Ofcom yesterday proposed significant reductions in the prices that BT Wholesale can charge internet service providers (ISPs) in parts of the country where it is the sole provider of wholesale broadband services – mainly in rural areas.
The proposed price reductions are between 10.75% and 14.75% below inflation.
As an ISP and BT Wholesale customer I say good oh! I’m not quite sure that it will achieve the effect Ofcom think it will achieve though. Yes we might find retail ISPs lowering their prices marginally for customers in these areas. Consumer ISPs already charge rock bottom prices so a cut of 15% off a low number won’t make much difference.
Also ISPs buy bulk backhaul bandwidth from BTW. This is not specific to particular exchanges or locales. For example Timico’s bandwidth comes into two docklands locations from all our customers all over the country. We would not be able to say “this customer gets more bandwidth because he is one of the lucky ones living in an area with reduced costs.
A big chunk of the cost is in the bandwidth used so whilst a reduction in line rental is good a reduction in bandwidth costs would be better. We may find that competition does drive down the cost to the end user a little in these cost reduced areas but there is also a fair chance that ISPs will just pocket the additional margin thanks very much and maintain homogenous pricing policy across the whole country. More packages means more complexity and ultimately more cost.
This many not necessarily be a company line here but it’s what I think will be the overall outcome. I might be completely wrong.
9 replies on “Ofcom hits BT Wholesale in the rurals #DEAPPG #FinalThirdFirst”
I think you are right.
Ofcom couldn’t regulate a rice pudding. They just don’t get IT.
Or they are part of the old boys network?
chris
I read this proposal earlier and it’s hopefully a move in the right direction.
I’m someone who’s connected via a Market 1 exchange so sound have a lot of ADSL choice 🙁
“…a fair chance that ISPs will just pocket the additional margin thanks very much and maintain homogenous pricing policy across the whole country.”
Timico may be different 😉 but I would put money on your statement being true! 🙁
NB. Do any of Ofcom’s ‘proposals’ ever go further than that?!
Not sure what happened there! Should have said:
I’m someone who’s connected via a Market 1 exchange so haven’t a lot of ADSL choice 🙁
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I don’t see homogenous pricing being maintained. On the contrary, quite a few ISPs already have “low cost areas”. For some its because they do LLU, and for others its so they can compete with LLU providers in the more competitive exchanges, even though they buy wholesale from BT everywhere they go.
The announcement also says that Ofcom is lifting wholesale regulation in parts of the country where competition is effective – will this exaggerate the price difference between rural Market 1 exchanges and everyone else even more?
Thanks for that useful input opticalgirl. Always happy to be corrected. I think at Timico we are always trying to make life simpler – we have thousands of service options across the patch when you include fixed line, mobile, data, voip etc.
OFCOM’s proposal is specific to one product – IPStream Connect. The consultation document does actually wax lyrical about bandwidth costs and anticipated growth in bandwidth requirements. The charge control does apply to bandwidth “IPstream Connect Contracted bandwidth per Mbit/s per node” – point 8 of the Annex to the Charge Control draft in Annex 5 to the consultation document (yes, I am that sad).
I also noted that as of 4/1/11 there’s a separate BT price for connecting to Market 1, 2 and 3 exchanges rather than a single price as before, currently the three add up to the same as the former single price. I guess this is ready to apply a reduction to the Market 1 element of it as per the price regulation.
Market 1 has 25% of BT WBA rentals but accounts for 32% of revenue.
I could be reading this wrong, but won’t capping the price in these areas actually push away competition. Thse exchanges don’t have LLU today as it isn’t cost effective. If the revenue per line drops even further, they will become even less cost effective to unbundle.
This sounds to me like these exchanges will be left with BT services and no choice / healthy competition.
Cuthbei
That’s a valid point Cuthbei