators on a range of performance measures “so that customers can shop around with confidence“.

* Consumer broadband, phone and mobile operators will also have to introduce “automatic compensation” when things go wrong, such as due to a “loss or reduction of service” (this is a feature that used to only be offered alongside business products).

* Future auctions of radio spectrum, specifically those that will go to mobile network operators, will include new obligations to help improve rural mobile coverage.

* Ofcom will also work to make switching mobile operators easier and will soon publish a new consultation.

* Ofcom also said they would work to help the Government design a 10Mbps Universal Service Obligation for broadband, but then we already knew they would.

The regulator claims that the new model of Openreach governance (detailed proposals on this are expected to surface later in the year) might require the company to “become a ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members“.

Ofcom also said that they would reserve the right to “spin-off” Openreach “as an entirely separate legal entity, with its own shareholders,” albeit only if BT doesn’t play ball with their proposals. But first the regulator will need to address this proposal with the European Commission (EC) and no doubt BT will object.

Sharon White, Ofcom Chief Executive, said:

“People across the UK today need affordable, reliable phone and broadband services. Coverage and quality are improving, but not fast enough to meet the growing expectations of consumers and businesses.

So today we’ve announced fundamental reform of the telecoms market – more competition, a new structure for Openreach, tougher performance targets, and a range of measures to boost service quality.

Together, this means a better deal for telecoms users, which will improve the services and networks that underpin how we live and work.”

The result is unlikely to please everybody and indeed we could well be back here again in the future because the issue of BT’s status in the market is a bit like the playground pinata; every now and then a group gets together to take a bite out of the seemingly unmovable object, such is the reality of being an incumbent Telco in today’s market.

Meanwhile there’s the question of what impact Ofcom’s changes will have upon the market, assuming all of their proposals survive the inevitable bickering match between warring operators. History tends to show that big changes need a year or so to solidify before ISPs start to take advantage of them, but some (e.g. greater access to Openreach’s network) may simply be too attractive to go unused for that long; assuming they can get the prices right (that’s a big question).

At this point we’d say that BT can already grant access to their cable ducts and poles through thePhysical Infrastructure Access (PIA) solution, but this can’t be used for connecting businesses and suffers from other limitations that have limited its uptake. Hence Ofcom are proposing something much more significant.

Similarly there’s the other question of how all this will affect the price that consumers pay, particularly in regards to the impact of Ofcom’s new quality standards and a move towards automatic compensation. Both could add extra costs on to both ISPs and Openreach, which may end up being passed on to consumers (it will be difficult to do this on the cheapest ISPs without raising prices). No doubt ISPs will also want Openreach to help cover the cost of compensating for any related service outage, which in the past has often been a big bone of contention.

At this point we’ve only had a chance to glance at the report and will come back to highlight other details as the day continues. In the meantime the big question mark is over how BT will react and indeed whether or not they might find the adjustment so tough as to prefer a spin-off, but we view the latter outcome as being very unlikely. We expect their response to come at around 9am.

Finally, it’s worth saying that the changes will all be introduced gradually through Ofcom’s periodic reviews (e.g. the next Wholesale Local Access and Wholesale Broadband Market Reviews) and not in one big bang. In other words it could take a couple of years before all of today’s proposed changes are fleshed out and become real for the market.

Ofcom’s Strategic Review (Initial Conclusions)
http://stakeholders.ofcom.org.uk/telecoms/policy/digital-comms-review/dcr-feb-16/

UPDATE 8:13am

Reading through the document we note that Ofcom are not yet proposing to make any firm changes to the pricing of Openreach’s FTTC (VDSL) “fibre broadband” service, which will disappoint TalkTalk andSky Broadband. Ofcom reasons that this could happen in the future, but it also wants to encourage rival ISPs to build their own alternatives.

“Competing providers should be incentivised to build their own networks where this is viable. It must not be too ‘easy’ for competitors to rely on ‘buying’ access to another’s network when there is the potential to invest in their own,” said Ofcom’s report.

However Ofcom’s notes that their position may change, particularly when they come to begin their next wholesale local access review that will cover the 2017-2020 period. “By 2020 superfast broadband services are predicted to account for the vast majority of broadband connections. Pricing flexibility will have been applied to BT’s FTTC investment for 10 years. For this market review, there will be a variety of arguments in favour of reduced pricing flexibility, including potentially reaching the original date for expected payback. In this context, we may be coming toward the end of the fair bet, which could result in a transition to some form of charge controls,” concluded Ofcom.

The post Ofcom Confirm NO Openreach Split from BT, But Big Change is Coming appeared first on United Networks.

Reports at the weekend suggested that Ofcom would not move to separate BT (here) from control of their national UK phone and broadband network (Openreach), although they might keep that option on the table. Never the less Patterson cannot afford to trust in leaks to the media, not least because BT will officially learn of its fate at the same time as everybody else.. tomorrow.

Gavin Patterson said:

“There’s a significant investment that we are ready to make now in the next generation of technology, more Fibre-to-the-Premise [FTTP], G.fast (and) Fibre-to-the-Cabinet [FTTC] … That’s a big decision, we are ready to make it if we get some regulatory certainty coming out of the Ofcom review.

Openreach is the only national player and it is very heavily regulated. We believe having Openreach as a unit within the BT group is good for investment and for research and development, and insures you get a national service at competitive prices. If it’s ever separated, would you see the same investments being made? I very much doubt you would.”

According to a related report on the FT, that “significant” investment would see BT spend £1 billion+on improving UK broadband connectivity. But the commitment lacks key information, such as whether or not this actually reflects an existing pledge or even if it has separated out Capex (capital expenditure) from Opex (operating expenditure).

Readers may recall that BT made a big commitment last September towards improving national broadband connectivity (here) and the bulk of that is focused on their G.fast deployment. BT intends to begin the commercial roll-out of G.fast in 2017 (here and here) and they’ve pledged to make the new service available to 10 million premises by 2020, with “most of the UK” likely to be done by 2025. Initially the service will only offer speeds of up to 300Mbps, before later increasing to 500Mbps.

At this point readers may recall that BT’s original £2.5bn commercial commitment to roll-out superfast broadband (FTTC/P) also intended to deploy significantly more ultrafast fibre optic 330Mbps FTTPbroadband (around 2.5 million premises passed), but the operator ended up dramatically scaling that back in order to focus on cheaper, but slower, 40-80Mbps FTTC. A fair bit of that £2.5bn didn’t get spent, which they’d say is good value for money.

However BT already spends around £300-400m per annum on “fibre” (so we were told last year) and broadly expect that to continue for the next 5 years until 2020, with the majority of future investment likely to support the G.fast roll-out. But BT also told us that G.fast could be done within the original £2.5bn commercial commitment and that begs the question, is the new promise of “significant” investment largely just a re-announcement?

We did shoot off a quick message in the hope of some clarity, although a BT spokesperson told ISPreview.co.uk, “Ofcom will release their provisional findings on Thursday morning and we will respond then. We made it clear in September that we are keen to invest large additional sums in the UK ‘s infrastructure and that has not changed. Regulatory certainty is required however as Gavin made clear yesterday.”

Lest we not forget BT’s other commitment, which originally (2010/11) promised to match the £830mstate aid allocation through the Broadband Delivery UK programme (this is separate to the £2.5bn commercial commitment). At this point it’s becoming hard to distinguish new commitments from old. In any case we might get a clearer answer after tomorrow.

Meanwhile Vodafone’s CEO, Vittorio Colao, also used the MWC event to take a last ditch shot at BT: “A model which was supposed to be neutral and separated has actually been creating extra profits for the company that owns it. It’s a model that allows equal access but a price higher than most European countries. I hope [Ofcom’s CEO] is going to say either that she really supports considering the split of Openreach or at least that she will put much tighter obligations on Openreach, both in terms of performance and pricing.”

We suspect that Vodafone will get at least part of what they want.

The post BT Pledge Over GBP1bn to Boost UK Broadband, But is it New Money appeared first on United Networks.

Instead Ofcom is expected to impose greater separation of Openreach from BT, which could involve giving rival ISPs more access to Openreach’s national network of cables and telephone exchanges (a highly likely outcome). Potentially Ofcom may also require BT’s network access division to have its own separate board, which the operator won’t be very happy about.

However it’s understood that the regulator will opt to keep the option of full separation on the table, which could be used as a bargaining chip should BT move to aggressively oppose their new measures. A BT source told The Telegraph that this may yet result in separation: “It could get to the point of separation by the back door” (i.e. if the price of Ofcom’s new regulation feels too high to stomach).

Naturally all of this is to be accompanied by a variety of other changes to market regulation, which will go well beyond the question of Openreach’s separation. We’ll find out more on Thursday.

The post BT Set to Avoid Openreach Split as Ofcom Opts for the Middle Ground appeared first on United Networks.

At present Ofcom’s on-going Strategic Review of Digital Communications is said to be “seriously” considering the option of breaking up BT, which if appropriate would require the regulator to refer the operator to the Competition and Markets Authority(CMA).

Politicians seem to be divided on the topic, with many supporting such a split (here) and others, such as Ed Vaizey (Digital Economy Minister), suggesting that it has “lots of potential to backfire” and existing “regulations have proved very effective” (here).

Meanwhile BT contends that it has continued to meet Ofcom’s existing regulatory targets and that any attempt to split their business might tie the process up in legal battles. Questions also remain over how BT’s debt / pension pile might be apportioned in the event of a split, as well as the impact on consumer prices from all of the related changes (better services cost more money) and what kind of market model might be adopted in its place.

BT has also warned that their plans to roll-out ultrafast (G.fast) broadband could suffer, but that may be a moot point if FTTH/P ends up becoming the favoured course. Equally there’s a risk that separating Openreach might harm investment in alternative network operators, since Openreach would perhaps be seen as the bigger target for investment. It also remains unclear whether smaller ISPs on Openreach’s network would be winners or losers in such a market.

In to this seemingly endless debate steps the CPS, which believes that separation of BT may be the best long-term fix for the United Kingdom’s telecoms market.

Daniel Mahoney, CPS Economic Bulletin, said:

“The UK’s broadband infrastructure is falling behind international competitors. BT has abandoned attempts to rollout ultra-fast fibre to premises broadband infrastructure. Instead, BT’s focus is on fibre to the network and sweating copper assets, which will provide comparatively slower speeds.

Structural separation of BT Openreach must therefore be considered for the UK’s broadband infrastructure. Regardless of whether there is merit in complaints about BT Openreach’s service provision, the current broadband infrastructure market appears anti-competitive.

The current broadband infrastructure system leads to a conflict of interest in two key ways. BT runs the UK’s broadband infrastructure and service providers are forced to use this infrastructure. Furthermore, BT uses its own infrastructure to provide internet services to customers, which is a major disadvantage to its retail broadband competitors.

Structural separation, however, could provide a market with a level playing field between all players, where the infrastructure that service providers rely on would not be owned by one company. This would be good for competition and good for consumers. There is every indication to suggest that a structurally separated BT Openreach – with various investors – might be more likely to invest in higher speed broadband provision. International precedents from Singapore and New Zealand provide favourable evidence for the structurally separated model.

Ofcom should refer the issue of structural separation of BT Openreach to the Competition and Markets Authority later this month. The Competition and Markets Authority can then investigate the matter and suggest the best ways of increasing competitive pressures in this market.

A delayed decision on this issue will be bad for broadband consumers and bad for the UK economy’s productivity. Previous delayed decisions on improving the UK’s infrastructure – such as that on Heathrow expansion – have been detrimental to the UK economy. Ofcom must not follow in these footsteps.”

A short summary of the bulletin can be found online (here), which echoes many of the arguments that we’ve seen before and suggests that such a move would foster the deployment of ultrafast FTTH/P in favour of hybrid-fibre solutions like G.fast. However it’s worth noting that this would not solve the connectivity problems for rural areas since none of the major players seems to anticipate 100% FTTH/P coverage or even close to it.

Ofcom aims to publish their findings by the end of this month, although it could still be delayed into March or later. At this point the weight of opinion seems to be moving in favour of those calling for BT to be split, but only the regulator can actually make the final decision and history shows that they tend to prefer a less aggressive approach. We shall see soon enough.

UPDATE 4:49pm

The official BT response is as follows.

A BT Spokesperson said:

“Unlike respected independent studies by Ofcom, the EU and others, this blog is under-researched and paints a false picture of UK broadband.

It compares the UK to other countries based only on average speeds, whereas other important measures – such as availability of services, prices and take-up – place the UK well against important international peers. There is also no acknowledgement that ultrafast speeds can be achieved at a fraction of the cost and in a fraction of the time using G.Fast technology pioneered by BT.

Independent analysts disagree that structural separation has been a great success elsewhere. They find that the few countries to try it have either higher broadband prices, slower roll-outs, much larger tax-payer subsidies – or a combination of all three.

There is simply no evidence that broadband investment would be higher or competition fiercer if Openreach became a smaller, weaker, standalone company. How could it, when the UK already has more than 500 firms competing in this market and Ofcom sets 96% of Openreach prices to level the playing field for them all?

As the blog highlights, the UK is in a stronger position than its European peers, and BT has outlined ambitious plans to invest in ultrafast broadband over the next decade.”

The post Centre for Policy Studies Calls for Ofcom to Initiate BT Breakup appeared first on United Networks.

The reaction, which according to The Telegraph also delivers a point-by-point rebuttal of the recent “Broadbad Report” that was signed by 121 cross-party MPs, comes at a time when Ofcom are said to be “seriously” considering (here) the option of splitting BT from control of their national broadband and phone network (Openreach).

BT’s CEO, Gavin Patterson, said:

“Separation would be costly and divert time and funding away from investment in UK infrastructure, at a time when the UK is at a crucial stage of its development as a world-leading digital nation.

Surely those impatient to see yet more homes and businesses get better broadband would rather that the money, time and effort went into the next stages of Superfast broadband, and then into Ultrafast?”

In fairness the “Broadbad” report had plenty of big flaws, such as using out of date information for broadband coverage and failing to do a deeper analysis of its own claims, which is disappointing because it arguably missed a golden opportunity to highlight some very real failings and therefore risked damaging the credibility of its own message.

Never the less the report did succeed in chiming in with all those politicians and people who, in a world where broadband is increasingly being seen as a vital utility service, simply expect an awful lot better from BT and its national service / network delivery business.

Patterson’s letter also pointed to praise of its network from around the world and made specific mention of Australia, which recently highlighted Openreach as an “example to follow“. Mind you this might not have been the best country to use given that Australia’s NBN broadband network project has been historically beset by political division and its many changing choices of technology, which have caused delays and other problems. Lest we not forget that Australia itself is a continent unto itself and a generally very different place from the UK.

Apparently some MPs have been “really aggrieved” by the letter and Conservative MP Grant Shapps, who pieced together the “Broadbad” report, also chimed in to suggest that the operator had gone into “PR overdrive” and should perhaps instead spend such money on improving its service delivery.

On the one hand we can hardly blame BT for moving to defend itself against sharp criticism of its service. On the other hand biting the hands that might one day turn around and cut you into little tiny pieces could risk drawing more support towards calls for the operator’s separation.

At this stage BT perhaps reasons that Ofcom has already made up its mind on the outcome and we’ll probably find out what that is within the next few weeks. Finally, Patterson added that BT was “far from the old-fashioned, unchallenged monopoly some critics seem to suggest“.

The post BT Fighting Against Separation from OpenReach appeared first on United Networks.

According to a status update from AAISP, “BT have a major problem at the moment and lines which log off are unable to log back in again. Our TalkTalkservices are unaffected, and lines which stay online are unaffected. This looks to be a country wide problem affecting many ISPs.” A large number of UK ISPs that use BT’s services (e.g. BTWholesale) appear to be affected by the issue, which began at around 2 – 3pm.

Sorry if your are experiencing network problems. Engineers are on site now. We will keep you updated.

— BT (@BTCare) February 2, 2016

The hashtag #BTDown on Twitter is starting to trend and the advice right now is that if you’re connected then don’t reboot your router as you may struggle to reconnect.

UPDATE 3:52pm

Apparently the problems are also extending to the systems that ISPs use to interface with BT via Openreach / Wholesale, such as diagnostic services. We also note that BT.com is working (partly), but their Service Status page for consumer broadband is not. It’s a very unusual problem.

UPDATE 4:03pm

Anybody expecting an Openreach engineer to visit today may see delays (more so than usual) because even BT’s engineers are being affected by some of the system outages.

UPDATE 4:06pm

Services that make use of Vodafone’s unbundled broadband lines are also unaffected by this problem, much like Sky and TT.

UPDATE 4:16pm

Some consumers who managed to reach BT’s customer support have been told that the ETA for a fix is around 4 hours, which suggests that they know what’s wrong. Otherwise we have so far had no reply from BT itself and our main source of information has been third-party ISPs, which are much more helpful.

UPDATE 4:29pm

Openreach are informing ISPs, such as Aquiss, that the target time for a fix is now 7pm.

UPDATE 4:36pm

Some ISPs are reporting that their API/XML Interfaces may be improving because the connectivity to Openreach/Wholesale is slowly starting to return. The official line from Openreach to ISPs is currently as follows: “We are aware of an issue impacting connectivity to Broadband services and are currently investigating with technical support teams. At the moment, we are unable to inform you of your specific affected circuits and services. Once root cause is established we will issue this detail promptly.”

Unconfirmed rumours are also bouncing around the ISP sphere that a DDoS attack may have been to blame, with everything ending up being routed to the Collindale PoP as all others were suffering problems. We can’t speak to the DDoS attack, but some of BT’s PoPs certainly hit troubled times.

UPDATE 4:49pm

We’re seeing some consumers report that their broadband is now reconnecting, but issues remain for other parts of the UK. Likewise BT’s websites appear to have come back to life after 2-3 hours of turmoil.

UPDATE 4:58pm

The official line from BT is in.

A BT Spokesperson told ISPreview.co.uk:

“Large numbers of customers have been experiencing temporary issues with their broadband services this afternoon. Customers can still receive and make calls as normal.

We’ve been working hard to fix the issue and are glad to report that nearly every customer affected is now reconnected, approximately two hours after the problem started.

We apologise to any affected customers for the inconvenience.

There is no evidence at this stage to suggest that we were subject to a malicious attack.”

The post BT’s National UK Network Suffers Serious Broadband Outage appeared first on United Networks.

Readers might recall that Joe Garner, who had only been in the role for around a year, suddenly announced his intention to step down last November 2015. Garner said he was leaving in order to pursue the same position of responsibility at the Nationwide Building Society.

However the change came at a pivotal point for the telecoms infrastructure giant, which is currently facing the possibility of a split from the wider BT group (Ofcom’s on-going Strategic Review). Never the less Garner is officially expected to take up his new post at some point during Spring 2016 and that left BT to hunt for a replacement.

Thankfully BT appears to have found their man in the shape of Clive Selley, who just so happens to be the operator’s current Group Chief Information Officer (CIO) as well as CEO of BT’s Technology, Service and Operations division. This should make him a good fit for the role.

Clive Selley said:

“I am honoured to have been asked to lead Openreach at this important point in its history. The huge investment it has made over the past decade has made the UK a broadband leader, and we need to build on those foundations by deploying fibre to further communities and by rolling out ultrafast broadband. Customer service is a top priority of mine and I am committed to delivering further improvements by working closely with all industry partners who rely on our network to serve their customers.

Openreach is at the heart of the UK economy with our open access network underpinning a ferociously competitive broadband market. That has benefited consumers and businesses greatly. The engineers are the lifeblood of Openreach and I have been hugely impressed by their tireless work in challenging circumstances during the current floods. They will play a crucial role in the coming decade as they have done to date.”

Gavin Patterson, BT Group CEO, said:

“Clive is a hugely talented individual and I am delighted he has agreed to lead Openreach. He has an unrivalled knowledge of networks and engineering and is ideally suited to take the UK from a superfast nation to an ultrafast one. He supports our vision for the UK’s digital future and will play a key role in ensuring that businesses, consumers and communities receive the services they need and deserve.”

It’s noted that Clive’s appointment coincides with the 10th anniversary of Openreach, which was established following Ofcom’s last strategic review in 2005. As such BT’s press release makes a point of praising the impact that “highly regulated” Openreach has had on the market and also touts its plans for deploying 300-500Mbps G.fast broadband technology to “majority of the UK” by 2025.

However none of that escapes the fact that Ofcom are currently in the driving seat of deciding Openreach’s fate and whether or not BT even retains control of its infrastructure. A decision on that is expected by around the end of February 2016, which is sure to give Clive Seller a few headaches. Whatever the outcome, further change is definitely coming.

The post BT Picks Tech Boss to Become CEO of UK Telecoms Division Openreach appeared first on United Networks.