1

Thank you

2

The new market

• Promotion of competition based on LLU

• More intense competition for narrowband lines

• Fewer, stronger competitors

• Improved incentives to invest in MSANs, Soft Switches,

network intelligence, Core Transport

• Reduced competitive investment in access and

backhaul

• Stable and certain regulatory framework

• Competition Act and consumer protection regulation

only at Retail level

3

Openreach

• Openreach has had its own headquarters, distinct brand and around 30,000 people, from January 2006

• It controls and operates the duct, fibre, copper and other non-electronic assets in BT’s access and backhaul networks (the ‘access bottleneck’)

• It provides product management, sales and service management for significant market power (SMP) products delivered over BT’s access and/or backhaul networks - bottleneck products

• Any performance-related pay for Openreach staff is based only on Openreach own objectives and performance; not BT Group’s

• BT will publish separate financial accounts for Openreach

4

Openreach- product set

• Wholesale Analogue Line Rental– customer access for analogue voice services

• Wholesale ISDN2 and ISDN 30 Line Rental– customer access for digital voice services

• Local Loop Unbundling (full and shared)– copper pairs

• Wholesale Extension Service– Ethernet partial private circuits from customer to first exchange

• Backhaul Extension Service– Ethernet partial private circuits from first exchange to POP or second exchange

• and facility to co-locate specified equipment at exchanges– aggregation equipment, video servers, access network termination

• Plus specified future access and backhaul services if requested by a CP

5

Example: LLU Equivalence of Input available on 30 June

• Openreach hit a major milestone on 30 June with the delivery of LLU Equivalence of Input (EoI) via the Equivalence Management Platform (EMP) – All CPs’ ordering, fault repair and dialogue services capability is conducted through a single

interface

– BT Wholesale new orders now use the same LLU products (SMPF & MPF) on the same terms as the rest of industry

• Openreach are fully committed to making LLU a success. – The number of lines unbundled is now in excess of half a million (announced 15/6/06).

– Openreach is currently fulfilling more than 20,000 LLU orders per week.

– Nearly 20 LLU Communications players provide unbundled services from almost 1,000 local exchanges across the UK today.

– The EMP will be able to handle greater volumes and improve automation of business critical processes for all LLU users

6

Local Loop Unbundling (LLU)

NTE Openreach provided

CP DSLAM

Openreach responsibility

BT Exchange

CustomerPremises

• Full unbundling - Metallic Path Facility (MPF)

• The whole line is transferred from Openreach to Communications Providers

• Communications Providers can provide any combination of Broadband, Voice and TV services to end users

• Shared line - Shared Metallic Path Facility (SMPF)

• Communications Providers share a line between the local exchange and their end user’s premises in order to supply broadband.

• Telephony services, provided by a WLR Communications Provider, use the same line

7

Wholesale Line Rental

Openreach:• Provides, repairs and maintains the lines• Bills the Communications Providers for services

Communications Providers:• Sell services to end users• Set prices • Bill end users• Arranges for calls to be handled

Communications Providers are able to:• Offer an own branded service to their

customers using Openreach access network

• Own the end to end customer relationship

NTE Openreach provided

Voice switch

Openreach responsibility

BT Exchange

CustomerPremises

8

Operator Density UK1 Operator

2-5 Operators

6+ OperatorsNationally* there are:

• 1698 unbundled exchanges in service at 30th June 2007.

• This represents 77.6% of Households.

• 465 have six or over operators present.

• 741 have two to five operators present.

• 492 of these have one operator present.

• Overall at 1st July 2007 there were 2,423,567 unbundled lines.

* Now taking into account novations, takeovers and ceases

9

WES

BT Access Node Ext. CP PoP SiteBT Access NodeEnd User Site End User Site

BES Backhaul Only

BES (Daisy Chain)

BNS

Backhaul only

e.g. cell site

WES Aggregation

WEES

WES

Local Access

Ethernet Products – June 2007

ONBS

ONBS only available in 21CN footprint

10

BT Core

CustomerSite

Point of Interconnect

Private Circuit (Leased Line)

• Retail PC Product

• Wholesale Provide – PPC Partial Private Circuit

• Openreach Provide– TILLAP and TILLBP

CustomerSite

LocalExchange

LocalExchange

Point of Interconnect

PPC PPC

TILLBPTILLAP TILLAPTILLBPTrunk

Private Circuit

11

21CN - The operational challenge is huge

• 30 million customer lines to be migrated to 21CN

• Five year migration programme

• Half a million tests conducted in the countdown to and during the first phase of end user migration

• More than 40million calls already successfully carried over IP trunk network link

• More than 300 trialists already testing end to end services between MSANs

Whatever way you look at 21CN it’s BIG….

12

21CN – End user migration progress

2007

2008

2009

2010

PSTNBroadband Both

2011