Annual Report 2012 - BT Plc

BT Group plc

Annual Report 2012

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2

Look out for…

The Equality of Access Board is a committee of the BT Group plc Board (“BT”). BT Group plc is a public limited company registered in England and Wales. This is the EAB Annual Report for the period ended 31 March 2012. Unless otherwise stated all facts, statistics, events or developments are correct to the nearest practical date before 15 May 2012. The opinions expressed are those of the EAB, not necessarily those of BT Group plc. The EAB Annual Report is a requirement of the Undertakings given to Ofcom by BT pursuant to the Enterprise Act 2002.

PricewaterhouseCoopers LLP provides independent assurance on key elements of the EAB’s Annual Report and these are indicated by the following symbol throughout the report. For the 2012 report PwC has adjusted the scope of its assurance to reflect the fact that many of the major milestones have passed and as a result the report focuses more on the results of reviews and monitoring activity. PwC continues to provide assurance over the completeness and accuracy of the compilation of the summaries of the EAB’s conclusions, the compilation of product KPI information and the consistency of these EAB conclusions with the evidence gathered on its behalf by the EAO including the underlying management information of BT.

‘2012’ refers to the financial year running from 1 April 2011 to 31 March 2012.

The Equality of Access Board was established on 1 November 2005 as part of the Undertakings offered by BT to Ofcom. We are a committee of the BT Group plc Board although our structure, membership and obligations to Ofcom make us unique.

Further reading online PwC assuranceFurther reading00

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4 Chairman’s introduction – a welcome from the new EAB Chairman, Phil Hodkinson

5 The EAB in brief – who we are and how we work

6 Assessing milestone delivery – an update on BT’s delivery of the systems separation milestones

9 Investigating breaches – an analysis of breaches of the Undertakings

10 Understanding industry concerns – the results of our industry survey, issues management and complaints-handling processes

13 Risk-based approach to ongoing compliance – our assessment of the top risks to BT’s delivery of the Undertakings during 2012

16 Outlook for 2013

22 Delivery of key milestones to date

23 Systems separation obligations

25 NGA monitoring themes

26 Behavioural dashboard

28 Product KPIs

31 Comparative performance charts

33 PwC’s assurance opinion

35 Glossary

18 The EAB

19 The EAO and EAB Secretariat

20 Monitoring, reporting and advising

20 Stakeholder engagement

20 Our view on our governance and resourcing

21 Wider governance of the Undertakings

Contents

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Review of the year

Undertakings status indicators

Who we are

Assessing milestone deliveryAn update on BT’s delivery of the systems separation milestones.

6

The EABFind out more details about our monitoring processes, our work with stakeholders and more information about our Board members.

18

Risk-based approach to ongoing complianceOur assessment of the top risks to BT’s delivery of the Undertakings during 2012.

13

Our view on governance of the UndertakingsWe are asked to give our views on how well the governance arrangements supporting the Undertakings are functioning. This section includes a description of these arrangements and our opinion on their effectiveness.

20

Product KPIsWe assess key performance indicators published by BT showing the performance of BT’s Equivalence of Input products. These are a useful way of comparing the services provided to communications providers within and outside of BT.

28

Behavioural dashboardOur dashboard includes measures such as training completions and customer satisfaction surveys. It provides a useful way of assessing how engaged BT employees are with the delivery of the Undertakings.

26

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4 Review of the year

In this context, the EAB is particularly keen to ensure that the company’s commitment to appropriate behaviour, for example via regular training and performance monitoring, is maintained. Our ‘behavioural dashboard’ gives us a good indication of how BT employees are behaving, for example when speaking to customers, but this alone will not guarantee compliance with the Undertakings.

Recent systems-related and information sharing breaches have demonstrated that senior management focus within BT also continues to be important if compliance is to remain embedded within the organisation. The company has committed to getting to the root causes of these recent breaches and the proactive review of all major systems that is currently underway is expected to identify a number of areas of concern which, left unaddressed might otherwise lead to more serious breaches in the future.

We welcome this proactive review and the remedial actions resulting from recent investigations. Both will enable the company to address the underlying causes so that recurring breaches become a rare event. When a new issue is uncovered, the EAB offers advice and guidance at an early stage to help BT remedy matters, but if an incident subsequently recurs we are naturally inclined to see it in a more serious and critical light.

Another important aspect of the work of the EAB is our focus on and understanding of the various interests of key stakeholders. I’m looking forward to maintaining and indeed strengthening our engagement in this respect. My first meeting as EAB Chairman proved to be an ideal opportunity to do so, with presentations from Ofcom, the Office of the Telecommunications Adjudicator (OTA2) and from the Chief Executive of BT. Alongside this, we also reviewed the findings of the recent industry survey conducted by the Equality of Access Office (EAO). A mix of large and small communications providers, and industry associations, contributed to the survey, the results of which will be factored into our ongoing monitoring and compliance programmes.

In my first months in the role, it is already evident to me that the EAB must remain alert to stakeholders’ perceptions of BT’s compliance with the Undertakings as closely as we do the reality. Whilst it is understandable that these perceptions will differ from time to time, ultimately it will be in none of our stakeholders’ interests if opinions diverge too far or for too long. Like all stakeholders, the EAB has an important role to play in understanding where differences of opinion may exist and what actions might be taken to narrow those differences.

Also, the EAB as a whole is mindful that whilst the Undertakings have served a very useful purpose so far, for example helping to achieve a highly competitive and innovative marketplace in the UK by international standards, their relevance going forward is already being called into question by the introduction of new products and services not envisaged when the Undertakings were formulated. We are committed to keeping abreast of market developments, for example the roll-out of Next Generation Access, so that we can assess equivalence when called upon. Equally, we are also conscious that it is not the role of the EAB to propose or determine policy in respect of matters that fall outside of the current Undertakings. That is a matter for Ofcom and the industry as a whole.

That said, I am in no doubt of the central role that the Undertakings will continue to have in shaping the future of the UK telecoms industry and thus the ongoing importance of the role of the EAB. I’m confident that we remain up to the task and in saying that would like to thank my fellow EAB members and colleagues in the EAO for the skill, care and commitment that they continue to bring to their roles.

Read more about the findings of the EAO's industry survey on page 13

This is my first annual report as EAB Chairman and I’m looking forward to building on the strong foundations that Carl Symon, the outgoing chairman, helped put in place. On behalf of myself and the other members of the EAB, we’d like to thank Carl for his commendable leadership of the EAB during its formation and the initial period of delivery of the Undertakings.

More than six years after the Undertakings were agreed and with many major milestones achieved, some might think that it would be tempting to take the foot off the pedal when it comes to monitoring BT’s ongoing compliance. Yet as time goes by, and as new products and services are introduced, the need to maintain a clear focus on compliance, and in particular BT upholding the ‘spirit’ as well the ‘letter’ of the Undertakings, is paramount.

Chairman’s introduction

The EAB must remain alert to stakeholders’ perceptions of BT’s compliance with the Undertakings.

Phil HodkinsonEAB Chairman

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Who we are – The Equality of Access Board, comprising a majority of independent members and the Equality of Access Office

– Established on 1 November 2005 as part of Undertakings offered by BT to Ofcom

– Oversight of the whole of BT in respect of compliance with the Undertakings

How we work

What we do – Monitor BT’s compliance with the Undertakings, including its delivery of major milestones and ongoing compliance

– Advise BT on areas where it needs to improve its compliance with the Undertakings

– Report on BT’s progress annually

Our stakeholders

The EAB in brief

Read more on page Read more on page 18 20

MonitoringFormal milestone delivery programme

Ongoing compliance

Risk-based compliance

Breaches, complaints and issues

Behavioural measures

Product key performance indicators

ReportingAnnual review of compliance reported publicly

Regular reports to BT plc Board

Bulletin for industry

Stakeholder feedbackCPs

Ofcom

OTA2

BT

AdvisingRecommendations to BT

Guidance for Ofcom

IndustryCommunications providers and

industry associations

BTAll of BT’s lines of business with a

particular focus on Openreach

OfcomStaff and senior management

Read more on page 6

Monitoring systems milestone deliveryBT has made substantial progress towards the delivery of key systems implementation targets but there are risks around the delivery of some future milestones and some aspects of ongoing compliance.

Read more on page 10

Concerns over information sharing There were a number of breaches involving non-compliant information sharing and BT is taking action to address this as part of its systems compliance review.


Focus on processes CPs remained concerned about the functioning of Openreach’s Statement of Requirements and exchange space allocation processes.


Equivalence on the agendaThe findings of our ‘Quick Checks’ process show that BT is offering equivalent products and services to communications providers but there were some non-compliant incidents.

2012 in brief

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Review of the yearOur focus this year has been on better understanding current industry issues and getting to the heart of whether BT continues to comply with the Undertakings six and a half years after they were agreed.

Assessing milestone deliveryIn 2012 there was one large Undertakings’ milestone due and there were a number of voluntary interim milestones and ongoing obligations which needed to be delivered. The largest set of obligations outstanding was that involving systems separation.

Systems separationBT operates a wide range of IT systems and these are subject to Undertakings’ obligations depending on where they sit in the company.

BT had to deliver a range of informal systems milestones during 2012 as well as fulfilling a range of other obligations. This was to ensure that BT made significant progress with systems separation and the migration of business customers by 2014.

Systems separation plays an important role in underpinning BT’s compliance with the Undertakings. There are a number of different systems obligations with which BT must comply. For example, BT has an obligation to separate the systems used by Openreach from those used by the rest of BT so that confidential or commercially sensitive information cannot be shared inappropriately across organisational boundaries.

BT must implement different levels of separation for each type of system including for Operational Support Systems (OSS), Management Information Systems (MIS) and for some other types of systems. It must also move customer records across to newly separated systems.

A variation to the Undertakings in September 2009 saw some systems separation obligations delayed and others cancelled. In return BT agreed to a number of new voluntary obligations including a range of business systems stack interim milestones. This resulted in the delivery schedule shown on p8.

Delivery progress in 2012There was one systems separation milestone due in 2012 and there were a number of informal milestones which BT had committed to deliver ahead of full physical separation.

Systems stack for business customersThe Undertakings require that 90% of customer records should be held on separate systems by December 2012. Achieving the 90% target required the introduction of a new system stack for business customers. A system stack for business customers is a collection of inter-related systems which allow BT’s business customers to be served equivalently. During calendar year 2011 BT was due to deliver two of these interim targets towards building this new business systems stack:

1. Start operational trial of stack 30 April 2010

2. Initial live deployment on stack 31 December 2010

3. Migration trial starts 31 March 2011

4. Volume migration starts 31 December 2011

To gain this insight we work in a number of different ways and we use our findings to shape our future monitoring programme. In this section we report on our findings against each of our activity areas and also give our views on potential future developments and risks in ‘Outlook for 2013’ on p16.

Assessing milestone deliveryWe look at major Undertakings’ milestones due during 2012 and consider BT’s delivery record. Further details on our earlier monitoring of milestone delivery can also be found in the ‘Undertakings status indicators’ section from page 22 onwards.

Investigating breachesWe give details of breaches of the Undertakings during the year, including our analysis of the impact and root causes.

Understanding industry concernsWe consider complaints and issues raised by industry and give details of our investigations and conclusions.

Risk-based approach to ongoing complianceWe describe the key Undertakings’ compliance risks and actions taken to mitigate them.

Outlook for 2013We give our views on forward-looking risks and forthcoming Undertakings’ obligations.

Read more on page 6

Read more on page 9




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In respect of the third milestone, the EAB found that BT had started the migration trial by 31 March 2011. However not all of

the success criteria had been achieved by the due date. We concluded that the fundamental parts of the interim milestone had been achieved and Ofcom agreed with this position.

The fourth and final UK business systems stack milestone (due 31 December 2011) required BT to begin customer migrations at

volume. In December 2011 BT indicated that it had achieved over 15,000 migrations and had also agreed with Ofcom the detailed success criteria for the milestone. Our validation found that BT had delivered the milestone against these criteria.

In our view the 90% customer side records separation target (due December 2012) remains at significant risk. To meet this separation target, BT needs to deliver the UK business system stack and then populate it with a sufficient number of customers. This depends on a highly challenging plan that rapidly accelerates the weekly migration volumes and there appears to be little contingency in the event of any unforeseen problems. We are concerned that the success rate for migrations is lower than anticipated and that this could impact BT's ability to achieve the 90% separation target. For these reasons we believe the milestone is at significant risk and we continue to keep it under close review.

Despite delivering its systems obligations compliantly, BT risks not meeting key separation and migration milestones in 2014 if it does not meet the interim targets in December 2012.

Equivalence of Inputs and customer side record targetsBT’s Installed Base Migration Complete (IBMC) dates were removed as part of the 2009 variation to the Undertakings with the exception of a 70% interim target for Wholesale Line Rental (WLR3) analogue telephony. Instead a series of progressive targets was established for measuring the proportion of end users consuming the Equivalence of Inputs (EoI) variant of certain key products. By 31 December 2012 the second progressive target requires BT to extend that number of end users consuming the EoI variant of certain products to 95%. We are satisfied that BT is on track to deliver this milestone as a result of its progress in delivering the interim targets.

By 31 December 2011 BT had to advise Ofcom of the further extended target it expects to achieve by 30 June 2014. BT informed Ofcom that it anticipates migrating a minimum of 97% of EoI lines and between 92% and 94% of customer side records. While the projected target for the migration of customer side records is lower than projected initially, Ofcom said that it: “welcomed BT’s continued activities to meet its remaining commitments and the progress BT has made to meet the December 2012 milestones. It is reassuring that BT businesses are fully engaged with this process and we hope that the inclusion of automated capabilities to speed up migrations will contribute to achieving a high pace of migration. While acknowledging the percentage migrations [BT has] advised for 2014, we would like to take this opportunity to emphasise the importance of BT aiming to migrate 100% of business customers, in so far as this is possible, in order to fully implement functional separation as envisaged by the Undertakings.”

Some industry stakeholders have told us that they are concerned about the delay to the delivery of the systems milestones following the variation to the Undertakings in 2009. Some felt that BT had gained an unfair advantage by staying on legacy systems for longer. We monitor whether BT is gaining an unfair advantage by staying on the ‘Classic’ product variant rather than moving to WLR3 through the ‘Comparative performance charts’ (see p31 for more information). These charts have typically shown that there is no incentive for BT to stay on legacy products for longer than non-BT CPs. However, we also investigated an issue raised by a CP on this subject which was found to be a non-trivial breach of the Undertakings (see p9, row five of non-trivial breach table). We will continue to assess the impact of BT’s migration programme on business customers.

Other systems obligationsThere were also other systems-related obligations due during 2012. As required by the Undertakings, we commissioned a bi-annual external audit undertaken by PwC of user access controls for 19 systems. PwC completed the audit and found that BT was compliant.

We also provided Ofcom with our third report on those systems listed in Annex 6 of the Undertakings, which are referred to as ‘core-hybrid’ systems. These are 11 OSS which it was agreed could have continued shared access by both Openreach and the rest of BT because they deal with operational network elements. Unlike other OSS there is only a requirement to have access controls rather than full systems separation. We carry out checks every six months to monitor access to these systems by BT employees and we report our findings to Ofcom. We found that only limited numbers of non-Openreach employees access the system and only where there is a demonstrable operational need.

In return for the 2009 variation to the Undertakings, Openreach agreed that it would deliver a voluntary range of obligations known as the Openreach Industry Commitments (OICs). At the time this report was published, Openreach reported that 19 of the 23 OICs had been delivered. These include phased initial releases of the Ethernet Strategic Transformation product which supports the Ethernet Access Direct (EAD) and Ethernet Backhaul Direct (EBD) products with further

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31 December 2009The EAB must ensure any new OSS is compliant – recurring annual check

31 Dec 2010Business systems stack initial live deployment (non-binding)

31 December 2011

– Advise Ofcom of percentage migrations and customer side records to be achieved by 30 June 2014

– Business systems stack volume migrations begin (non-binding)

31 December 2012

– 95% of installed end-users migrated

– 90% customer side records level 2 systems separation

– Ensure any new OSS is compliant – recurring annual check.

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

30 June 2012

– Audit of customer side records

30 April 2010Business systems stack operational trial starts (non-binding)

Timeline of major systems obligations from 2009 onwards

2009

2010

2011

2012

2014

31 March 2010Openreach must update the systems roadmap

31 March 2011Business systems stack trial migrations begin (non-binding)

30 September 2009

– 18 month Openreach roadmap published describing when commitments to be delivered

– Change control process published.

30 June 2010

– External audit of user access controls

– Implement user access controls for OSS listed in Annex 6

– Implement physically separate access and user access controls for some BT employees

– OSS physical separation

– The EAB to perform quarterly checks of access to OSS listed in Annex 6 from this date onwards

– At least 90% of BT’s relevant installed end-user base shall be migrated so that the products that this base purchases... do so on an EoI basis

– MIS level 2 separation

– Non-OSS and non-MIS level 2 separation

30 June 2014

– BT to achieve further increased percentage migrations of customer side records and migration to Eol products as previously notified to Ofcom by 31 December 2011

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In 2012 there were seven breach cases which the EAB determined non-trivial:

Description Remedy

1 Failure to maintain effective user access controls and inappropriate information sharing within a data warehouse (a data processing engine which manages billing information across BT).

BT corrected the data streams so that they were automatically directed to Openreach. The access controls for the system were also reviewed and this breach was closed.

2 Failure to apply effective user access controls which allowed BT Wholesale information to be placed on a system without adequate controls in place.

User access controls were implemented and access was restricted on the system. Briefings were issued throughout the business. The breach was closed.

3 Since 2005 BT CPs had been able to access information on major incidents and faults via a system which was not available to non-BT CPs. Details of the incidents would have been made available to non-BT CPs during the normal course of business. The system was not classified as high risk initially and was not included in compliance monitoring.

Systems access was withdrawn for all people with inappropriate access and communications around usage were improved. BT also made improvements to access controls and system governance. The EAB concluded that this closed the breach.

4 An anonymous Openreach employee complained to Ofcom that Openreach was unfairly prioritising frames work for a particular customer. This meant that Openreach did not provide the same product or service to all CPs on the same timescales.

The briefing to engineers to prioritise frames work was withdrawn and the EAB agreed that this closed the breach.

5 A CP in Northern Ireland – which had won business customers from BT Retail – had trouble migrating them from BT Retail’s Classic product set to WLR3. This problem also affected other non-BT CPs moving customers from Classic to WLR3 but it did not affect BT Retail.

The issue will not be resolved fully until BT has migrated all users to the UK business systems stack. The EAB recommended that in the interim period BT makes improvements to the migrations process and to the service level agreements that it offers.

6 BT Retail participated in weekly calls with BT Operate and BT Wholesale which included information on future planned engineering works which was not available to other CPs.

BT Retail is no longer included on the call and planned engineering work information is notified to all CPs at the same time. The EAB concluded that this closed the breach.

7 BT reported a failure to apply adequate user access controls on an OSS which records BT’s lines.

BT’s remedial actions – including changing access rights for some employees – were under review by the EAO at the time this report was published.

planned releases scheduled. The OTA2 works with Openreach and industry to facilitate the delivery of the OICs.

Systems compliance reviewIn 2012 BT commenced a review of the compliance status of systems across the company. We welcomed this review following our concerns about the number of breaches involving non-compliant information sharing. The review covered more than 2,000 systems and BT reported to us that the majority of these were compliant at the time of assessment.

BT reported that its initial findings had resulted in it doing further investigations into 2% of the systems which appear to be at risk of not being compliant with the Undertakings. At the time this report was published it was looking into these in more detail.

We will assess the findings of BT’s review and conclude more fully in our 2013 Annual Report. In the meantime we are satisfied that BT has worked proactively to identify incidences of non-compliance which may not have been uncovered without the review. We welcome steps the company is planning to put in place to help to avoid similar incidents taking place in future.

Our overall view on systemsThe programme to deliver compliant systems is central to BT’s delivery of the rest of its formal commitments and ongoing compliance with the Undertakings. Until the last of these obligations is delivered in 2014, checking that BT has delivered its systems obligations will remain one of the highest priorities in our monitoring programme. Once these deadlines have passed we will continue to monitor usage on an ongoing basis.

We are satisfied that BT is committed to delivering its remaining systems separation milestones and is also putting in place the correct measures to ensure that its systems and their users continue to comply with the Undertakings. We will assess the findings of the systems compliance programme in 2013 and we will also monitor closely the company’s progress towards the milestones due in 2014.

Investigating breachesThe EAB assesses any non-compliance with the Undertakings and seeks to understand the impact that this might have on CPs and on BT’s business. In particular, we evaluate breaches reported to us by BT as well as those identified through our own investigative work, including issues raised to us by CPs and through our formal complaints process.

The Undertakings place obligations on BT and the EAB to identify and report on breach cases. Following a breach notification from BT, the EAO carries out its own investigation and the EAB determines its view on the case and its significance (non-trivial or trivial). It also considers the appropriateness of BT’s proposed remedial actions. Alternatively the EAO can report breaches to the EAB which it has identified during its own investigations.

The EAB can also recommend additional actions to mitigate the impact of a breach – particularly when a remedial action cannot be implemented immediately as it requires the development of a new process or systems solution. These are known as ‘consequential’ actions and are also designed to minimise the risk of similar breaches occurring in the future.

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BT’s systems during the past few years as a result of the large number of formal and voluntary systems milestones included in the Undertakings. As a result of the breaches relating to inappropriate sharing of information, we made recommendations to BT that it reinforces messaging on this topic so that employees remain familiar with information sharing boundaries in the company. We also expressed our concern at the decline in the number of Undertakings’ training completions shown on our ‘Behavioural dashboard’ on p26 as this training can cover topics such as how to share information compliantly. BT reported to us that the Undertakings were not relevant to some of the people invited to complete the training, for example third party contractors working outside of BT sites. It said that this accounted for the lower completion rate in some areas. We will continue to maintain our focus on this area during 2013.

Other breaches related to CPs not receiving equivalent services from BT. Some of these instances of BT CPs potentially receiving preferential treatment were the result of systems errors or technical faults but others were the result of employee behaviour. We note that some of these breaches did not appear to have a significant impact for CPs but nevertheless we have urged BT to maintain its focus on offering equivalent services.

Following our feedback in 2011 that BT was not processing breaches as quickly as it could, the company changed its process so that it informed the EAO earlier of any potential breaches, was better at identifying common themes and provided early notice of any long-running or complex investigations. The EAB also revised its breaches process to ensure that it fitted in with the BT process and would allow for ad-hoc meetings to be convened to deal with urgent cases.

Our view on breachesThere were a higher number of breaches in 2012 compared with the previous year, although the overall number remains low. This increased number was partly due to BT making a greater effort to identify and remedy non-compliance in some areas. However in the coming year the EAB will continue to pay close attention to those cases where BT employees appeared to have a low level of awareness about the Undertakings and the potential consequences of their actions.

We welcome BT’s proactive review of systems compliance on which we will report further in our 2013 Annual Report. This review may help to resolve some issues which could have an impact on non-BT CPs and their end users and may prevent future breaches. We would also like BT to maintain its focus on ongoing compliance across the whole of the Undertakings to ensure that employee behaviour does not result in further non-compliant incidents.

Understanding industry concernsWe keep in regular contact with non-BT CPs and industry associations and hear views on a wide range of issues through both formal and informal channels. This includes formal complaints from CPs and informal feedback via our issues management process. In 2012 we also surveyed the industry to hear their views on whether BT was still complying with the Undertakings six and a half years after they were first agreed.

Complaints to the EAB There was only one complaint investigated during 2012. In early

2011 the EAB received a complaint from a CP which wished to remain anonymous on pricing for the EAD product. The complainant flagged potential non-equivalent behaviour by BT Global Services and Openreach in relation to a bid by BT Global Services. One of the key allegations made in the complaint was that BT Global Services had prior knowledge of the launch of a term discount for Openreach’s EAD product which it then used to gain a competitive advantage in the bid.

There were five breach cases which the EAB determined trivial:

Description Remedy

8 Inappropriate and unintended information sharing for three days about the implementation of mobile termination rates with the Value Added Network team within BT Wholesale.

A targeted scheme of refresher training took place in BT Wholesale and the EAB closed the breach.

9 Inadvertent sharing of information within the Integrated Services Digital Network Automation Tool Management system, which was used for diagnostic testing in the ISDN30 repair process.

User access controls were implemented and the EAB closed the breach.

10 Inappropriate sharing of Customer Confidential Information (CCI) as part of an exercise to resolve which lines of business owned circuits in some data centres.

The information was deleted and an updated version was sent out. The EAB agreed that the remedial actions had been completed and this breach case could be closed.

11 Data on incoming and outgoing call traffic was provided to BT CPs and non-BT CPs via different systems.

BT changed the design of the system to resolve the issue and the EAB closed the breach.

12 Openreach shared a presentation containing Commercial Information (CI) with BT Global Services employees who were not entitled to see it.

The EAB recommended that Openreach and BT Global Services review their governance arrangements to ensure that CI is clearly marked and that document distribution lists are carefully monitored.

There was also one trivial breach reported previously, the remedy for which was ongoing from 2011:

Description Remedy

13 Level Two systems separation was not put in place for an Openreach call-centre agent performance monitoring system containing CI/CCI.

This breach will be ongoing until the system changes in 2013 and the EAB continues to monitor ongoing compliance with user access controls.

Seven further potential breaches were under investigation and one investigation was further progressed but had not yet concluded at the time this report was published. We will report on the outcome in our regular bulletin and in the 2013 EAB Annual Report.

Under the breach process, cases which are very minor are not fully investigated but details of the case and the rationale for not conducting the full factual and legal review are reported to the EAB. These are classified as discretion cases. In 2012 the EAB exercised its discretion over matters such as a case where an employee in BT Innovate and Design shared information with a BT Wholesale employee regarding the timing of an Openreach network upgrade. The timing of the upgrade was already known to industry and was therefore unlikely to have any impact.

Some of the breaches reported to the EAB during 2012 related to systems and inappropriate information sharing. This was almost certainly because greater attention has been placed on evaluating

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The other key allegation was that BT Global Services and Openreach had not followed the equivalent process for calculating Excess Construction Charges in relation to the bid. In July 2011, following a detailed investigation, the EAB decided not to uphold the complaint as the evidence indicated that neither of the actions raised by the complainant had taken place.

Complaints to BTAs in previous years the EAB continued to receive regular reports of the complaints to BT from CPs relating to the Undertakings. BT received 15 complaints up to the end of March 2012 which is slightly less than the 17 received in the previous year. The charts below show the complaint themes which were most common and the number of complaints upheld:

Chart 1 Complaint themes

9

3

1

2

Equivalence

Process

Behaviour

Spirit

Source: BT

Chart 2 Complaints upheld/not upheld

6

9

Upheld

Not upheld

Source: BT

A more detailed description of the complaints received under each theme can be found below:

EquivalenceFour of the complaints received alleged that Openreach had supplied BT CPs with an earlier service provision than that offered to the complainant. Openreach investigated these and in one case it upheld the complaint. In this case, a CP’s order had been delayed in the system due to a technical error. It did not uphold the other three cases as it found that in one case a CP had not placed an order correctly and this had not been completed, in another case provision lead times had improved following the introduction of additional resource and in the third case, extra appointment slots had been added for all CPs and BT had picked one of these.

Two cases alleged that CP end users had been transferred to BT Retail by Openreach before the standard 10 day transfer window had elapsed. Following an Openreach investigation, both allegations were found to be true. This led to disciplinary action being taken and the Openreach team concerned received further training in the correct process. We have requested further details on this case in order to gain assurance that these are isolated incidents.

One case alleged that Openreach had withdrawn calling line identity information from a report containing calls data, and that BT Retail still received this information. Openreach investigated the allegation and found that the information BT Retail receives is related to ‘classic’ PSTN lines rather than WLR3 and that a report containing WLR3 data was made available to all CPs in June 2011. The CP was advised and no further action was requested.

One case alleged that BT was allowing deliberate early life failures on analogue and digital lines for non-BT CPs which led the customer to think that the CP was at fault. Openreach investigated the complaint and visited the CP in question and no further action was taken. We have requested further evidence that the complainant was satisfied that the complaint could be closed.

One case alleged that BT CPs may have been aware of a special offer that Openreach notified in November 2011, in advance of notification to industry. Openreach investigated the complaint and found that BT CPs had not received notification of the special offer in advance of industry. The CP was advised and no further action was requested.

ProcessOne case alleged that Openreach had transferred a CP end user to BT without permission – so-called ‘slamming’. An Openreach investigation found that the losing CP had received the appropriate notification of a pending transfer and did not act upon it.

One case alleged that Openreach had made certain telephone numbers available which should not have been. Openreach investigated the allegation and found that the numbers had become available due to an Openreach advisor’s taking incorrect action. The teams concerned were re-briefed to ensure the correct process was followed.

One case alleged that a piece of equipment had been incorrectly annotated with a BT Retail fault reporting telephone number. Openreach found that the number in question should not have been shown on a circuit which had been installed on behalf of one of Openreach’s CP customers. Openreach plans to issue a briefing to its engineering community informing it of the correct practice.

BehaviourTwo cases related to allegations of inappropriate comments made by Openreach employees whilst on site at customer premises. In both cases the Openreach employee denied making the comments and no further action was taken.

SpiritOne case was received by BT Northern Ireland (BTNI) regarding information that a CP alleged had been inappropriately shared by the upstream part of the organisation with the downstream part. BT investigated the allegation and found that there was inappropriate information shared within BTNI. However there was no breach of the Undertakings as they do not apply in the same way in Northern Ireland. Nonetheless, BT treated this case as non-compliance with the spirit of the Undertakings.

As in previous years the number of formal complaints received by the EAB remains very low. The number of Undertakings related complaints received by BT also remains just below the same low level as last year.

Book 1.indb 11 21/05/2012 23:52


One ongoing area of concern is around the development of Ethernet products. We continue to pay close attention to how this product functions although we have not identified any non-compliant incidents.

In December 2010 Openreach took the decision to restrict pricing details for Ethernet orders above 1Gb and move to a ‘terms on application’ approach resulting in less transparency around pricing and other terms. CPs told us that they were concerned as to whether the pricing and terms for greater than 1Gb orders were operating equivalently with pricing detail withheld from general visibility.

In response we assessed a sample of orders supplied by CPs and reviewed the detail of how the connection and rental pricing had been determined by Openreach. These were then compared to a sample of similar BT CP orders and cross-referenced with the Openreach pricing list to establish whether in each case the pricing details quoted to both BT CPs and non-BT CPs had been completed equivalently. We were able to provide industry with assurance that both connection and rental charges for greater than 1Gb orders had been constructed using system driven menus and that the process was operating equivalently for BT CPs and non-BT CPs.

Chart 4 EAO Quick Check reviews 2011 - 2012

14

3

3

6

Potential breach identified

Actions recommended to BT and CP briefed

Actions recommended to BT (internal only)

No actions recommended, BT and CP briefed

Source: EAO

All Quick Checks completed during 2012 resulted in the EAO’s providing Undertakings’ compliance assurance/clarification to Ofcom, CPs or the UK Competitive Telecommunications Association (UKCTA); two resulted in BT taking corrective action internally; and two resulted in Openreach running learning sessions with CPs to enable greater understanding of the areas of concern. One Quick Check influenced the scope of a scheduled compliance check on space and power and three have triggered more detailed potential EAB breach investigations.

Where appropriate, we have sought further assurance from BT that complaints are being correctly identified and reported to the EAB.

Issues managementWe look into issues raised informally by key stakeholders including BT, non-BT CPs, Ofcom and the OTA2 as part of our ‘Quick Checks’ process. The process allows us to record and track issues and to assess rapidly whether they need more detailed, formal investigation.

In 2012 we investigated 26 issues. Common themes are shown in the chart below:

Chart 3 EAO Quick Checks 2011-2012 themed areas

8

1

Equivalence of Inputs

Governance

NGA

Copper

Space and power

Ethernet

Information sharing

Openreach Statementof Requirements process6

11

2

2

5

Source: EAO

The theme of equivalence occurred the most in our issues management process – and this was also reflected in the formal breaches process (see p9 for more information). We looked into a number of issues concerning equivalence including whether the provision performance of Openreach’s EAD product was equivalent. We found that BT CPs often used a value-added project management service which helped to reduce issues and this service was also available to non-BT CPs but rarely used. Openreach offered a briefing to CPs to explain the options available.

We also looked into equivalent access to the Openreach industry portal following a concern raised by a CP. We found that access controls for the portal were operating in compliance with the Undertakings.

Two CPs in Northern Ireland raised concerns via our issues management process. One of the issues raised also applied to CPs operating in the UK mainland and concerned how Openreach managed order transfers. This was later investigated via the EAB’s breach process and found to be a non-trivial breach (see p9, row five of the non-trivial breaches table for more information).

The other issue raised involved BTNI field technicians mistakenly treating new orders from the CP as BT Retail orders. BTNI must comply with the Undertakings while acting as an agent for Openreach and BT Wholesale. It does not operate on functionally separate lines and not all of the Undertakings apply in the Province. To resolve the issue BT Northern Ireland updated its field engineer training and BT made a systems change to make it clear to technicians which orders related to each CP.

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Industry surveyIndustry opinion shapes our work. In November 2011 we surveyed CPs and industry associations with a direct interest in the Undertakings to hear their views on whether BT had fulfilled its Undertakings’ obligations and whether it was continuing to meet these obligations on an ongoing basis. Ten CPs and industry associations completed the survey.

Four CPs were satisfied with how the Undertakings had been delivered but fewer respondents gave a positive response than in a previous survey we conducted in 2009. Those who did respond recognised that BT had worked hard to deliver the Undertakings.

A number of common themes emerged from the survey, including concerns around whether equivalent products were on offer in all instances, for example one respondent expressed concern that BT CPs were not required to move to the WLR3 product as quickly as non-BT CPs and this may lead to advantages in terms of improved functionality.

Some CPs said that they believed that BT was offering equivalent services while others said that there was an ongoing perception that the opposite was true – that BT’s downstream business received preferential treatment from Openreach. The EAB concluded that this perception relates predominantly to those dissatisfied with service performance. Balancing service performance with equivalence is an ongoing issue for some CPs, but service performance falls outside the remit of the Undertakings and hence is not a matter that the EAB is able to investigate.

We assess whether there is any evidence of non-equivalent performance through BT’s product key performance indicators. See page

28

Other concerns expressed in the survey stemmed from the development of NGA products, with some respondents concerned that there had been a gradual erosion of the principle of equivalence when it came to NGA. More information on our NGA monitoring programme can be found on p25.

Some respondents suggested that it might be time for a formal review of the Undertakings, stating that the large number of exemption requests made by BT and agreed by Ofcom had undermined the credibility of the Undertakings.

Our view on industry concernsWhile many CPs are satisfied with the way that the Undertakings are functioning, there are a number of common and recurring themes raised via complaints, our issues management process and through the industry survey. These include:

– fears that equivalent products and services are not on offer, even though we have seldom found instances of non-compliance

– particular concerns around the Ethernet product portfolio – with most attention focused on the EAD product

– wider policy concerns around BT’s delivery intent and governance of the Undertakings

– a feeling that it may be time to review the Undertakings to check that they are relevant to current industry issues.

We are aware that there are a number of industry concerns which remain unresolved over time and that smaller CPs and CPs with business customers feel that their needs are often overlooked in the formal consultative processes and working groups. We will continue to encourage BT to engage with industry on these points and we will look into issues that relate to the Undertakings as and when they arise.

We have followed up on all of the issues raised in the industry survey which required further investigation. Industry feedback is vital in helping us to understand the concerns expressed by different CPs and also in shaping our future monitoring programme.

We will continue to work with those in industry where we may be able to assist with the resolution of some of the issues raised. Other points raised via the survey and the issues management process require wider consideration and have been fed back to both Ofcom and BT for further action.

Risk-based approach to ongoing complianceWe take a risk-based approach to assessing BT’s ongoing compliance with the Undertakings based on the findings of our monitoring work and on feedback from stakeholders including CPs, Ofcom and BT. We evaluate our risk register regularly to make sure that our work covers the most relevant concerns.

During 2011 we identified the following risks relating to BT’s compliance with the Undertakings and these shaped our monitoring work during 2012. These are described in summary in the table and then in more detail below:

Risk What we did

1. Openreach’s Statement of Requirements (SoR) process – operation and industry confidence.

Review of Openreach’s SoR process and ongoing engagement with the OTA2.

2. Next Generation Access – risk of launch of non-EoI product(s) and/or non-compliance with passive input obligations.

Ongoing reviews and recommendation made to Openreach.

3. Inappropriate information sharing and issues with user access controls on systems.

Assessment of breaches and scheduled assessment of BT’s systems compliance review.

4. Systems implementation of the business systems stack, associated user access controls and audit of ongoing compliance of existing OSS user access controls.

Regular monitoring of BT’s delivery of the Undertakings.

5. Ineffective compliance governance processes (e.g. space and power allocation).

Review of space and power allocation process.

In 2012 we explored each of these risks in more detail as described in the following pages and this has led us to reprioritise the risks as part of our forward-looking risk register (see p16 for more information).

1. Openreach’s SoR processThe operation of Openreach’s SoR process has been discussed frequently in the past few years. In 2012 CPs once again drew attention to the functioning of the process in response to our survey. The SoR process is the main conduit for CPs to raise requests for new products or variations to existing products.

In previous years CPs had expressed their concern that requests by non-BT CPs via the process were not as likely to succeed as those raised by BT CPs. In response to industry feedback Openreach launched a new SoR process in 2009 which allowed CPs to see SoRs raised by other CPs and encouraged collaborative working.

We have an ongoing programme to assess the functioning of the SoR process. Our reviews in previous years concluded that the process

Book 1.indb 13 21/05/2012 23:52


Overall we are satisfied that BT is committed to running an equivalent SoR process although output is low and speed of throughput remains a concern, and the evidence that it is equivalent in practice is inconclusive. We will continue to monitor the performance of the SoR process at regular intervals and we will factor the concerns about it into a full review of the process which was ongoing at the time this report was published. We will report the 2012 figures in the 2013 EAB Annual Report once we have completed our review. We will also continue to listen to industry feedback on the performance of the tool on a regular basis.

2. NGABT continued to roll out its Next Generation Access (NGA) network during 2012. This included the continued roll-out of Fibre-to-the-Cabinet (FTTC) – which involves installing fibre to street cabinets and re-using the existing copper lines into premises – and Fibre-to-the-Premises (FTTP), which involves installing fibre into homes or premises as an overlay of the copper local loop.

We take a ‘principles-based’ approach to monitoring BT’s delivery of NGA. This involves assessing aspects such as checking that NGA products are developed and launched on an EoI basis and monitoring that the choice of backhaul for CPs is not limited by the NGA products which Openreach deploys.

More information on our NGA monitoring programme can be found on page 25

In October 2011 Openreach completed a consultation with industry on FTTC passive inputs as required by the Undertakings. Passive inputs include access to the copper wires between a BT FTTC cabinet and the end-user premises and the provision of a cabinet to a CP. They provide greater flexibility for CPs planning to develop and offer their own NGA products but they require high initial investment costs. We recommended a revision to the wording of the consultation so that it would help to capture CP views on passive inputs and Openreach accepted and included this recommendation. Openreach received only one response to the consultation.

During December 2011, as required by the Undertakings, Openreach reviewed with Ofcom whether the Undertakings relating to FTTC needed to be varied, superseded or released in the light of FTTC deployment, as well as relevant market and technological developments. Following the review Openreach informed Ofcom that it would not be seeking any changes to the Undertakings and Ofcom stated that: “any future changes to regulation in this area, including in relation to the development, provision and operation of FTTC, are most appropriately considered as part of the next WLA market review, which is due to commence in 2012.”

More information on our monitoring programme for NGA is included on p25. Our monitoring programme shows that BT is delivering its NGA obligations although we still have some concerns on whether the design principles for future passive input products were incorporated into the design of FTTC. However Openreach’s industry consultation on passive inputs has gone some way towards allaying these concerns.

3. Inappropriate information sharingOne of our key focus areas since the establishment of Openreach has been to assess information flows across organisational boundaries within BT. We examine information sharing boundaries in different parts of the business on a rolling basis and our findings feed into our risk register. The increased number of breaches reported during 2012 relating to inappropriate information sharing also confirmed our ongoing focus in this area.

was working equivalently although we made recommendations on increasing the transparency of how requests were processed.

We concluded in previous years that the SoR process was working equivalently. However we recognise that it is not functioning to the satisfaction of all CPs and we will continue to monitor its performance.

0

10

20

30

50

60

40

70

%

Chart 5 Openreach’s SoR process

Reject/Cancel Review Stages In Development Delivered

85

2818

1610

85

149

117

6239

5334

BT CPs

Non-BT CPs2010 and 2011 figures combined

Source: Openreach and the OTA2

As shown in the chart above, more SoRs were delivered for BT CPs than for non-BT CPs during 2010 and 2011. The OTA2 reported to us that it wanted to understand why the number of SoRs delivered for BT CPs was higher than those delivered for non-BT CPs. It recognised that one explanation could be the higher number of SoRs submitted by BT CPs, often relating to WLR3. There are, however, a wide range of reasons why SoRs may be rejected, for example an unclear benefits statement in support of the SoR and at present our analysis of how this process is functioning is ongoing.

CPs have expressed their concerns to us that NGA requests are processed at the NGA Trialist Working Group and outside of the formal SoR process. Some smaller CPs have told us that it is more difficult for them to attend all industry working groups where new requirements may be discussed. Following an industry survey to better understand concerns on the SoR process, we recommended to Openreach that all CPs should be able to see new NGA requirements via the SoR tracker tool even if not all requests are entered into the formal SoR process. Openreach made notes from the NGA Trialist Working Group more widely available and we have since seen a number of NGA SoRs entered via the tracker tool. We will continue to monitor that Openreach makes NGA requirements visible to industry.

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Programmes which operate across BT divisions and involve sharing information between upstream and downstream divisions are by their nature high risk. In 2012 we completed a review of information sharing arrangements in BT’s Managed Ethernet Access Services (MEAS) programme. MEAS is BT Wholesale’s Ethernet service to many mobile operators which enables them to supply high-bandwidth to their end users.

The review did not find any instances of non-compliance but highlighted some areas for improvement including the need for an increased focus on compliant information sharing within the programme, updates to website materials and refresher compliance training for a small number of individuals. We also sought further detail on the operational relationship between BT Wholesale and BT Operate to assess whether it was consistent with the Undertakings.

Given the complex rules around information sharing, and the number of breaches reported, we consider that non-compliant information sharing will remain a high risk. This is because we believe that systems access controls and systems separation should better control the flows of information between different parts of the business. We will maintain a particular focus on end-to-end BT programmes in the coming year.

4. Systems implementationAs discussed on p6 we consider this to be a high risk area on which we will continue to focus during the coming years. Our work encompasses BT’s delivery of future systems milestones and our assessment of the company’s systems compliance review which was ongoing at the time this report was published. More information on our forward-looking work programme can be found on p16.

5. Ineffective compliance governance processes, such as exchange space and power allocationWe continue to assess the governance processes that BT has put in place to manage its implementation of the Undertakings. More information on our view of BT’s governance arrangements can be found on p21.

One key process which we continue to monitor on an ongoing basis is the availability of exchange space and power. Space in BT’s local exchanges is an important part of the infrastructure supporting the delivery of the Undertakings. BT Operate manages the local exchanges which house the access nodes owned by Openreach.

In October 2008 BT and Ofcom agreed a variation to the Undertakings in response to CPs’ concerns that they had difficulty in reserving space in BT exchanges. The variation required BT to:

– publish guidelines for the process of allocating exchange space and power for Openreach’s LLU and Ethernet products

– conduct a proactive review of exchanges with a view to freeing up space

– develop and launch a space-only allocation product on an EoI basis

– review the scope of the existing LLU co-mingling product to allow more flexible use of exchange space.

The variation also required the EAB to carry out regular audits of exchange space and review allocation processes focusing on those exchanges where the main distribution frames were constrained.

In 2012 we carried out our regular audit of exchange space and found that, although the process was operating equivalently, it was still largely reactive to CPs’ forecasts and orders. Openreach implemented our recommendation that it improve its communication with CPs so that they will be aware of planned activities and exchange sites of interest. Openreach is required to identify options to free up space at a list of sites agreed between Openreach and Ofcom. At the time this report was published Openreach was reviewing exchange sites with Ofcom to agree an appropriate list of sites.

We carried out our regular audit of exchange space and found that, although the process was operating equivalently, it was still largely reactive to CPs’ forecasts and orders.

We also looked into an issue raised by two CPs on space and power allocation at Poplar exchange in London, which serves the main London Olympics site. We found that space and power requirements at the exchange were being handled equivalently but there were issues with other processes. This investigation helped to shape our wider review of exchange space. Exchange space remains an area of concern for CPs and we will keep track of progress through our ongoing monitoring programme.

Our overall view of BT’s compliance in 2012Our view is that BT continues to be committed to compliance with the letter and the spirit of the Undertakings. The Undertakings have led to significant changes in the way that the UK telecoms industry functions and functional separation and EoI have been included as potential remedies in the new European Union framework. However six and a half years after the Undertakings were first agreed BT needs to maintain a focus on compliance in areas such as inappropriate information sharing and systems.

There is also a risk of BT’s becoming more complacent as it moves towards ongoing compliance rather than working towards the delivery of major milestones. We understand that priorities may shift over time but it is important to ensure that compliance with the Undertakings remains uppermost in the minds of all BT employees and is fully supported.

It is also our view that the long-running and challenging nature of the systems obligations may make it likely that some of the forthcoming delivery milestones will be missed. We discuss this in more detail in ‘Outlook for 2013’ overleaf. We will continue to listen to industry views and use them to shape our ongoing monitoring work as well as keeping abreast of current concerns.

Book 1.indb 15 21/05/2012 23:52


Outlook for 2013The EAB takes a risk-based approach to planning its forward-looking monitoring plan by evaluating non-compliant incidents and the output from the previous year’s monitoring programme. Our work is also driven by the outstanding Undertakings’ milestones due in the forthcoming year.

Forward-looking risksWe reviewed our risk register in February 2012 and agreed that the findings of our monitoring work and an increase in non-compliant incidents relating to systems had led to significant changes in our top five risks:

Risk area EAB’s planned action

1. Ineffective controls over systems access.

We will assess the findings of BT’s system compliance programme and continue to perform our own assessments.

2. Inappropriate information sharing.

We will continue our programme of rolling reviews into different areas of the business, including a further review of BT Wholesale’s MEAS programme.

3. Systems implementation to achieve customer records migration and EoI targets by 31 December 2012.

We will continue to attend the Ofcom quarterly roadmap review sessions and will review progress with BT on a monthly basis.

4. Inappropriate influence on commercial policy as a result of the drive for increased end-to-end working within BT.

Review of the guidance provided to BT and review of the Annex 2 process which controls access rights.

5. Direct interfaces into BT Operate by other BT lines of business.

Review of governance arrangements put in place by BT.

The highest potential risk is around inappropriate access to systems following a number of breaches identified in this area. BT has put in place a programme to mitigate this risk – see more information on BT’s systems compliance review on p9 – and we will assess its effectiveness once it is complete. Inappropriate information sharing also retained a high position in the risk table due to the risk that non-compliant incidents may continue to occur in this area.

Forthcoming Undertakings’ obligationsThe systems delivery milestones in the Undertakings stretch until 2014 and some of the major milestones are due by 31 December 2012. The largest of these milestones is for 90% of customer side records to be held on separate systems.

To meet this separation target BT needs to deliver the business system stack and then populate it with a sufficient number of customers. This depends on a highly challenging plan that rapidly accelerates the weekly migration volumes with little contingency for unforeseen problems. For these reasons we believe the milestone is at significant risk and we continue to keep it under close review.

In May 2011 Ofcom agreed to grant BT an exemption relating to the Olympics. The exemption will allow BT in exceptional circumstances to use processes other than the standard EoI processes. It will also allow for a certain number of engineers from Openreach and BT Operate to work cross-functionally at any one time. We will continue to monitor actively that BT is complying with the terms of this exemption and Openreach has been reporting to us on a monthly basis and will continue to do so in the run up to and during the London Olympics.

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17

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18 Who we are

Who we areThe Equality of Access Board was established on 1 November 2005 as part of the Undertakings offered by BT to Ofcom. We are a committee of the BT Group plc Board although our structure, membership and obligations to Ofcom make us unique.

The EAB has oversight of the whole of BT when monitoring compliance with the Undertakings. It has terms of reference setting out its role, monitoring and reporting remit, its powers, how its members are appointed and its organisation.

For more information See www.bt.com/eab.

The Undertakings require that the EAB has five members: three independent members, one BT Group plc non-executive director and one BT senior manager. In January 2012 Phil Hodkinson was appointed as the new EAB Chairman following the retirement from the BT plc Board of Carl Symon.

Dr Tim Whitley, BT senior managerDr Tim Whitley is Managing Director of Research and Technology and BT’s Adastral Park research and development facility. He started working for BT in 1981 as an apprentice engineer in North Wales and has since held roles in areas including optics research, technology consultancy, technical architecture and recently served as BT’s Group Strategy Director.

Sir Bryan Carsberg, IndependentSir Bryan Carsberg was Professor of Accounting and Business Finance and Dean of the Faculty of Economic and Social Studies at Manchester University, before becoming Professor of Accounting at the London School of Economics from 1981 to 1984. He was Director General of Oftel (the former telecommunications regulator) from 1984 to 1992, Director General of the Office of Fair Trading from 1992 to 1995 and Secretary General of the International Accounting Standards Committee from 1995 to 2001. Sir Bryan holds a number of non-executive board appointments. He is a Chartered Accountant.

Dr Peter Radley, IndependentDr Peter Radley is a Fellow of the Royal Academy of Engineering and has worked in the telecommunications industry since 1965, involved in pioneering fibre optics, GSM and broadband. Between 1991 and 2002 he held positions in Alcatel with global responsibility for technology and marketing and as Chairman and CEO for Alcatel UK. He was a founder of the Broadband Stakeholder Group set up by the UK Government. Since 2002, Peter has been an independent advisor to a number of organisations including the DTI and South East England Development Agency and he is also chairman of technology start-up companies in the broadband, IP and mobile sectors.

Stephen Pettit, IndependentStephen Pettit is a non-executive director of National Grid plc and Halma plc. He is a former executive director of Cable & Wireless plc. Before joining Cable & Wireless, Stephen was Chief Executive, Petrochemicals at British Petroleum. He was previously Chairman of ROK plc, a non-executive director of National Air Traffic Services, KBC Advanced Technologies plc and Norwood Systems Limited.

Phil Hodkinson, ChairmanPhil Hodkinson was appointed to the BT Group plc Board on 1 February 2006. He is a member of the Audit & Risk Committee, Nominating & Governance Committee, the Committee for Sustainable and Responsible Business, and the Pensions Committee. He is a non-executive director of HM Revenue & Customs, Travelex and Resolution, and a trustee of Action Medical Research, Business in the Community and BBC Children in Need. Prior to his retirement in 2007, Phil’s roles included group finance director of HBOS, chairman of Insight Investment and Clerical Medical, and chief executive of Zurich Life and Eagle Star Life. He is a Fellow of the Institute of Actuaries.

Book 1.indb 18 21/05/2012 23:52

19Who we are

Who

we

are

The EAB is supported by the EAO and the EAB Secretary on all matters within its remit. The EAO reports regularly to the EAB on the detailed status of BT’s delivery of the Undertakings. It carries out investigations into complaints made by CPs and into possible breaches of the Undertakings on the EAB’s behalf.

During 2012 the EAB Secretary organised four Board meetings. Minutes have been provided to Ofcom and the EAB Chairman regularly reported the EAB’s views to the BT Group plc Board.

How we work

Ofcom briefing

Annual Report

EAB minutes & overviews

EAB Meetings: deliberation & decisions

EAO monitoring report

Product KPIs

Milestone validations

Audit & Validation plan

Exemptions & variations

Behavioural measures

EAO reviews EAB breaches process EAO assessments

Complaints & breaches

BT

Complaints

CPs

Direct CP views

Regular & ad hoc BT Reports

EAOCPs

Issues management

Book 1.indb 19 21/05/2012 23:52

20 Who we are

Monitoring, reporting and advisingThe EAB monitors BT’s delivery of key Undertakings, reports on progress to Ofcom and industry and offers advice to BT on its compliance with the Undertakings.

MonitoringWe conduct a wide range of monitoring activities to assess BT’s compliance with the Undertakings. On the EAB’s behalf, the EAO monitors BT’s delivery of the milestones listed in the Undertakings.

The EAO also assesses BT’s ongoing compliance with obligations from previous years. It runs an Audit and Validation plan through which it audits BT’s ongoing compliance with specific sections of the Undertakings on a rolling basis.

The EAB also agrees a programme of ongoing compliance reviews based on areas of known or potential risk. In devising the programme, the EAB considers common themes arising from breach cases or issues identified during the EAO’s monitoring work. The EAB also takes account of the findings of relevant internal and external audit reports that have assessed BT’s delivery of the Undertakings, as well as issues raised by stakeholders.

The EAB’s monitoring methodologies are included in the table below:

Monitoring activity How we perform it

Milestones We validate that products and systems separation are delivered by the timescales specified in the Undertakings, for example products such as WLR3.

Principles We assess BT’s compliance with agreed areas of focus for NGA through attending working groups. We also validate the delivery of some NGA products with launch dates at BT’s discretion.

Ongoing compliance

A combination of monthly, quarterly or annual reviews and ‘spot checks’ of areas mandated by the Undertakings (such as product KPIs) and a rolling programme to review areas identified as high risk.

Non-compliance Investigations into complaints raised directly by CPs via the EAO’s complaints process and investigations of breaches raised either by BT or the EAO.

Issues management Reviews of issues raised informally by CPs, Ofcom and other stakeholders.

The EAB applies similar criteria across all of its monitoring activities:

Blue Undertaking delivered or review completed.

Green Undertaking delivery on track, or in the case of ongoing compliance, review completed with no issues identified

Amber Undertaking is at risk, or in the case of ongoing compliance, issues identified.

Red Undertaking date has been missed or is in jeopardy, or review has identified major deficiencies or issues.

The EAO Director makes the decision to move the delivery status from Green to Blue before reporting the outcome to the EAB. This applies to both the delivery of milestones and the completion of ongoing compliance reviews. As part of its assurance opinion, PwC assesses the EAB’s work across all of these monitoring areas. Those activities referred to in its assurance opinion are marked by throughout the report.

ReportingThe EAB is required by the Undertakings to conduct an annual review of BT’s compliance with the Undertakings, and upon completion send a report to Ofcom. It is also required to publish a summary report which is to be made available on BT’s website. Currently, the EAB aggregates all of its findings into one report and publishes it to all concerned.

The EAB is required to report on particular areas including its views on the governance of the Undertakings, BT’s delivery of major milestones, potential future breaches and the findings of the product KPIs.

The EAB also publishes a regular update about its activities on its website: http://www.bt.com/eab.

AdvisingThe EAB advises BT on areas where it believes improved compliance with the Undertakings can be achieved. During 2012 we made recommendations to BT on topics such as systems compliance and information sharing.

Stakeholder engagementWe have three sets of direct stakeholders in the UK: CPs and telecoms industry associations, Ofcom and BT.

During 2012 the EAB heard the views of industry stakeholders at its meetings and it paid close attention to the output from the EAO’s ‘Quick Checks’ process. It also heard regularly from the OTA2. The EAO continued to hold meetings with CPs and industry associations as well as attending the Connectivity Services forum and NGA working groups. The EAO also continued to maintain contact with CPs in Northern Ireland by attending the Northern Ireland Telecom Stakeholder Forum. In November 2011 the EAO surveyed CPs to hear their views on whether the Undertakings had been delivered six years after they were agreed.

We hold regular meetings with Ofcom. An Ofcom Board member attended an EAB meeting in January 2012 and the EAO has monthly meetings with Ofcom policy directors. The EAO has also met the OTA2 regularly to discuss progress.

The EAB met a range of BT stakeholders during 2012. This included the BT Group Chief Executive and the Chief Executive of BT Northern Ireland, who attended a meeting to give an update on the company’s activities in the Province.

Our view on our governance and resourcingThe Undertakings require the EAB to give a view on how well its governance arrangements are functioning and whether it is satisfied with the level of resourcing available. The EAB considered factors such as the development of the EAO’s monitoring process in response to changes and the findings of a BT Internal Audit review of the EAO’s and EAB’s processes in Q4 2012. The EAB also completed an annual board effectiveness survey. It confirmed that its governance arrangements are functioning well and that it is satisfied with the level of resourcing made available by BT.

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21Who we are

Who

we

are

Wider governance of the UndertakingsBT has a company-wide responsibility to deliver its Undertakings’ commitments. The EAB engages with each of BT’s lines of business to monitor compliance with the Undertakings and is required to assess the effectiveness of the governance framework that BT has put in place to support the Undertakings.

BT’s governance structureOpenreach does not report to BT’s Operating Committee to support functional separation of the organisation from the rest of the company. BT’s governance structure to support the delivery of the Undertakings has continued to evolve over the past six and a half years. During 2012 it consisted of:

– The Enterprise Programme Steering Board (PSB): this forum is the most senior governance body within the programme and has a group-wide responsibility for setting policy and direction, managing priorities, resolving risks and issues and ensuring consistency across BT’s business units.

– BT Undertakings’ Customer Delivery Board (CDB): this forum provides pan-BT monitoring and governance across workstreams. It ensures effective risk and issue mitigation and reporting.

– Workstream Execution Boards: the programme is divided into three key workstreams: UK Business Solutions, Migrations and Openreach Industry Commitments, each of which has its own lead who is responsible for the governance of a portfolio of projects via their own Execution Boards.

– The Undertakings programme: consists of an Undertakings representative for each line of business – reports progress, plans and issues into the leadership team within BT Innovate and Design on a monthly basis via its own Customer Delivery Board/Execution Board to ensure that any major delivery issues are resolved.

– Breach Review Group: consists of Undertakings and legal representatives across the business and assesses the status of potential breaches.

The Undertakings programme reports to the BT Design Council on a monthly basis. It also reports to the BT Operating Committee on a quarterly basis to ensure that the programme is cost-effective and is consistent with BT’s strategic direction.

BT has a responsibility to ensure that its employees have the necessary tools and training to comply with the Undertakings. The company issued a Code of Practice to BT employees in the UK in December 2005. This was updated and re-launched in March 2008.

E-learning courses, based on the revised Code, were launched at the end of June 2008. These are designed to ensure that BT people are familiar with the Undertakings and their associated responsibilities.

The EAB and BT’s governance frameworkThe EAB conducts reviews of different aspects of BT’s governance of the Undertakings on a year-by-year basis.

As part of our regular monitoring of Next Generation Access we have attended the NGA Trialist Working Group, the NGA Business user forum and Ethernet and Copper Product and Commercial Group meetings to assess whether Openreach’s engagement with industry is operating effectively. We also attend Ofcom’s systems roadmap sessions.

Openreach continues to present its annual operating plan to us on an annual basis. At the time this report was published we were reviewing Openreach’s product management process. We were also reviewing how BT handles external complaints relating to the Undertakings.

Our view on BT’s governance of the UndertakingsThe EAB has considered the effectiveness of BT’s governance framework by looking at factors including the measures in place to detect breaches and address potential breaches and the reporting mechanisms in place to give updates on the Undertakings. We are satisfied that BT has a suitable governance framework in place although we recommend that the company reviews its arrangements to ensure that the Undertakings are fully supported in terms of adequate numbers of compliance officers and ongoing employee engagement.

Book 1.indb 21 21/05/2012 23:52

22 Undertakings status indicators

Undertaking Date due Milestone status Comments

IPstream EoI RFS 31 Dec 2005

Relevant Broadband service using EoI IPstream/IBMC 31 Dec 2006

LLU EoI RFS 30 June 2006 Non-trivial breach resulting; BT paid allowances to CPs. The EAB confirmed that the breach was remedied in December 2006.

IPstream using EoI LLU IBMC 31 Dec 2006 Non-trivial breach; BT completed delivery end of Aug 2007.

WES, BES, WES Backhaul and WEES EoI RFS 30 Sept 2006

Relevant Retail Ethernet Service using EoI WES IBMC 31 March 2007

WLR Analogue EoI RFS (informal milestone) 31 Dec 2006 BT paid allowances to CPs.

WLR Analogue EoI RFS 30 June 2007

WLR Analogue IBMC 30% target 30 June 2008 Milestone reached November 2008.

WLR Analogue IBMC 70% target 30 June 2009 Milestone reached September 2009.

WLR Analogue IBMC 100% 30 June 2010 Revised obligation included in 2009 variation.

WLR ISDN2 EoI RFS 30 Sept 2007 Trivial beach regarding some new end-user orders.

BT’s Retail ISDN2 using EoI WLR ISDN2 IBMC 31 March 2009 Non-trivial breach; revised obligation included in 2009 variation.

WLR ISDN30 EoI RFS 28 Feb 2008 (was 31 Dec 2007)

BT’s Retail ISDN30 Service using EoI WLR ISDN30 IBMC 31 Dec 2009 Revised obligation included in 2009 variation.


Delivery of key milestones to dateThis table lists our view of the status of all the key Undertakings that were due to be delivered up to 31 March 2012 including those delivered in previous years. The key gives an explanation of the different terms used in the table.

The EAB monitors the delivery of major EoI products covered by the Undertakings. Many of those with set delivery dates have been delivered in previous years and the remaining WLR3 obligations were removed in 2009. The EAB also monitors the delivery of NGA products to ensure that they are launched on an EoI basis, even though these do not have set launch dates in the Undertakings.

Achieved

Not achieved

Removed

Replaced

Key

Concerns

On track


Book 1.indb 22 21/05/2012 23:52

23Undertakings status indicators

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IPstream Connect available for order; start of BT and CP end-user base migration

31 Oct 2008 Achieved ahead of schedule.

IPstream Connect IBMC and migration of CP end-user base

31 March 2009 Achieved ahead of schedule.

GEA over FTTP Not applicable Not applicable Launch review completed by EAB.

GEA over FTTC Not applicable Not applicable Pre-launch review completed by EAB.

Systems separation obligationsThe EAB monitors the delivery of systems separation through either full physical separation of systems, or through the implementation of user access controls. During 2009 there was a variation to the Undertakings that resulted in changes to the delivery dates for systems separation.

OSS separation – User access controls and physical separation


User Access Controls for WLR3, SMPF, MPF and ISDN2 30 June 2007 Mostly delivered by the required date, but only fully met in late September 2007 due to a trivial breach.

Operational support systems separation independent external audit of User Access Controls including ISDN2 and ISDN30

30 June 2008 Achieved ahead of schedule.

Implement physically separate OSS for WLR manual exception tasks

31 May 2009 Non-trivial breach; milestone removed by 2009 variation.

Additional audit of User Access Controls 30 June 2010 Achieved ahead of schedule.

Implement User Access Controls for OSS listed in Annex 6

30 June 2010

Implement physically separate access and user access controls for BT people not listed in 5.44.6 (a)

30 June 2010

OSS physical separation 30 June 2010 Milestone removed as part of 2009 variation; BT now has to deliver physical separation when “reasonably practical and proportionate”.

EAB to perform quarterly checks of access to OSS listed in Annex 6 starting in June 2010

From June 2010 onwards

Moved to six monthly in agreement with Ofcom.

Migration to EoI products


At least 90% of BT’s relevant installed end-user base shall be migrated so that the products that this base purchases, that consume the Measured Products, do so on an EoI basis from Openreach

30 June 2010

BT to advise Ofcom of the further increased percentage migrations of the relevant installed end-user base achieved by 30 June 2014

31 Dec 2011 (latest) or 6 months after completion of business systems stack migration (if earlier)

BT informed Ofcom that it would migrate 97% of the relevant installed end-user base.

At least 95% of BT’s relevant installed end-user base shall be migrated so that the products that this base purchases, that consume the Measured Products, do so on an EoI basis from Openreach

31 December 2012

BT to achieve further increased percentage migrations previously notified to Ofcom by 31 Dec 2011

30 June 2014

Book 1.indb 23 21/05/2012 23:52


Customer side records migration


Ready to mass migrate PSTN customer side records 31 March 2008

50% of relevant customer side records migrated to physically separate OSS

30 Nov 2008

50% of non-WLR supply side records migrated to physically separate OSS

31 Jan 2010 Non-trivial breach; milestone removed by 2009 variation

Ready to mass migrate customer side records relating to Featureline

30 June 2009 Non-trivial breach; revised obligation included in 2009 variation.

90% of relevant customer side records migrated to physically separate OSS

30 Sept 2009 Revised obligation included in 2009 variation.

90% of non-WLR supply side records migrated to physically separate OSS

31 Jan 2010 Removed by 2009 variation.

90% of users migrated to physically separate OSS for WLR manual exception tasks

31 March 2010 Removed by 2009 variation.

At least 80% of BT’s customer side records relating to the Measured Products held on OSS shared between Openreach and the rest of BT are migrated to at least Level 2 system separation;

30 June 2010

BT to advise Ofcom of BT’s customer side records to be achieved by the 30 June 2014

31 Dec 2011 (latest) or 6 months after completion of business systems stack migration (if earlier)

BT informed Ofcom that it would migrate between 92% and 94% of customer side records.

Implementation and ongoing application of the obligations in relation to customer side records in section 5.44.2 is subject to an audit commissioned by the EAB on an ongoing basis at least every 24 months from 30 June 2010.

30 June 2012 (latest)

Initial audit of achievement of 80% migration milestone has been completed.

At least 90% of BT’s customer side records relating to the Measured Products held on Operational Support Systems shared between Openreach and the rest of BT are migrated to at least Level 2 System Separation;

31 December 2012

Achievement depends on successful delivery of the UK business system stack and a rapid migration of customers.

BT to achieve further increased percentage migrations previously notified to Ofcom by 31 Dec 2011

30 June 2014

UK business systems stack implementation (non-binding milestones)


Business systems stack – Operational Trial Starts 30 April 2010

Business systems stack – Initial Live Deployment 31 Dec 2010

Business systems stack – Trial Migration Begun 31 March 2011

Business systems stack – Volume Migration Begun 31 Dec 2011

Book 1.indb 24 21/05/2012 23:52


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MIS and other systems separation


Management Information Systems separation 22 Oct 2006 Includes Level 1 separation for Annex 5 systems and Level 2 separation for others.

MIS roadmap 30 June 2007

MIS Level 2 separation 30 June 2010 BT did not implement Level 2 separation for all its MIS.

Non-OSS and non-MIS Level 1 separation 30 June 2010 Although the milestone was achieved, ongoing compliance is high risk due to the solutions adopted by BT.

NGA-related Undertakings


NGA related Undertakings cease to apply to future deployments (conditional)

31 Dec 2010 The number of end user premises capable of being served by a BT FTTC enabled cabinet had exceeded 500,000 before 31 December 2010.

BT to consult on demand for FTTC Passive Inputs and Backhaul over fibre

31 Dec 2011 Consultation completed, one industry response received.

BT and Ofcom to review NGA Undertakings 31 Dec 2011 No changes to the Undertakings.

Next Generation Access monitoring themesWe monitor six areas of compliance for NGA:

NGA theme Status Activity

Consultation and engagement – Openreach is required to consult with industry on key changes and product developments.

Openreach continues to engage with industry through working groups and fora. Some in industry have expressed concern that requirements for NGA products are processed via the NGA Trialist Working Group rather than Openreach’s formal SoR process. Openreach held an industry consultation on passive inputs.

Products – to be designed, launched and CPs’ users migrated to the new product on an EoI basis.

We concluded a pre-launch review of the GEA product over FTTP in pilot phase and found that it was operating compliantly although there were a few aspects which could only be reviewed after full launch had taken place.

Equipment and locations – to ensure that NGA solutions are not made unattractive to CPs, either because of cost or availability of equipment, space or power.

We have found that all NGA developments and products use existing Openreach exchange space and power products, and there is also the option for CPs to use their own infrastructure.

Backhaul – to ensure that the NGA product does not preclude or dictate the choice of backhaul for CPs or make the product commercially unattractive because of the cost or limitations of the backhaul solution.

No CPs have raised concerns with us on this topic so we conclude that Openreach is fulfilling its obligations.

Passive components – a range of requirements resulting from a variation to the Undertakings, including a requirement to consult with industry and a stipulation that Openreach should use the same components, processes and systems it uses itself for the purposes of its active product.

Openreach held an industry consultation on passive inputs and accepted the EAO’s advice on a change to the wording of the consultation.

Governance – A range of obligations including the use of statement of requirements processes on the same basis for all CPs, appropriate sharing of customer confidential and commercial information and all transactions to be carried out on an EoI basis.

Some new NGA requirements are being progressed using the SoR tracker tool and are discussed at the NGA Trialist Working Group. At the time this report was published we were reviewing the SoR process.

Book 1.indb 25 21/05/2012 23:52


Behavioural dashboardBT employees must comply with the Undertakings in the way that they behave when working with colleagues and dealing with customers. We monitor BT’s progress towards encouraging Undertakings-related behavioural change by assessing a range of behavioural indicators:

Measure Status Comment

Manager and Team Member Undertakings training completion

Source: BT

UK Based Team Members - target 90%

UK Based Contractors - target 90%

UK Based BT Managers - Target 95%

100

Perc

enta

ge o

f Com

plet

ion

90

85

95

75

80

70

GroupRetail WholesaleGlobal Services

Innovate & Design

OpenreachOperateBT

Training completion rates for UK managers remained above target across the company, although figures for training completions continue to be below target for team members in BT Global Services and for contractors in BT Global Services and BT Group. BT has undertaken a number of initiatives to drive up completions and the EAB has recommended that BT continues to provide effective training to maintain awareness of the Undertakings. BT also reported to us that the Undertakings were not relevant to some of the people invited to complete the training, for example third party contractors working outside of BT sites. It said that this accounted for the lower completion rate in some areas. We will continue to monitor completion rates across BT.

Openreach brand awareness – Business only

0

10

20

30

40

50

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Source: Openreach

% B

rand

Aw

aren

ess

Awareness levels of the Openreach brand decreased slightly in 2012 but the graph shows that there has been a gradual increase in awareness over time. Openreach continues to place the Openreach brand on its vans with only a small number left to be rebranded.

Openreach delivers products equivalently

Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12

Source: Openreach

% c

usto

mer

s ag

ree

The chart shows the twelve month rolling average. There has been a downward trend for this measure during the year. This trend was mainly caused by a greater number of CPs answering ‘Don’t know’ to the question. At the beginning of the year there was a change to the mix of CPs asked this question, with more smaller CPs involved in the survey and their responses showed that they were more likely to answer ‘Don’t know’.

Openreach ran knowledge calls on equivalence for smaller CPs throughout 2012 and 75 CPs joined the calls. Openreach reported that a number of the issues raised by CPs in response to this question related to service rather than equivalence. It has told us that it will be addressing a range of issues raised by CPs on the calls in its compliance programme for the coming year.

Book 1.indb 26 21/05/2012 23:52


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Measure Status Comment

BT Wholesale delivers products equivalently

65

70

75

80

85

90

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

*equivalence applies to certain key Products and Services as defined in the UndertakingsSource: Openreach

% c

usto

mer

s ag

ree

Question no longer asked therefore no scores are available from April 09

New surveyprocess April 08

Confidence that BT will deliver Telecom Strategic Review commitments

Believe BT delivers products equivalently* to all customers

BT Wholesale only manages two products on an EoI basis in 30% of the UK. For those products, the chart shows that the level of confidence that BT Wholesale delivers its products equivalently has been maintained and shows improvement since last year.

The data to form this chart was obtained through telephone interviews with customers. Bearing in mind the reduced sample size and the cost of running these types of interviews, BT Wholesale decided to discontinue this measure from December 2011 onwards.

Satisfaction with Openreach engineers

Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12

Source: Openreach

% a

ppro

pria

te b

ehav

iour

70

75

80

85

90

95

100

The rolling 12-month average for this measure fell during 2012 and is below target, although a similar measure for Openreach account managers maintained a good performance. We will continue to monitor this measure as two CPs have raised engineering behaviour as an issue.

Openreach SoR process This is covered in more detail on p14. The Openreach SoR process was under review by the EAB at the time this report was published.

BT Wholesale SoR processApril 2011 to March 2012 (as at 03/04/2012)

Source: BT

SoRs raised by non-BT CPs

SoRs raised by BT CPs

Num

ber o

f SoR

s

0

5

10

15

20

25

30

35

40

DeliveredAcceptedRejectedPendingReceived

The chart shows SoRs were delivered for a higher number of non-BT CPs than for BT CPs. We are satisfied that this process is running equivalently and without issues.

Book 1.indb 27 21/05/2012 23:52


Product KPIsThe EAB assesses key performance indicators (KPIs) published by BT showing the performance of BT’s EoI products. The KPI charts for each product portfolio compare service provided to CPs within BT to that for non-BT CPs.

The KPIs are shown as line charts with one line representing the product performance experienced by BT CPs and the other the performance as experienced by non-BT CPs. If the two lines are consistently different it may indicate that there is an equivalence issue. However there are several factors that can cause differing performance and these do not necessarily indicate a breach of the Undertakings. Tests are also applied to assess whether any difference is statistically significant. These factors are explained on a product-by-product basis below for a selected number of KPIs.

Openreach

Chart 15 WLR3 Analogue Top Level Provision

% orders completed by CCD

90

92

94

96

98

100

Apr

11

May

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Jun

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Jul 1

1

Aug

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Sep

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Oct

11

Nov

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Dec

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Jan

12

Feb

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Mar

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Source: BT Non-BT CPs

BT CPs

During the year, WLR3 analogue provision performance favoured non-BT CPs. The WLR3 analogue provision KPI metric comprises the sub-order types New Provides, Migrations and Transfers, which each have different average times to process. Non-BT CP orders comprised a higher percentage mix of the more simple Transfers and Migrations orders while a higher percentage of BT CP orders were New Provides which required the installation of a new copper line. We have concluded that there is no indication of non-compliance with the Undertakings’ requirements.

Chart 16 WLR3 Analogue Top Level Repair (all care levels)

% faults completed in objective time

60

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Sep

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BT CPs

WLR3 analogue repair performance appears to have favoured BT CPs during the year. However our analysis highlighted no significant equivalence issues once the different service levels that CPs chose to order are taken into account.

Chart 17 LLU Provision – SMPF Basic Provides


90

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BT CPs

SMPF Basic Provide performance favoured BT CPs for the majority of the year. Non-BT CPs operate mainly in locations of high business density and in just three out of the nine BT operational zones. Any service delivery issues within these locations can impact non-BT CPs’ overall performance while BT CPs’ operations are spread across the entire UK and are therefore more resilient to issues in any particular area. This, in combination with significantly greater volumes of BT CPs, resulted in higher BT CP performance levels for some of the year.

Book 1.indb 28 21/05/2012 23:52


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Chart 18 LLU Provision – MPF New Provides


40

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BT CPs

The provision performance for MPF favoured non-BT CPs throughout the year. A very high percentage of BT CP orders are ‘multiple orders’ whereas nearly all non-BT CPs orders are ‘single orders’. This means that when a BT CP order fails it often results in a multiple customer order failure, whereas non-BT CP orders that fail usually only affect one customer order and this affects the performance chart. Following analysis, including disaggregation of the order types, we have found no indication of failure to comply with the Undertakings.

There are too few BT CP repairs for MPF to make a valid comparison.

Chart 19 Ethernet Provision – Ethernet Access Direct


90

92

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Apr

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May

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Sep

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BT CPs

EAD provision performance favoured BT CPs for the majority of the year. We found that BT CPs chose to purchase a high volume of the ‘project managed service’ product with some of its orders. The use of project services removes some of the reasons for order failure and this has had the effect of improving BT CP performance. The project managed service is available from Openreach to all CPs on an equivalent basis under its ‘Project Services’ contract. We concluded that there is no indication that EAD provision does not comply with the Undertakings.

Chart 20 NGA Provision – GEA over FTTC

% orders completed on time

90

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Apr

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Jul 1

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Aug

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BT CPs

GEA over fibre to the cabinet provision performance for BT CPs and non-BT CPs remained broadly equivalent throughout the year and we have found no indication of a lack of equivalence.

Although GEA repair volumes are currently very low, early analysis indicates that current performance is equivalent. We will continue to monitor both provision and repair performance carefully during the coming year.

BT Wholesale

Chart 21 IPstream Connect Provision

% orders provided on time

Apr

11

May

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Jun

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Jul 1

1

Aug

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Sep

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Oct

11

Nov

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Source: BT

95

96

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100

Non-BT CPs

BT CPs

IPstream Connect provision performance favoured non-BT CPs. We found that the Simultaneous Provide order type (where the copper line and the IPstream broadband service are provisioned at the same time) impacted on the overall result. Simultaneous Provides are more complicated than standard orders and therefore have a lower provision success rate than other order types and BT CPs consume a much higher number of Simultaneous Provide orders than non-BT CPs. We found no Undertakings compliance concerns in this area.

Book 1.indb 29 21/05/2012 23:53


Chart 22 IPstream Connect Repair

% faults cleared on time

Apr

11

May

11

Jun

11

Jul 1

1

Aug

11

Sep

11

Oct

11

Nov

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Dec

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Jan

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Feb

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Mar

12

Source: BT

80

85

90

95

100

Non-BT CPs

BT CPs

IPstream Connect repair performance favoured BT CPs during the year. This was because CPs can choose which diagnostic tool they use as part of the repair process and BT CPs chose to use the Openreach Broadband Boost tool to log complex faults, the statistics for which are not shown in this chart. In contrast, non-BT CPs logged more faults using BT Wholesale’s Special Fault Investigation tool, on which this chart is based. Despite this difference in approach we found no indication of non-compliance with the Undertakings.

IPstream Connect migrationsWe found that IPstream Connect migration performance has been equivalent throughout the year.

Chart 23 Wholesale Broadband Connect Provision

% orders provided on time

Apr

11

May

11

Jun

11

Jul 1

1

Aug

11

Sep

11

Oct

11

Nov

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Dec

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Jan

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Feb

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Mar

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Source: BT

80

85

90

95

100

Non-BT CPs

BT CPs

Ofcom removed regulatory obligations for Wholesale Broadband Connect (WBC) in the competitive Market 3 during 2008; therefore the EAB monitors WBC in the regulated Markets 1 and 2. During the year performance favoured non-BT CPs as with the IPstream Connect product. We identified that the Simultaneous Provide order type – which is complex and has a lower target timescale success rate than other order types – affected the performance chart. BT CPs receive a higher percentage of Simultaneous Provide orders than non-BT CPs and analysis has shown that when this order type is excluded performance appears to be equivalent.

Chart 24 WBC Migrations

% migrations provided on time

Apr

11

May

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Jun

11

Jul 1

1

Aug

11

Sep

11

Oct

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Nov

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Dec

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Jan

12

Feb

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Mar

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Source: BT

90

92

94

96

98

100

Non-BT CPs

BT CPs

Performance favoured BT CPs during the year. A major project that required a migration of orders between CPs affected the chart performance. Root cause analysis indicated that orders received by BT Wholesale are allocated taking factors such as exchange capacity, exchange equipment footprint and engineering availability into consideration. BT CP and non-BT CP orders are handled on the basis of ‘ratio of orders by telephone exchange’ and if the overall requirement for an exchange cannot be delivered, the number of orders is reduced while maintaining the ratio of BT CPs and non-BT CP orders.

In the case of the large project the likelihood of an exchange’s having only non-BT CP orders was high while the likelihood of an exchange's having only BT CP orders was low, therefore due to volume, failures on a ‘per exchange’ basis were statistically more likely to affect non-BT CP order performance. BT assured us that when the major project order was excluded from analysis, performance for BT CPs and non-BT CPs was equivalent.

Book 1.indb 30 21/05/2012 23:53


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Comparative performance chartsIn the course of agreeing the OSS variation in 2009, Ofcom reflected industry concerns that slower progress towards migration to the new EoI products following changes to the remaining IBMC dates might have adverse consequences on equivalence in practice. Accordingly BT offered to provide Openreach’s Comparative Performance Charts (CPCs) to the EAO.

The intent of the CPCs is to indicate whether Openreach’s service performance levels for the EoI and non-EoI product variants disincentivise the rest of BT from migrating to the EoI product variants.

The CPC reports indicate whether or not BT may be getting better performance by leaving its installed customer base on the non-EoI (i.e. ‘classic’) product variant rather than migrating them more quickly to the EoI variant (WLR3) following the resetting of the IBMC dates.

Ofcom’s OSS variation statement said:

“Given the consultation responses Openreach will also advise the EAO, at least quarterly, of the comparative performance stats between EOI and non-EOI for the main product sets (PSTN, ISDN2, ISDN30, WLR2, and WLR3) where the IBMC dates have been reset by the variation.”

“Openreach will report to the EAO on a quarterly basis, from January 2010 at the latest, on key performance metrics comparing EOI and non-EOI/legacy supply. Measures will cover installation times, early life fault rates, fault repair times and repeat fault rates. The relevant (high-volume) products covered include WLR Analogue, ISDN2 and ISDN30."

Ofcom continued: “We consider that this will place pressure on Openreach to deliver broadly equivalent performance to CPs and those BT downstream customers depending on non-EOI inputs. This additional reporting and monitoring has been agreed between BT and us subsequent to comments made in responses to the consultation.”

The CPCs provided to the EAO since October 2009 are not necessarily comparing ‘like for like’ products, and some categories shown on the charts may be consumed by a small number or even a single CP and hence expose commercially confidential information. As a result, BT and Ofcom have agreed that the charts should not be published. However, Ofcom and BT have asked the EAB to publish its opinions on the charts.

It is also important to note that the CPCs do not perform the same function as the EoI product equivalence KPIs shown on the previous page and they should be viewed independently as both the subject matter and the statistical approach are different.

Two metrics are examined for both provision and repair processes for each of the Analogue, ISDN2 and ISDN30 products:

Provision:1. Time to install (in working days)2. The percentage of provisions suffering early life failures.

Repair:1. Time to clear the fault (in working hours)2. The percentage of repairs requiring a repeat repair to clear.

To draw a conclusion, the EAB reviews both metrics to assess whether BT would benefit by remaining on the non-EoI product variant. In the case of a ‘mixed picture’ where one metric is an incentive and one metric is a disincentive, the EAB assumes that it is unlikely to have a significant impact on BT’s behaviour.

The EAB’s analysis of the CPC metrics from April 2011 – March 2012

CPC Commentary

Analogue repair The performance levels of the ‘repeat repairs’ metric shows that there appears to be a potential incentive while the repair performance metric shows a potential disincentive for ensuring all new analogue telephony provisions are EoI. This ‘mixed’ picture means that it is unlikely for there to be a significant impact on BT’s behaviour.

ISDN2 provision Performance levels of the both provision metrics show no clear disincentive for migration to the EoI version.

ISDN2 repair For the majority of the year there has been no clear incentive regarding repair performance to ensuring that all ISDN2 circuits are migrated to the EoI systems.

ISDN30 provision There is a potential incentive and a potential disincentive to ensuring all ISDN30 provisions for all end users are processed on EoI systems. The transaction volumes are very low with little or none for the classic BT product and this ‘mixed’ picture means that it is unlikely therefore to have a significant impact on BT’s behaviour.

ISDN30 repair For the majority of the year there has been only a potential disincentive to ensuring all ISDN30 products are migrated to the EoI variant and thus supported by the new systems. Once again transaction volumes are very low with little or none for some of the year for the classic BT product. This potentially could impact BT’s behaviour.

The EAB found no obvious examples of there being a clear and consistent disincentive across all of the metrics of a particular product to cause BT to delay moving to the EoI product and systems. In most of the cases there was a mixed picture. For example, the EoI product would perform better in one metric but worse in the other metric. In some cases the CPCs indicate there will be a benefit in a particular metric of a product; but in all but two cases this is offset by a disadvantage in another metric. The two areas where this was less clear are ISDN2 and ISDN30 repair, where for some of the year the CPC metrics indicated that there was only disincentive to migrating all ISDN2 and ISDN30 products to the EoI platform. The EAB will continue to monitor the planned activity roadmap in this area closely while it is aware that current volumes are very low.

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On this basis, the EAB can provide some reassurance to Ofcom that the metrics which it specified indicate that BT is not gaining a clear advantage compared to non-BT CPs by remaining on non-EoI products and systems longer than originally planned.

In addition, BT’s progress towards the delivery of its remaining Undertakings’ obligations for current generation products and systems would also support the CPCs in showing that BT is not gaining an advantage by remaining on non-EoI products.

The systems variation agreed in September 2009 set out targets relating to separation of BT’s systems. In relation to the migration of its customer base to equivalent products, BT had previously reported that by 31 March 2010, 90% of its residential customers were served on an equivalent basis, which included the migration of over 12m consumer customers. The EAB validated this assertion.

This year BT reported two non-binding system migration milestone achievements, firstly confirming that business customer migration trials had started in March 2011 and secondly that the volume migration of business customers had started during December 2011, The EAB validated both of these non-binding assertions.

During December 2011 BT advised Ofcom of the further increased percentage migrations of both the relevant installed end-user base and BT’s customer side records to be achieved by the 30 June 2014. The EAB validated that BT had met its commitment to inform Ofcom by 31 December 2011.

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Respective responsibilities of the Equality of Access Board and PricewaterhouseCoopers LLPWe have been engaged to express an independent opinion on selected aspects of the Equality of Access Board (“EAB”) Annual Report for the year ended 31 March 2012 (the “Report”). The preparation of the Report in accordance with the requirements of the Undertakings given to Ofcom by BT Group plc (“BT” or the “Group”) pursuant to the Enterprise Act 2002 effective 22 September 2005 (the “Undertakings”) is the sole responsibility of the EAB.

There are no generally accepted standards for reporting on compliance with the Undertakings or in respect of related performance measures. The reporting policies adopted by the EAB in forming their opinions expressed within the Report are described in the sections entitled “Monitoring Reporting and Advising” on pages 20 and 21.

Scope and approachOur engagement was designed to provide assurance on:

•whether, in our opinion, the conclusions reached by the EAB in respect of:

– the validation of milestone deliveries in the period set out on page 7;

– the investigation of breaches set out on pages 9 and 10;

– the investigation of complaints made to the EAB and BT set out on page 11;

– the themes and results of quick checks performed in the period as set out on page 12;

– the review of key compliance risks as set out in the table on page 13;

– the key risks included in the EAB risk register as set out on page 16; and

– the Undertakings status indicators as set out on pages 22 to 25.

(the “EAB Conclusions” each indicated by the are complete and consistent with the underlying management information of the Equality of Access Office (“EAO”) and are consistent with the evidence gathered by the EAO in accordance with the Reporting Policy.

In this regard, we planned our procedures to provide us with reasonable assurance on the completeness and consistency of the EAB Conclusions with underlying management information. We obtained an understanding of the relevant controls and procedures applied by the EAB and the EAO to generate, aggregate and evaluate information in respect of the Group’s governance, delivery and ongoing compliance with the Undertakings, including the EAO monitoring and reporting, audit and validation plan, quick checks, exemptions and variations and breaches and complaints processes. We completed tests over data consolidation and reporting in respect

of the EAB Conclusions only and did not perform testing over the generation of data within the underlying management information systems of the Group or the sufficiency of evidence gathered by the EAO.

•whether, in our opinion, the Product Key Performance Indicators for WLR3 Analogue Top Level Provision, WLR3 Analogues Top Level Repair (all care levels), LLU Provision – SMPF Basic Provides, LLU Provision – MPF New Provides, Ethernet Provision – Ethernet Access Direct, NGA Provision – GEA over FTTC, IPstream Connect Provision, IPstream Connect Repair, Wholesale Broadband Connect Provision and WBC Migration shown on pages 28 to 30 are properly compiled from the underlying management information of the Group. In this regard, we planned our procedures to provide us with reasonable assurance they are properly compiled from underlying management information. We completed tests over data consolidation and reporting only and did not perform testing over the generation of data within the underlying management information systems of the Group.

In addition, we reviewed the minutes of EAB meetings, discussed with employees of the EAO the processes to collate the Report and reviewed the remainder of the Report for consistency with our knowledge of the Group in order to report whether anything came to our attention to indicate that the remainder of the Report is inconsistent with the findings of our work.

We planned and performed our evidence-gathering procedures to obtain a basis for our conclusions in accordance with the International Standard on Assurance Engagements 3000 (Revised) – “Assurance Engagements other than Audits or Reviews of Historical Information”. We have not performed an audit, and therefore do not express an audit opinion in accordance with International Standards on Auditing (UK and Ireland).

We believe that our work provides a reasonable basis for our conclusions.

Considerations and limitationsThe Group’s governance measures to ensure compliance with the Undertakings represent a set of internal controls and other actions designed to provide reasonable assurance regarding compliance, in all material respects, with each of the Undertakings and to support reporting of compliance with those Undertakings. Further, the EAB’s governance measures to monitor, assess and report on the Group’s compliance with the Undertakings represent a set of internal controls and other actions designed to provide reasonable assurance regarding the assessment of compliance, in all material respects, with each of the Undertakings. Because of the inherent limitations in any set of internal controls, for example the degree of judgement required in applying certain controls, internal controls may not prevent, detect or report non-compliance with the Undertakings. Also, projections of any evaluation of effectiveness to future periods are subject to the

Independent Assurance Report to the Equality of Access Board and Ofcom

Book 1.indb 33 21/05/2012 23:53


risk that controls may have become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This report, including the conclusions, has been prepared for and only for the EAB and Ofcom for the purpose of allowing the EAB to meet its requirements under the Undertakings and for no other purpose. We do not, in giving these conclusions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

ConclusionsIn our opinion:

• the conclusions reached by the EAB in respect of:

– the validation of milestone deliveries in the period set out on page 7;

– the investigation of breaches set out on pages 9 and 10;

– the investigation of complaints made to the EAB and BT set out on page 11;

– the themes and results of quick checks performed in the period as set out on page 12;

– the review of key compliance risks as set out in the table on page 13;

– the key risks included in the EAB risk register as set out on page 16; and

– the Undertakings status indicators as set out on pages 22 to 25.

(the “EAB Conclusions” indicated by the are properly compiled from the underlying management information of the EAO and are consistent with the evidence gathered by the EAO in accordance with the Reporting Policy;

• the Product Key Performance Indicators for WLR3 Analogue Top Level Provision, WLR3 Analogues Top Level Repair (all care levels), LLU Provision – SMPF Basic Provides, LLU Provision – MPF New Provides, Ethernet Provision – Ethernet Access Direct, NGA Provision – GEA over FTTC, IPstream Connect Provision, IPstream Connect Repair, Wholesale Broadband Connect Provision and WBC Migration shown on pages 28 to 30 are properly compiled from the underlying management information of the Group; and

Based on the work performed, nothing has come to our attention to indicate that the remainder of the EAB Annual Report for the year ended 31 March 2012 is inconsistent with the findings of our work.

PricewaterhouseCoopers LLP Chartered Accountants London

15 May 2012

Book 1.indb 34 21/05/2012 23:53

Annex 2 Less stringent restrictions related to the Undertakings

applied to BT employees

BES Backhaul Extension Service, a legacy product in the Ethernet portfolio

BT CPs BT Wholesale and BT’s two downstream businesses BT Global Services and BT Retail

Business systems stack

A collection of inter-related systems which allow BT’s business customers to be served equivalently

BTNI BT Northern Ireland

CCI Customer Confidential Information

CDD Customer Delivery Date

CI Commercial Information

CPs Communications Providers

CPCs Comparative Performance Charts

EAB Equality of Access Board

EAD Ethernet Access Direct, a point-to-point access product in the Ethernet portfolio offering high bandwidth connectivity, linking end user sites, CP networks and BT exchanges

EAO Equality of Access Office, the team which supports the EAB

EBD Ethernet Backhaul Direct, which provides uncontended access from an access node to a handover point

EMP Equivalence Management Platform, the strategic system underpinning the delivery of EoI products

EoI Equivalence of Inputs, which means that BT provides the same product or service to all CPs on the same timescales, terms and conditions by means of the same systems and processes

FTTC Fibre-to-the-Cabinet, an NGA technology that involves installing fibre to street cabinets and using the existing copper infrastructure from the cabinet into the home

FTTP Fibre-to-the-Premises, an NGA technology that involves installing fibre into homes or premises as an overlay of the copper local loop

GEA Generic Ethernet Access, a product enabling broadband connections over Next Generation Access

IBMC Installed Base Migration Complete, which is the date by which the migration of all of the relevant BT installed customer base to the EoI product or platform is completed

IPstream Connect product supplied by BT Wholesale to enable BT CPs and non-BT CPs to offer broadband services to end users

ISDN/ ISDN2/ISDN30

Integrated Services Digital Network a technology allowing voice, internet and video to be delivered via the same dedicated line

KPI Key performance indicator

LLU Local Loop Unbundling, the process by which CPs can rent the copper lines between BT's exchanges and customer premises from Openreach to provide voice and broadband services using their own equipment

Glossary

MIS Management Information Systems

MPF Metallic Path Facility, a circuit comprising a pair of twisted metal wires between an end-user’s premises and a main distribution frame

NGA Next Generation Access

Non-BT CPs Communications Providers external to BT

OICs Openreach Industry Commitments, a voluntary range of obligations in return for the 2009 variation to the Undertakings

OSS Operational Support Systems

OTA2 Office of the Telecommunications Adjudicator

Passive inputs Products that allow greater access to the underlying infrastructure on BT’s Next Generation Access network with no use of electronics/power

PwC PricewaterhouseCoopers LLP

RFS Ready for Service, which is the date by which an EoI product or service is available for use by other CPs for their new end-users

SMP Significant Market Power

SMPF Shared Metallic Path Facility, access to the non-voiceband frequencies of the Metallic Path Facility

SoR Statement of Requirements, the process by which CPs submit their product requirements to BT

WBC Wholesale Broadband Connect, a next generation copper broadband product

WES Wholesale Extension Service, a legacy product in the Ethernet portfolio

WEES Wholesale End-to-End Service, a legacy product in the Ethernet portfolio

WLR Wholesale Line Rental, a product supplied by Openreach which is used by CPs to offer telephony services using their own brand, pricing structure and billing, but using BT's network

WLR3 An EoI version of Wholesale Line Rental


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BT Group plcRegistered office: 81 Newgate Street, London EC1A 7AJ.Registered in England and Wales No. 4190816. Produced by the Equality of Access Office

Registered office: 81 Newgate Street, London EC1A 7AJ.Registered in England and Wales No. 4190816.Produced by BT Group. Designed by saslondon.comPrinted by RR Donnelley.

www.bt.com

Please recycle

Book 1.indb 36 21/05/2012 23:53

Annual Report 2012 - BT Plc

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Transcript of Annual Report 2012 - BT Plc