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Last updated: September 22, 2005 3:50 pm

BT reveals business unit forced on it by regulator

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The public face of BT received a makeover on Thursday when the group unveiled Openreach, the branding of an operationally independent business unit it was forced to set up as part of a regulatory settlement aimed at encouraging greater competition in the telecommunications sector.

Ben Verwaayen, BT chief executive, took the wraps off the new identity of the division, which was previously known as Access Services but has now been branded Openreach. The new unit will include almost the entire company’s field engineering force and half its fleet of ubiquitous white vans.

The move is part of a deal with Ofcom, the combined telecoms and media watchdog, which was reached in June as part of a strategic review of the telecoms sector with the core aim of breaking BT’s stranglehold at the local exchange level. Rivals have long argued that BT’s control of this economic bottleneck had stifled competition.

Ofcom confirmed on Thursday that it was closing the book on its review following a final consultation period with the industry. It differs little from the draft proposals it published in June, which were warmly welcomed by BT’s rivals at the time.

The creation of the access services unit is designed to ensure that rivals receive the same treatment as BT’s retail business. Over the years, rivals have filed a string of complaints highlighting the preferential treatment that BT’s wholesale business had given the retail unit in the past.

One industry executive on Wednesday described the new regulatory blueprint as the “biggest sea-change in regulation in 20 years” back to the privatisation of BT in 1984. The new unit will be headed by Steve Robertson, a senior BT executive, but oversight will be ensured through the creation of a compliance board.

The board, which comes into being later this year, will have five members, including a BT non-executive who will act as chairman. BT can also appoint one other executive from just below board level. The three other directors will be independent.

Openreach will begin operating in January 2006 and will have revenues of more than £4bn, or almost a quarter of BT’s total annual sales, and assets worth around £8bn.

The move will see the size of BT’s wholesale business, which operates the network and designs new products and services for use by rivals and BT’s retail business, cut by more than half as 15,000 of its 28,000 staff move over.

A further 15,000 staff will move from the retail business, which currently employs just under 40,000. The new business’ 30,000 workforce will include 25,000 field engineers.

It will also take 22,000 of the company’s fleet of 44,000 white vans, which over time will be repainted with colourful “waves” to emphasise the distinction from BT.

The rebranding of the network access unit was a key demand from rivals, who argued that the halo-effect of BT engineers turning up to fix faults at premises that were using another service provider helped the incumbent win back customers.

As the Telecom Adjudicator reports, “right first time delivery” has gone backwards for two consecutive months. That means that one in four customers do not get a service that works on the agreed date.

Cable & Wireless, BT’s biggest competitor for fixed-line services in the UK, said there was an opportunity for real change, but Francesco Caio, chief executive, said BT’s service to its competitors remained inadequate.

“Openreach must improve dramatically on BT’s performance in consistent and reliable, right first time, delivery of local loop unbundling,” Mr Caio said.

“It is that, not the name on the vans, that customers and Ofcom will watch to see if these pledges will deliver the innovation and choice that have eluded UK consumers for too long.”

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