Jilted Partners Call for Breakup

openreach

The failings of Openreach ring throughout the industry are to such an extent the frustration for many smaller service providers can be so great that many of them list Openreach at the top of their list of bugbears, above fraud, in life. Structural separation has been floated as the answer to all our woes but does the industry agree? Comms Business went to find out!

It is unanimously agreed that Openreach are not providing an expected level of service across the entire market. Whilst this is not exactly a new revelation it is very much relevant as Ofcom undergoes its Strategic Review of Digital Communications after Openreach was created ten years ago.

Many smaller service providers currently feel like they are being treated unfairly. Speaking to Clifford Norton, MD of Channel Telecom, he outlines how dealing with Openreach is now having a significant impact on his business. “Every month we have to fill in a template form, which we can only do once per month, with all the missed appointments and the various charges they shouldn’t have charged us. That could be between £16k – £20k pounds in incorrect charges in any month. After you send that template into billing at Openreach we have to wait three to four months for them to decide how much of it we get back. I could be sitting on £50 – £60k worth of money which I have had to pay Openreach for things I should never have been charged for in the first place. In that time customers often turn to us and say if we charge them for things that didn’t happen, like missed appointments, then they will leave us. We constantly lose customers because of this situation.”

Nortons’ story is not an unfamiliar one…

Neil Watson, Head of Service at Entanet, says that his company believes that Openreach need to be made more accountable and must be made to up its game. “The current levels of service are simply not acceptable and a more effective solution needs to be found for the good of the whole industry”, he states.

At present, he says, all communications providers receive equally poor levels of service from Openreach and that it does appear to favour other BT companies in some situations. Watson dismisses BT’s assertion that any enforced separation from Openreach would threaten investment as “questionable” and points out that the company is continuing to plough millions into buying the television rights to sporting events.

The question is, what can Ofcom do to ensure Openreach delivers an acceptable level of service so providers can get on with running their business rather than having to deal with unnecessary headaches?

Ofcom’s Strategic Review of Digital Communications is examining competition, investment, innovation and the availability of all digital communications services. These include broadband, mobile, landline and bundled services.

Sharon White, Ofcom Chief Executive, said: “This review is about ensuring people get the best possible communications services, wherever they live and work.

“Our priorities are clear. We want to promote competition, investment and innovation, so that everyone benefits from even better coverage, choice, price and quality of service in years to come.”

The Great Debate Continues

One of the major areas of debate within the review is the proposed structural separation of BT and Openreach. BT and their CEO Gavin Patterson fail to see what separation will achieve and is currently threatening ten years of litigation and under investment in the UK infrastructure if Ofcom were to enforce a split. The industry as a whole seems to be split over the proposal too,

Mark Salvin, CEO of Swift Managed Services, commented on Ofcom reorganising Openreach “Ofcom don’t seem to do much, I wouldn’t hold your breath on this one.”

David Beaton, IT Director at Midas Group, said “To my mind the biggest problem we as a business encounter is the Openreach monopoly on last mile connectivity to many of the sites we try to connect. Dealing with Openreach is like walking through treacle at the best of times and a lack of serious competition or access to their network breeds complacency, poor process and delay. I don’t see how splitting them from BT will improve this – the root of the problem stems from the way BT was privatised in the first place, giving Openreach a monopoly – I think (anecdotally) in New Zealand they approached this in a much better way. If you want to see real change you should split the network assets (physical fibre) and service layer by giving other competent installers more access – if I never have to speak to Openreach again about missed appointments, changes to agreed surveys, contractor delays or their impotent Indian call centre that just tell you to ring back in 24hours it will be a good thing.”

Rob Pritchard, Owner of benchmark-it.co.uk and former BT employee, said “The best long-term solution would be true infrastructure competition wherever viable from the likes of Virgin, CityFibre, Hyperoptic and others – this would drive better value and improved service levels. If Openreach is so bad, you have to ask why alternative providers have not made more of an impact – even if only at a local level in the more competitive cities and towns. Is it easier for network-based competitors to complain than to address the potential market opportunity?”

Barry Johnston, from Onega Consulting said “An even greater disaster waiting to happen. A separate entity will fall prey to larger concerns such as Sky and Virgin.”

He continued, “One would hope that the caveats could, and will, be enforced and a better service would come out of a separation but history tells us that this is usually not the case. Even though Railtrack is supposed to be untouchable by other entities, the quality of delivery has suffered and the service to the public is really no better than it was.”

David Alldritt, Technology and Innovation Director at HighNet said “Structural separation has much to commend it. I hope that Ofcom reach the same conclusion. After 10 years the original ‘Undertakings’ have failed to deliver appropriate service levels, and investment in infrastructure and engineering resources haven’t matched the cash returns that Openreach bring into BT Group. Functional separation remains a flawed concept when the interests of BT Group shareholders have priority over delivery of services to CPs, end-users and all other stakeholders. A separate business could potentially deliver much better value for money, and although It won’t be an easy transition best to bite the bullet and get on it with it asap.

Hands in the Air!

BT’s position on the whole thing has been unwavering. In a statement to Comms Business they said “We do recognise that service needs to improve, but there’s no evidence that splitting Openreach from BT Group would achieve that.

It’s worth noting that Openreach is currently exceeding all 60 of Ofcom’s service targets and we are delivering on time more often, fixing faults faster and reducing delays. Openreach has also been investing significantly to improve service, including the recruitment of an additional 3,000 engineers, but we accept there’s more to do. There has been progress though, and we fail to see why an independent Openreach would provide better service.

Finally, structural separation in telecoms has had questionable results in New Zealand (where prices and coverage lag the UK, despite high public funding) and Australia.”

BT CEO Gavin Patterson has been quite clear where his allegiances lay, with BT shareholders. He has threatened a legal showdown and a decade of under investment just when the UK needs it most. The next phase of broadband is called “ultrafast broadband” and requires a significant cash injection to roll out, Patterson is holding back the development until Ofcom rule out separation.

“At the end of it, and if we’re meant to be looking at the next 10 years, what do you want to look back on?” he asks, in an apparent aside to George Osborne and Sharon White, the recently installed chief executive of Ofcom. “Do you want to see the UK still at the forefront of the internet economy, with the most developed online economy in the world by some definitions? Or do you want to look back at 10 years of litigation and arguments?”

Patterson is adamant that Openreach benefits by being under the BT roof, he said, “Openreach benefits from being part of the wider BT group, it’s not the other way round. Its rivals seem to be framing it as somehow Openreach funds the BT group. It’s quite the opposite. Openreach benefits from the balance sheet of the BT group, the scale of research and development in BT, and from the ability to ensure there is a customer who will buy its services.”

Ed Says…

In what feels like an elaborate game of chess and with multiple smokescreens there is a lot at stake here. Is separation the answer? Perhaps not, but something needs to drastically change in the near future. We will be discussing this topic at the Convergence Summit on the 7th October in a seminar being run by the FCS. Come along and have your say.