Eh?

Where are they getting this number from?

At the same time, Openreach has prioritised paying large dividends to shareholders over investing in the country’s digital infrastructure – consistently offering 15% return on equity to investors.

15% on equity? How?

44 comments on “Eh?

  1. Although there’s been moves to separate OpenReach from BT operationally its still effectively a wholly owned subsidiary (unless I’ve missed something recently).

    My guess is that 15% is the gross profit or EDITDA or some other pre tax, pre investment metric which could be made to look like a “dividend” to BT.

    PS If Labour really did want to do something innovative they could force BT to sell OpenReach, The industry has been clamouring for that for years because BT used OpenReach’s monopoly to stymie completion for years eg duct sharing.

  2. …nationwide full-fibre is estimated to provide a potential boost to productivity worth an estimated £59bn.

    I’d like to know where they get this figure from. Having an internet connection is a vast benefit. But how many businesses benefit from a data rate better than can be obtained on a 4G connection? You’d have to be handling an enormous amount of data in real time. How many businesses do that?

  3. Thanx Tim. And particularly for the foto you chose to illustrate with. I suspect there a similarity to the oversell used to flog performance cars going on in ultra-broadband. Sure it’s great to have something will break 0-100 in under 7 seconds & top out at 155. But you’re commuting on the M25. Also known as willy-waving.
    But like Labour, still no actual numbers. Or are there none? Just the glossy brochures?

  4. Actually cloud services probably push the demand for data rate in businesses, though I don’t know of any economic benefit studies. Also if you look at data centre comms infrastructure such as switches & routers, the year on year capacity increases are staggering. We’re now up to 100Gbits/sec interconnect.

  5. I’ve seen this sort of claim before.
    If a share which trades for £1 pays a dividend of 1.5p, then the yield is 1.5%.
    i.e you get paid 1.5% of your investment per year.

    But if the paid up share capital of that share (a purely arbitrary number, for anyone buying, selling or holding the share) is 10p, then the “return of share capital” is 15%.

    Eldridge Pope used to come out with statements like this. Long gone.

    I wonder if similar ignorant or mendacious misunderstanding is behind this 15% claim.

  6. Thinking about it a bit more, cloud services became possible and profitable because of the maturity of the Internet at that point, but they are probably pushing rate increase requirements just as much as, say, Netflix.

  7. unfortunately the “policy” is popular with the youth. It would be good to see a proper debunking on a mainstream media channel, but it isn’t going to happen! Most of today’s voters have no experience of the pain of nationalised industries, and unfortunately don’t even understand the impact the “policy” will have on their pensions! Hence the same popularity for the idea of re-nationalising the private bits of the railways, without even realising that when it goes wrong it is because of the publicly owned bits.

  8. “consistently offering 15% return on equity to investors.”

    The company was only formed in 2017, it hasn’t had time to consistently do anything.

    “Investors” There is one share. It is owned by BT.

    As John says, no dividends have been paid.

  9. Aren’t we in danger of saying “640 KB ought to be enough for anyone”? Yes, you could do an awful lot with an old PC – even connect to the internet – but the rest of the world has moved on, and you can barely load a website with 640 MB, let alone KB.

    The same applies to broadband. In theory we can do an awful lot with just 2 MB broadband; but if the rest of the world is on gigabit fibre, online services will be built around the expectation of fast internet; and businesses won’t be able to benefit.

  10. You’d think they would type “Openreach Dividend Yield” into a search engine, wouldn’t you ? Or that some Guardian reader would think … that sounds a lot ? But no. BT’s DY is 6.9% (which is high) but is under severe pressure.

    Any company with a 15% DY is either fraudulent , on the verge of bankruptcy , or both.

  11. I have no idea about the figure, but high end ‘broadband’ does make remote working vastly better. The effect on GDP and productivity I have no idea

  12. Andrew M;

    Traffic expands, etc etc, road capacity, and the size of internet pages – about an order of magnitude over about a decade.

    Anyway, in the article, the author mentions access to banking services, and kids unable to do their homework as they can’t get online. Ignoring two things there (those kids might not be happy when they no longer have that excuse, and what the hell are they expected to be doing that requires 50Mbps for an hour or two five days a week?), ultimately what has snaffled the capacity over 2400-56k dial up, dual channel ISDN, to ADSL and now VDSL?

  13. Andrew M – But we haven’t been standing still. Fixed line broadband in the UK has been getting faster year on year. FTTC is commonplace even in rural areas now. It’s probably more difficult to find a house that only gets 2Mb type speeds than one that gets at least 20Mb. Most exchanges are set up to offer a multiple of competing service providers.

    I suspect the real action is 5G anyway. Since 2007 it’s been mobile that’s driving consumer grade digital transformation. Facebook and Google would be a fraction of current values without mobile internet. Apple would still be dependent on selling overpriced laptops and music boxes. Uber, Tinder, etc. wouldn’t exist (maybe that wouldn’t be a bad thing).

    It’s not so much the internet connection itself, as having it in your pocket or on your fondleslab that makes the difference. 5G might make the whole idea of FTTP for consumers as redundant as telegraph poles.

  14. Can someone explain how 1Gbps vastly improves home working over 10Mbps? I suppose there are some use cases where this is so but surely the majority of remote/home workers are office drones running a thin client which is merely showing the output of the office big boxes? Netflix recommends 5Mbps for HD streaming which would seem to require more bandwidth than that thin client.

    I’m happy to have someone enlighten me as to otherwise.

  15. Roamer – 10mbps download speeds are probably just about ok for most remote workers, but the upload speed will be a fraction of that, which is a pain in the arse if you’re trying to upload chunky files. Unless you’re an astrophysicist or video editor it’s hard to imagine a use case for consumer gigabit uploads though.

  16. ” essential for cam work and video game/esports streaming in HD. Obvs. ”

    So the camsters & video game jocks might like to chip in 15 billion to pay for it?

  17. Andrew M,

    “Aren’t we in danger of saying “640 KB ought to be enough for anyone”? Yes, you could do an awful lot with an old PC – even connect to the internet – but the rest of the world has moved on, and you can barely load a website with 640 MB, let alone KB.

    The same applies to broadband. In theory we can do an awful lot with just 2 MB broadband; but if the rest of the world is on gigabit fibre, online services will be built around the expectation of fast internet; and businesses won’t be able to benefit.”

    No, it’s not that at all. It’s about the value of different sorts of information compared to the size.

    You can get the information about a hotel (in text) like the price of rooms, check-in time and so forth within 20-30kb.
    You want a 3 low-res images of the hotel, that’s 200k
    You want a dozen images of the hotel, the rooms and the view, that’s maybe 3mb.
    You want a 30 second video of the hotel, that’s 90mb.

    That’s descending value per kb. I could happily book a hotel, generally, based on the second option. It’s nice if there’s a 30 second video, but you don’t get much useful information in that 90mb.

    Most fibre is purely for entertainment. As Steve said, there’s some niche uses for massive volumes of data. Personally, I do less than I used to, because we mostly do data processing on cloud servers now. If i want to kick off a job against a huge data set, that stays on the server and I process it on the server, not on my PC.

  18. roamer: “Can someone explain how 1Gbps vastly improves home working over 10Mbps?”

    This brings back a memory from the dark ages, when companies started firing secretaries (Those capitalists fired WOMEN? The patriarchal bastards!) and putting computers on every engineer’s desk. Some of the engineers complained, mainly because they missed the female company, but using the excuse that they did not know how to touch-type.

    The VP coldly responded — “An engineer who can type with 2 fingers can still type faster than he can think!”

  19. … but if the rest of the world is on gigabit fibre, online services will be built around the expectation of fast internet; and businesses won’t be able to benefit…

    This sounds hauntingly like the HS2 argument. It’s worth building because X will benefit from faster travel. We have an excellent system for dealing with propositions like this. Capitalism. If it’s such a good idea X can pay for it.

    Nothing against ultrafast broadband. Great idea. But not on the public tit. If it’s such a good idea the beneficiaries will stump up for it.

  20. Faisal Islam (BBC econ editor) has just pointed out on Twitter that the wage bill alone is over £850m and those jobs have been guaranteed.

  21. What’s the need/desire for fast internet upload rates?

    A simple one for domestic users is use of a ‘cloud’ backup scheme like BackBlaze.

    If you want to be fairly sure your photos are safe (and your ripped-from-vinyl-which-is-a-real-pain music) then you’ll be squeezing a terabyte or more up to the cloud. That takes days to weeks to months depending on speed – for the initial backup.

    Which is why I run BackBlaze in Texas (200-300 Mbs download, 20-30Mbs up) but NOT in Normandy.

  22. “A simple one for domestic users is use of a ‘cloud’ backup scheme like BackBlaze.

    If you want to be fairly sure your photos are safe (and your ripped-from-vinyl-which-is-a-real-pain music) then you’ll be squeezing a terabyte or more up to the cloud. That takes days to weeks to months depending on speed – for the initial backup.”
    Fuck! I never knew uploading selfie backups to cloud storage was so important. Let’s spend 50 billion.

  23. I wonder how many of those who complain about slow broadband are connected to crap and badly placed broadband routers by wifi on old devices?

    My desktop is connected directly and I get 60+ mbps but over WiFi the best I get is 30 mbps. In some parts its down to a couple of mbps.

  24. You can get the information about a hotel (in text) like the price of rooms, check-in time and so forth within 20-30kb.
    You want a 3 low-res images of the hotel, that’s 200k
    You want a dozen images of the hotel, the rooms and the view, that’s maybe 3mb.
    You want a 30 second video of the hotel, that’s 90mb.

    But the web page you load will only contain the first two – the hi-res images will load on demand, and the video will be streamed, which can all be easily handled within a 10Mb connection. I think that just reinforces the point that BoM4 is making.

    For me (in a Chilterns village) FTTC and a standard phone line gives me 75Mb down + 25Mb up, which is more than enough for my needs. I might pay a few quid more a month for FTTP, but it would just be for bragging rights.

  25. Roamer- essential for cam work and video game/esports streaming in HD. Obvs.

    I thought the key for video games was latency once they get above a certain rate?

  26. For remote and distributed working, videoconferencing can eat quite a bit of bandwidth, and it’s an area where there are sudden jumps in usefulness as quality improves: it goes from being a distracting annoyance, to being somewhat useful for some meetings, to being genuinely helpful for all routine meetings, to being a massive aid to productivity. I’m someone who “doesn’t do” video — I can’t learn from video and don’t watch TV — but I’ve been surprised how helpful a dedicated videoconferencing setup can be.

    I always thought an always-on link between the members of a team would be neat. I think the audio side is more important than video — and much more difficult to implement. Not sure if there’s been any progress on this recently, as I retired a few years ago now.

    I’m sure it’s reached the point where it’d be much better to reduce latency than increase bandwidth. For audio, I seem to remember less than 100ms end-to-end can be ignored — you learn to accommodate that much delay in speech — but once it goes over something like 200ms you start tripping over the next person to talk. Much more than that and you need an explicit turn-taking arrangement, and that doesn’t feel natural.

    Also, symmetric bandwidth is what counts, if you’re talking about helping business. Huge downlink speed with a modest uplink is all about TV. Sofa-based consumption of approved content, with the uplink needed largely for licensing, metering and surveillance.

  27. @Tim W

    Labour’s plan is to compulsory purchase at price they decide and pay with bonds, not cash.

    Sounds like expropriation (Zim, SA etc).

    Is this legal in EU?

  28. @bis November 16, 2019 at 5:31 pm

    This sounds hauntingly like the HS2 argument. It’s worth building because X will benefit from faster travel. We have an excellent system for dealing with propositions like this. Capitalism. If it’s such a good idea X can pay for it.

    Spot on. Capitalism wants to build anything that makes a profit. Capitalism – City Fibre – have today cancelled a £1.5Bn fibre expansion (FT) Talk Talk cancelled an IPO/Float of a subsidiary yesterday

    If HS2 made sense a Capitalist consortium would have built it

    @BlokeInTejas November 16, 2019 at 5:53 pm

    If BackBlaze so important to you, You could pay for a faster speed in Normandy

  29. @ Pcar
    Since when did Labour care about whether it was legal?
    When Burmah Oil’s case (against Harold Wilson as President of the Board of Trade) finally got decided in their favour by the House of Lords, Harold Wilson (as Prime Minister) put through a new law to cancel the judges’ decision.

  30. “potential boost”
    “estimated”

    Actually, the potential boost is well into the trillions. Many of them. Many, many trillions. Or more.

    Potential.

    But with very very low probability.

    So the simple answer is they pulled it from their arses.

    As usual.

    And they’re lying.

    As usual.

    Quelle surprise, as we say round here.

  31. Pcar

    Alas, I cannot. There is no wire link to my place in Normandy. None.

    There’s a possibility of a sorta 56K speed ADSL, at best.

    Only a 4G wireless link. Which is plenty fast enough, but has a monthly capacity limit, which is easy to approach with normal software updates. Not much room left for the gigabytes of RAW photos. And there, there’s no ‘rollover’ of unused month to month gigabytes. Don’t get me wrong, I’m not complaining, just explaining.

    But what I didn’t explain was that I make sure I have local backup in Normandy, and bring anything important created there back to home home on a hard disk. It works well enough.

  32. BT publish regulatory accounts which look at Openreach separately donuts actually fairly simple to verify that there have been a number of years where that business has had a 15% return on capital employed. No it doesn’t pay a dividend but cash is moved about the group which has the same effect.
    I’m completely against this nationalisation plan ( disclaimer I work for someone who competes with openreach but this is my personal view ) however openreach is basically the cash engine of BT group and it’s not hard to verify.

  33. A number of years.

    What happened in the other years?

    ROCE is not a dividend.

    15%. ONS numbers suggest that the average for manufacturing is about 13, and about 18% for services. So bloody what?

  34. Arthur, I’m pretty sure the upload bandwidth squeeze for conference calling (video or audio) can be solved by a remote server handling the load, so you only need one upload and one download stream, merged by the server. Certainly happens on single phone lines now where you dial into a number that hosts several other incoming calls and sends them back out to you. I’ve never tried Skype group calls but presume they already do this passably.

    Bloke in Tejas – a terabyte is a huge amount of data. I agree it’ll take ages to upload first time (11.5 days on 10Mbps, if I’ve got the noughts right) but I expect few people need anything like that much. It’s about 20,000 CDs at typical mp3 compression or ten times that in typical photos. As bloke in spain says, those that need it can pay for it. And FTTC speeds of 25Mbps upload are available now to much of the UK.

    So, I’m still not seeing how UK wide FTTP would make a huge difference to the typical remote worker. (I agree an ADSL 0.5Mbps upload is pants but FTTC of 8+ seems to me to be fine for most.)

  35. @roamer
    My OneDrive is >500GB and most of that is my photo collection – I’ve got very few videos, which would take up much more space. When I first joined, my upload speed was only a few Mb, so the initial sync took a couple of weeks (I didn’t have as much data, back then).

  36. @ Marty McFly
    Return on Capital Employed is before interest and before tax. Even ignoring interest a 15% pre-tax ROCE will not permit a 15% dividend just a 12% one.

  37. Super fast broadband does not matter, one of the best connections I ever had was a leased line with a pitiful amount of bandwidth (16 KBps?) but it never went down and had incredibly low latency.

    People who don’t actually know about the subject think their children need it for homework or whatever, they don’t, that’s for youtube, porn, downloading music/games/movies although the youth seems to prefer streaming which is another argument against needing ‘super fast’. However that is the target audience for this announcement.

    I’d have thought making sure wireless systems cover the more remote regions was the best outcome than having Labour piss billions up the wall trying to bribe a few middle class people with super fast connections.

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