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.