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[Chrysalis]

I still have verizon's CEO comments in my head when he mentioned the savings on maintenance from ditching copper were so big that it almost in itself funded their fibre rollout.

The answer to your question ignition is sadly BT are thinking only short/medium term, I still remember your payday loan comment and still think it has a ring of truth to it.

[gt94sss2]

I reckon the skewed risk has resulted in Openreach seeing 20-25% less investment than it should have.

I doubt it's that great. Ofcom often produce 'interesting' figures but they are usually based on economic theory and the assumption that BT is an (economically) efficient operator which is virtually impossible to be in real life.

As such, I doubt the extra CapEx expenditure would be much higher if Openreach was independent- in fact, if I put my mind to it, I could easily make a case tha CapEx would fall if Openreach was separate.

I know BT has previously also made the statement that the CapEx figures are misleading as you can now buy much cheaper and capable kit than previously- so the spend goes further and is not directly comparable- make of that what you want.

The way Openreach is being run is nuts. They are hiring engineers to maintain an obsolete network rather than trying to replace it. I just don't get the thinking on this. Surely with borrowing being so cheap across the board they should be investing heavily into capital expenditure in order to lower operational expenditure going forward, not hiring engineers to get the KPIs on their copper network up?

It's being run in order to meet the targets it's regulated against with the prices/return fixed by Ofcom. It might be crazy but it's perfectly logical - and as a company they always have to remember the pension deficit - in fact it's often joked that BT is a pension fund with telecoms sideline.

[gt94sss2]

We just don't know how much is destined for better commercial G.Fast coverage through Openreach, or for better NGA coverage through Openreach (via increased BDUK offsets, or USO funding), or for better 4G coverage with EE. We do know it isn't for TV rights.

Not sure why I have formed the impression from but I think that in the early years the investment will be more around 4G and meeting the requirements of the emergency services communications contract.

This will expand the reach of EE's 4G network, thus having a commercial benefit as well - I suspect the spend will then change to g.fast as the technology will be more mature and demand will hopefully have been proven.

[niemand]

It's being run in order to meet the targets it's regulated against with the prices/return fixed by Ofcom. It might be crazy but it's perfectly logical - and as a company they always have to remember the pension deficit - in fact it's often joked that BT is a pension fund with telecoms sideline.

I'd have thought carrying lower operating costs going forward would've been better for the pension deficit than taking on a bunch of new staff who will, in time, be wanting retirement benefits too.

Over 90% of the UK is passed by FTTN now, with zero prospect of any exchange lines being retired.

Of course these conversations may have gone on in the background as I said, but I'm very surprised there wouldn't have been any kind of leak or PR.

Speaking with a CTO of a firm in the sector the ideal would be getting shot of BT Retail from the group, getting rid of LLU and replacing with bitstream-based VULA products and a PIA+ product.

Sadly this is probably beyond the wit of Ofcom to contemplate.

[gt94sss2]

 I suspect that they wouldn't be significant cost savings until fibre largely replaced the copper network -  until then BT would need to maintain the copper network while hiring lots of staff to install fibre in the interim - for little immediate gain.

We also have to face the fact fact of the 500 odd Openreach customers customers only a subset retail fibre products.  Having said that I understand BT have said that ISDN and PSTN should be switched off in 2025 and have previously spoken about wanting a sunset clause for things like copper LLU.

I haven't studied the figures in detail but it looks like the current NGA investment is effectively only replacing the revenue that Openreach lose elsewhere due to price controls on other products.

One pensions the problem is historic -  the current schemes will be much less generous and based on more realistic life expectancy..

[Chrysalis]

ofcom would implode if we killed LLU, it is their baby.

[WWWombat]

I reckon the skewed risk has resulted in Openreach seeing 20-25% less investment than it should have.

Those numbers - when you put them in real terms how do they look?

I'll help - the 1.108 billion in CapEx from 2006/7 would be 1.446 billion now.

Does that take account of the fact that Ofcom have a built-in reduction of investment in the older networks, and a built-in escalator (downwards) of regulated income to match?

Or are you calculating primarily from the cost of capital to Openreach vs the rest of BT?

I tend to think that the "growth factor" perhaps applies only to the unregulated side of the investment. So far ... more to read though.

The way Openreach is being run is nuts. They are hiring engineers to maintain an obsolete network rather than trying to replace it. I just don't get the thinking on this. Surely with borrowing being so cheap across the board they should be investing heavily into capital expenditure in order to lower operational expenditure going forward, not hiring engineers to get the KPIs on their copper network up?

I'm obviously not privy to the behind the scenes regulatory discussions but surely if BT were making an effort to take the FoX project beyond the trial stage we'd have heard more about it, if nothing else through BT's PR machine?

If BT had something to gain from fibre, we might see more action. As things stand, they'd have to supply VULA, so limiting income, and offering no particular spur. And there's be no reduction in expenditure, as they have to keep the copper network fully up and running anyway. There is no "savings from maintenance" - the USO and all that malarky.

There is talk of BT wanting to kill of the PSTN as we know it in 2025, but doing so likely needs a lot of USO adjustments - what service(s) will they be required to provide? How, technically? What quality? The impact on copper for the service itself, and for quality assurance/testing? With the answer to some of these, you can start to ask the knock-on questions for LLU supply.

I don't think there's a coincidence in the new USO negotiations being slated to trigger regulations from 2020, and BT's switch-off date of 2025 - a five year notice period to LLU companies.

Once BT get approval to lose copper where they see fit, then you might start to see fibre being rolled out in such places as a direct consequence of the reduced maintenance. Until then, the threat of demands from TalkTalk etc hold it at bay.

[WWWombat]

Not sure why I have formed the impression from but I think that in the early years the investment will be more around 4G and meeting the requirements of the emergency services communications contract.

I think I reached the same conclusion.

[WWWombat]

Speaking with a CTO of a firm in the sector the ideal would be getting shot of BT Retail from the group, getting rid of LLU and replacing with bitstream-based VULA products and a PIA+ product.

I agree with you/him about the LLU and PIA+ parts. I worry that cheap/regulated VULA products detract from the prospect of real fibre - from either BT or from some entity making serious use of PIA+.

No comment though, on splitting retail out.

[kitz]

If there was any splitting off to do.. I still maintain retail is far more logical than Openreach.  It would also put a stop the the BT sport argument.

iirc then BT'r profits were 2nd to Openreach.    If you looked closely at the figures, a stonking big chunk of Openreach's profits came from BTr

[niemand]

I agree with you/him about the LLU and PIA+ parts. I worry that cheap/regulated VULA products detract from the prospect of real fibre - from either BT or from some entity making serious use of PIA+.

No comment though, on splitting retail out.

I shouldn't have used VULA there really, as what I'm thinking of is quite different from unbundling, however I had a more 'flexible' service model in mind than fixed tiers. VULA was completely the wrong term though

With Retail gone BT Group merge Openreach and Wholesale and we can follow a Japanese model where people pay the telco for the access line and the ISP for the Internet access.

In Japan people pay NTT directly for flets, so a charge levied by the telco depending on whether they are served by FTTP, FTTB or VDSL, and bring that flets service to the ISP.

[Chrysalis]

Makes too much sense ignition, ofcom are obsessed with the idea that openreach do no deal direct with the consumer.

[gt94sss2]

In Japan people pay NTT directly for flets, so a charge levied by the telco depending on whether they are served by FTTP, FTTB or VDSL, and bring that flets service to the ISP.

Having lived in Japan for several years, the situation there isn't as simple as you suggest/may appear from here. There is a lot less competition in Japan, much higher prices and they have much weaker regulation.

I was however interested to read that BT said recently:

Today, customers get a telephone line as a pre-requisite to having a broadband services. With single order broadband, customers will no longer get a telephony service with their line, they will get a physical line over which broadband is delivered. From 2018, we expect on the BT network that if the customer also wants a telephony service, there will be a pre-requisite of having a broadband line and that by 2022 we anticipate that the PSTN voice service will be withdrawn.

Edit: which is a few years earlier than I expected

[c6em]

Makes too much sense ignition, ofcom are obsessed with the idea that openreach do no deal direct with the consumer.

To be honest I tend to agree with them to an extent.
The ISP's act as triage for BB and phone faults to weed out the dross/nutjobs/forgot to turn it on types.

So BTOR only focus on the "real faults".
If BTOR had to deal with this lot they would have to set up a full customer "handling" as I might put it(!) systems in place.
All of which will cost at lot....and all of which would be past on to the consumer as higher bills.
Then there is the pass the parcel problem already happening now where voice blames BB and BB blames voice when your voice and BB supplier are different.

Were it not for the above I'd also be an favour of the 3 monthly payments sort of thing.  One to the network operator, one to your voice service provider and one to your data provider for your BB service.

[WWWombat]

I was however interested to read that BT said recently: [ snip ]

Edit: which is a few years earlier than I expected

I expected that kind of start date, but the finish date is a long way in advance of what I thought. My timing was based on the change of USO (from voice to broadband) plus a minimum of 5 years ... hence 2025.

Interesting that VM don't think we've reached the point of needing a broadband USO at all, while I suspect that BT consider it mandatory so as to get rid of the old voice one.

Do you have a full link to that quote?