Ofcom orders BT to separate from Openreach

[ShefStealth 10]

Reported less than an hour ago on the BBC news website - thought it would probably be of interest here seen as a fair percentage of threads end up being about Broadband/ISP issues.

 

BT ordered to legally split from Openreach by Ofcom - http://www.bbc.co.uk/news/business-38141510

[geared 299]

Question is now will it improve service or will nothing change??

 

Openreach are a total shower because they're the only game in town, so if you want something doing it will be done as and when they see fit.

[apelike 10]

If it is split then the advantage would possibly be lower line rentals for broadband which would be a good thing as till now they have a monopoly on them.

[ShefStealth 10]

If it is split then the advantage would possibly be lower line rentals for broadband which would be a good thing as till now they have a monopoly on them.

 

See this is where I think Ofcom is screwing up a little because a lot of products and services are still going to be BT Wholesale's domain. BT Openreach was actually a division spun out of BT Wholesale in 2005/2006 to try and appease the regulators and bring forward LLU from other network providers. It was at this time that BT Wholesale/Openreach upgraded everyone to MaxDSL (up to 8mbit line rate adaptive ADSL v1) in order to try and compete better and differentiate against the LLU providers.

 

Every provider of phone products (with the exception of Virgin Media and Kcom in Hull) operate from BT's WLR. As an example, if you pay Sky for your phone bill (Sky Talk), you've actually got a BT WLR ('Wholesale Line Rental') line that Openreach administrate from a physical point of view, but BT Wholesale administrate from a call routing/pricing standpoint. BT Wholesale set the price of the actual line itself, factoring in how much it costs to power each line, the average cost of Openreach engineers maintaining a line over an average 12 month period, and the cost of routing calls over and between networks. If working on a broadband analogy but for PSTN, it works kind of like a hybrid between the old Datastream/IPstream of old for ADSL on BTs network, and LLU. The WLR is akin to BTs old stream products i.e 'this portion of the data has to run across our network' and the LLU is where the other telco's come in to play.

 

Since BT rolled out 21CN at their exchanges, calls are routed VoIP which brings costs down. They're converted back to analogue PSTN at exchange level. Because of this VoIP routing, the other telco providers can part-route calls over their transits if so wished, again to bring down costs and to balance loads. BT Wholesale then just charges back to the relevant telco when costs are incurred additional to the inclusive call allowance tier that is subscribed to.

 

ISPs/Telco's will still have to maintain contracts with BT Wholesale even if Openreach is legally spun-off as a seperate entity from BT Group. It's basically a fudge. At the moment, all of BTs divisions can cover each other in the event of profit or loss. There's been massive losses previously in BT Global Services division, but this unit was kept afloat by the rest of the BT group's performance as a whole. This isn't going to happen anymore going forward if Openreach is full unravelled - it's purely going to be merited o its own performance terms in the markets. This is partly why BT Group's share holding is going down today even though the physical assets they own will be the same after the company is initially split. BT would still own Openreach initially after a split (owning 100% of the shares) but have to report it as a seperate entity/comany - shares would then be gradually sold in Openreach, initial profits going back to BT group to allow the new company to purchase the company assets outright.

[apelike 10]

ShefStealth

 

Not so sure as Plusnet operate and charge much lower prices than BT, and yet operate as a separate entity as a stand alone company owned by BT.

[Ghozer 112]

and some providers use their own equipment (LLU, mostly TalkTalk and Sky where available) rather than BT's....

[ShefStealth 10]

ShefStealth

 

Not so sure as Plusnet operate and charge much lower prices than BT, and yet operate as a separate entity as a stand alone company owned by BT.

 

BT Openreach's price list for WLR is available online: https://www.openreach.co.uk/orpg/home/products/pricing/loadProductPrices.do?data=63iUyYbpRV%2Fdw36mtxo4r1nqs1m6OcKz301sgolk8P2FdiaKKPEfrCsJCb3sZkzJ - look at Analogue Lines Line rental prices (1.1.2) and you'll see that the line rental cost per year excluding VAT is £86.72 - include VAT and that becomes £104.06 per year - break that to monthly and that's approximately £8.67. This is the cost charged to all telco's (yes, even Plusnet and BT Retail) by BT Openreach on behalf of BT Wholesale (The clue is in the name of the product) - you'll notice that even though Plusnet charge less than BT, they'll never break this lower price threshold as this is the 'cost' incurred to Plusnet from Openreach/Wholesale.

 

Plusnet and BT Retail are treated the same in respect to being a customer facing devision of BT. They are however treated differently for two reasons. When BT bought Plusnet back in 2006, they realised that Plusnet had a large percentage of technically literate users on the platform. It was at that point still considered a 'small player' in the market place (Tier 3, less than 250,000 xDSL) BT Retail as an ISP was at that time and is classed as Tier 1 (1Mil+ xDSL) Although Plusnet is operated 'as a separate company' within the BT group, they still feed in to BT Groups' share price. They are treated as a test-bed platform for a lot of the rollout and tech, and partially because of this then Plusnet is allowed to command a cheaper retail pricing structure, whilst allowing them to utilise hardware available to other BT Retail customers (routers/TV equipment etc.) I can't comment more on Plusnet's traditional relationship with BT prior to their take-over, and some of the other reasons why BT bought Plusnet because I believe I may still be restricted under an NDA. Some of the info is already in the public domain however, such as that BT wanted Plusnet's knowledge and expertise on traffic management at the time, but one of the other main reasons might still not be widely known, and was specifically stated to staff not to disclose.

 

 

and some providers use their own equipment (LLU, mostly TalkTalk and Sky where available) rather than BT's....

 

As I said before, all the telco's have to utilise BT WLR for the phone line which has a set price list and set products for calls within the overall product. This is why all the telco's only offer 'standard line rental' with no inclusive calls, evening and weekends or anytime call packages, partly because these are the main products offered under WLR and are easiest for telco's to allow customers to compare and compete but also because of 'last mile'/peering costs. There will always be some exchanges that the telco's do not have equipment (LLU) that would allow them to route a VoIP phonecall back to analogue PSTN and for this they will utilise BT's network. The telco in question, such as Sky, may utilise some of their own software/hardware in order to route phone calls and monitor for billing, or using other features such as 1471 etc. I know until last year at least, if you call 17070 from a standard BT line, you'll get a BT LDU response but if you call it from a Sky Talk phone line, you'll get Sky's software response and the call won't give a full hardware LDU feedback. I don't think this has changed, but it partially demonstrates one of the few differentials between the telco's and how they can afford to be marginally cheaper. In the main though, they all still rely on Openreach and BTw, even just for PSTN peering and this won't change any time soon.

Edited November 29, 2016 by ShefStealth
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