Sky plead for Openreach separation - FTTPR

[Work in progress, citations and links will follow]

Sky UK CEO Jeremy Darroch has written an apparently impassioned plea to Ofcom to separate Openreach from BT Group.

A superior digital infrastructure would indeed be great for the UK. Mr Darroch's passion for ultrafast broadband is good, although it doesn't quite seem to marry with his company's own broadband products - no reselling of Openreach's current FTTP footprint, and no 80Mb product that can be purchased online, if a customer wishes to purchase it from Sky they must call.

Their enthusiasm for superfast broadband seemed somewhat lacking, too. They were late to offering services higher rated than basic ADSL for a few reasons. Wanting more control over the service than the bitstream option could realistically provide, essentially wanting all the benefits of LLU, especially cost being the major ones.

Perhaps Mr Darroch would consider, if separation is such a simple, quick fix, putting some of his company's money where their PR is. Sky have given us plenty of Fibre to the Press Release, to the point of a trial in York that looks, more and more, like an extremely expensive lobbying tactic, but have thusfar committed in no way to investment in FTTP post-separation or indicated where all the post-separation investment will come from.

Sky purchased a national network from Easynet, which was used to collect data from BT exchanges. Sky rent links from the exchanges and rent the copper going into them. Their primary TV business does not use their own satellite network, they rent capacity from SES Astra.

Sky's record in the UK is not build networks; they seem more inclined to acquire them if the price is right, and rent them if that's impractical.

Mr Darroch notes the situation in countries elsewhere. He does not note that, for the most part, these conditions are as they are because either the state is heavily involved, New Zealand and Sweden being obvious examples, or in Spain and France where competitors to the incumbent put their money where their mouth is, dropped the FTTPR and set about building the FTTP.

Mr Darroch makes some statements that simply make no sense.

Sadly it is often not economically viable for other providers to roll out separate ultrafast networks. We are working with TalkTalk to trial fibre to the premises in York. While demand is encouraging, it is difficult to achieve a reasonable return on investment while BT Retail remains tied to Openreach. Freeing up Openreach would allow the right level of investment to be made.

BT Retail aren't the ones giving away free broadband, Mr Darroch. The low return on investment environment is one you and TalkTalk made. Your companies are the ones that historically treated broadband as a value added product, bundled in with line rental or TV. BT Retail are regulated to ensure they cannot undercut you.

Not to mention that yourselves and TalkTalk are able to keep this network to yourselves. How do you propose Openreach may deploy a network viably when they are required to wholesale it and may not keep all the revenue from the end customer?

Companies that actually spend their own money building the networks would dearly love to be able to charge more for access, it would allow them to invest more and deliver a higher return on investments. For those companies, such as Mr Darroch's, that do not pay the capital costs of the access networks but instead rent them at regulated prices, there are no such considerations.

Welcome, Mr Darroch, to the market yourselves and TalkTalk have created. The irony of the company that treats broadband as a freebie to be given away with their TV service complaining that people aren't willing to pay for it is tremendous.

He also said things I agree with.

A wise man once defined insanity as ‘doing the same thing over and over again and expecting different results'. With so many agreeing change is needed, Ofcom this week has the opportunity to lead the way. 

I agree. The current approach of regulating Openreach so heavily has allowed your company and TalkTalk to create the environment of low returns on investment, and hence made the UK unattractive to those who wish, unlike yourselves, to deploy more than FTTPR here.

Then sadly ruined it with the rest of the paragraph.

The industry, with much of the nation, will be ready and eager to support it.

Virgin Media who, unlike Sky, do not rely on Openreach and are instead spending money building out their network in competition with Openreach, disagree. I take the words of a company committed to spending £3 bilion on their network over those of a company that is more likely to spend £3 billion buying up sports rights as far as this matter is concerned.

What the UK needs is an environment that encourages risk taking, encourages investment and encourages strong competition. One that presents positive business cases to new entrants, lowers their barriers to entry, and, by producing more competition for Openreach at all levels, encourages them to invest more and to improve their quality of service.

An environment that allows Openreach to make the services and equipment that Sky and TalkTalk rely on to deliver free broadband redundant, and to replace the copper with fibre, improving the business case. It does seem strange given the apparent enthusiasm for FTTP that neither Sky or TalkTalk have reached out to Ofcom to indicate that they wouldn't mind having the equipment they have placed in BT's exchanges made redundant if it meant copper would be replaced with fibre.

I guess the willingness to sweat assets isn't exclusively a BT trait.

The environment that you would seem to want, Mr Darroch, is one where Sky reap all the rewards without taking on any of the risk, and reap all the profit without any concern over how viable the investment actually is.

Which is absolutely what you should be wanting - you represent shareholders and have a duty to deliver the largest return possible to them, regardless of the impact it may have on other companies, the UK as a whole, or your and other businesses' customers.

Wanting it both ways, socialism for yourselves, capitalism for others, rarely ends well.

Random Sunday update - ultrafast frustration, Ofcom

In a somewhat frustrating note today I had a wander to the local supermarket and as soon as I left my own road was greeted by marks on the pavement indicating the route ultrafast broadband is going to take.

There are a fair few people making a lot of use of our existing broadband. More than once during the school holidays I had to play with settings to ensure I could work smoothly. Our speeds are decent, for the type of connection we have we're above average, for the UK as a whole if all were to buy the fastest connection available to them we're considerably below average.

Regardless my only option longer term unless I manage the quality of service on the connection is to purchase a second link in order to keep the online experience smooth, and it's going to have to go through the exact same equipment, copper, cabinet, etc, as the existing one so there are going to be plenty of common points of failure between them.

It shouldn't be this way. I live in the 3rd largest city in the UK, in a densely populated residential suburb. I am quite happy to spend money on my connectivity however if I want truly diverse and strong connectivity the bill for the second line is way out of range for a home worker. The install charge quoted is £6,150 and the monthly fee on a 3 year contract £240. Not a lot anyone who builds networks can do about this.

Any solution would run the risk of requiring street works which are not possible here right now. The more properties covered the higher the risk of street works. The only way to reduce this risk is to cover fewer properties which means higher costs per property.

In other news I've made a few somewhat unkind comments about Ofcom in the past. Seems as though their thoughts with regards to BT and Openreach are politically expedient, extremely incompetent and more of the same - further regulation in order to try and undo the mess their regulation has created. A view I've heard a few times is that Ofcom's end game is to quite literally wear BT down by placing regulation on top of regulation into voluntarily divesting Openreach as it ends up impractical for them to continue ownership.

If this does end up being the case I sincerely hope BT use every tool available to them to push back on Ofcom. We are supposed to have a Conservative government in power; you'd hope they'd be far more enthusiastic about allowing the market to work and trying to ensure that those who've risked their own capital making investments see those risks fairly rewarded. Forcing Openreach to allow access to their dark fibre is opposed by those who've made investments themselves as competitors to Openreach and rather than incentivising private investment actively discourages it. Why invest yourself when you can wait for Ofcom to give you what you want? Win:win - you don't have to spend your own money, Ofcom get to justify their own existence and impress the politicians.

Ofcom certainly seem to have politics down. As with most politicians and political institutions if you think the problems they've created are bad just wait until you see their solutions.

Here's hoping that the rumours are wrong and Ofcom will impress and surprise us all.

Developer delays

So as may have been noted from an earlier post of mine rollout of ultrafast broadband in my area is difficult due to unadopted roads.

This area has had a long history of issues between developers and council, as I suspect most do. The FTTC cabinet that serves the area is only there because the council adopted the road early after a bunch of wrangling with the developers concerned.

I'm beginning to understand their pain. This is from the section 38 agreement governing the road adoption process in my immediate area. The maintenance period is the 12 months between being provided a provisional certificate and the final adoption inspection.

Now I'm not a lawyer but this seems pretty clear. During the maintenance period keep the road to be adopted in good order and fix anything that you find wrong.

The below email from a developer seems to indicate they disagree:

Again I'm not a lawyer and could be, and indeed probably am, wrong, but I'm not sure that ignoring the defects until the inspector has highlighted them and rejected the road due to them is keeping to the paragraph in the agreement above. I would have thought that the developer should be doing a little more than just noting the defects, fixing them would've seemed to be more compliant.

I have, of course, brought this to the attention of the local authority. Because I'm nice like that.

I'm not holding my breath for the developer remedying the issues any time soon, which is bizarre as you'd have thought they'd be desperate to rid themselves of responsibility for roads, not drag the process out.

Input on why they'd do this welcome. The cynic in me says that they are hoping the highway inspector won't see all the issues they are aware of and they can save money on repairs, instead having the taxpayer pick up the tab post-adoption. That is just me being cynical, right?

Dear Ofcom

The claim:

We are analysing mobile prices over recent years in 25 countries. Our findings show that average prices are around 10-20 per cent lower in markets with four operators and a disruptive player than in those with only three established networks. Austria’s regulator says that, since the deal there, overall mobile prices have climbed 15 per cent and by 30 per cent for customers who only make calls and send texts.

The reality:


The worst thing here, for me, is the use of 'Austria's regulator'. Using the, at best, debatable comments of another regulator to justify a position and presenting them as fact. PR was apparently more important than an accurate case. And we can be forgiven for wondering why we don't have the kind of FTTP and 4G networks that others do, and why 3 of the biggest telecomms companies in the world, Deutsche Telekom, France Telecom and Telefonica have either sold their UK mobile company or want to.

A regulator that genuinely cares about quality rather than just retail pricing would be one of the biggest steps towards improving connectivity in the UK, both fixed and wireless. Wide spread challenger FTTP networks are conspicuous by their absence in the UK, Ofcom's policies are at very least one of the major reasons.

ISPReview feature a great comment from NTT Data on Ofcom's position regarding the acquisition of O2 by Three.

NTT Data is, incidentally, the IT services arm of NTT: the Japanese telco that underwent structural separation when its retail and mobile businesses were separated from the rest of the group.