BT Broadband
January 5, 2010
In previous lives I have traveled the world for business reasons, so I keep a watchful eye on Telecom happenings in other parts of the world. When I spot something interesting, I like to share it with readers.
I just finished reading an article in the Financial Times about British Telecom (BT) and a relationship they have with Carphone and Sky. Carphone and Sky have been asked by BT to make a buy commitment of ₤1.5bn ($2 billion+) as potential customers for wholesale broadband products that BT is planning…the subject is investing into fiber networks – not wireless. I discovered, however, that this nugget is not the real story.
The really interesting part of this story is the regulatory influences on BT. OFTEL (which is the equivalent of the FCC in the United States) had BT split itself several years back into basically two companies – a retail and a wholesale company. The wholesale company is called Openreach and it controls/owns the backbone and copper access networks. They treat BT retail like any other customer under an open access model (I have written about this concept previously–open access at the curb to any premise). Openreach maintains a quasi-regulated, monopoly-like wholesale business for wholesale access services yet open to competition.
This model has been in effect for several years now. According to the article, BT retail has a 30% market share in retail, and is now a dwarf in relative terms, to other Euro-based fixed line providers that were not split like BT.
The numbers really caught my attention. Openreach, in the first six months of its current operating year, has posted revenues of ₤2.6bn ($3.6 billion+) with an operating profit of ₤586m ($980+ million). The numbers and results are really interesting, especially in relation to the whining in the United States about the ILECs.
Once again, as I have admitted in previous posts, I am a bigot – a fiber bigot. Fiber is first and, in my opinion, anything else is a waste of money until the fiber is installed.
In regards to splitting up the ILECs in the US in a similar fashion as BT, that horse has already left the barn due to laws such as unlawful seizure of property and FCC agreements.
The whining continues while the FCC is formulating a broadband policy over the next few months. Based on what I have read, we still have the same whining going on relative to the ILEC and future broadband policy. My favorite – lower prices on special access!
Here is my opinion. If you are a carrier that likes the ILECs infrastructure so much (yet claims the ILEC is ripping everyone off), why won’t a CLEC or a consortium of CLECs or a consortium of CLEC’s and Cable Companies make a cash offer to the ILEC to buy the equivalent footprint of an Openreach? Think about the benefits: lower prices, full last mile access control and, most importantly, you would get the ILEC as a built-in customer right out of the gate. Sounds like heaven to me!
Wall Street can put a value on the ILEC Openreach equivalent assets, given the Openreach results. So call your favorite Wall Street Banker and hop to it. Have I mentioned that I am tired of the constant whining about the ILECs? Debt markets are open and I am sure your banker can advise you accordingly. The ILECs have already demonstrated a willingness to sell off these types of assets just this past year. So what is stopping you? Or is it just easier to complain and blame than adjust your business model (that may have been flawed in the first place)? Free will, free choice – you don’t need government intervention. Pardon the pun – you just need to get a “backbone.” And the fastest way to get one is to buy it out from under your supplier the ILEC.
My fantasy is that the FCC actually reads this blog…I am fairly confident President Obama checks it daily. Here is the straight deal – since the Communications Act of 1996, decisions have been made. These choices have been made freely based on different business models – no one was Tony Soprano’d into anything. Business models were conceived of free will, free choice and in some cases, knowingly subject to swimming with the ILECs (under regulatory oversight that had never been tried). Many business models were “advised” by the really smart people on Wall Street as well.
It is now 2010 – it has been 14 years since CA1996…and just like a bottle of 14-year aged fine wine, I continue to hear the same 14-year bitter whine. After 14 years, don’t you think a different approach might be justified, especially given where the United States falls relative to high-speed network rates when compared to other advanced countries? This small-scope thinking of copper loops and special access is hurting America. 14 years of ILEC network infrastructure arbitrage has gone on long enough!
Now that I’ve explained and articulated the BT scenario, join me for my next post as I offer my recommendations to the FCC and President Obama for a sensible broadband policy.
Written by Dave Rusin - Telecom Executive
Posted by wbrache | Filed Under Infrastructure and Bandwidth, Telecommunications industry
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It’s surprising, but welcome, to read about a model that Britain got right; especially given that OFTEL/the government had something to do with it!
Yep, it does seem to have worked, even at first a lot of the industry were somewhat sceptical. Fair play to OFTEL, and now it looks like this idea is expanding to BT fibre ducts (http://www.samknows.com/broadband/news/bt-to-open-up-fibre-ducts-to-rivals-10405.html) \o/. It possibly could be exciting times over this side of the pond! (for once!!!)