cheaper BB confusion

Mixed messages over cheap broadband offer
By Tim Richardson
Published Tuesday 12th April 2005 16:39 GMT

UK Online's headline-grabbing offer of entry-level broadband for under
£10 a month has caused a stir among UK punters keen to snap up the
offer of cheap broadband.

Tempted by high-speed net access for under a tenner a month, many
readers who contacted El Reg were disappointed to find out that the
service is only available in some areas. In fact, it is only available
via 232 exchanges where EasyNet - UK Online's parent company - has
installed its kit ready to provide telecoms services direct to
punters.
Click Here

A spokeswoman for UK Online said the company did make it clear that
the £9.99 a month offer is only available to 4.4m people in the UK but
would take on board any feedback. Whether or not the ISP needs to be a
little less forceful with the spin and more upfront about the
practicalities of its offer is of little concern. More interesting,
though, are suggestions that UK Online's new prices could spark a new
round of price cutting by ISPs. And this is where it gets tricky.

For yesterday's move by UK Online has effectively introduced a
two-tier broadband pricing structure for DSL in the UK. If you're
lucky enough to be hooked up to an exchange that has been unbundled
then you can get cheap broadband - because UK Online has the choice of
BT or EasyNet as its wholesale broadband provider. When unbundler
EasyNet provides the wholesale service, UK Online can offer 512k
broadband for £9.99 a month, while the same 512k service via BT
Wholesale costs £19.99 a month.

That price difference is why so many telcos and ISPs are interested in
LLU.

However, industry insiders remain unconvinced that the intervention of
UK Online will spark a price war - for the immediate future at least.
One reason is that the ISP is still very small. Although it declines
to reveal subscriber numbers, industry sources have told us that at
the end of last year UK Online only had around 4,000 punters and is
hardly in a position to challenge those already firmly established in
the industry.

Then there's the dosh. Sure, ISPs could cut prices but unless
underlying costs are also trimmed, such a move - in the long-term at
least - would just prove uneconomic. As one industry source told us:
"You either have to invest in LLU or lose lots of money."

Some ISPs such as Wanadoo are investing in LLU but decline to reveal
any significant detail because they don't want to give the game away
ahead of a commercial launch. When Wanadoo finally does unveil an
unbundled product it will face the same conundrum as to whether it
also employs a two-tier pricing strategy. The view among a handful of
the UK's biggest ISPs today is mixed. One told us that setting two
prices depending on location could confuse punters, as UK Online has
already found out, and obstruct national marketing campaigns. Another
broadband provider told us that setting different prices for different
areas wouldn't be a problem.

Of course, all this could be resolved at a stroke if the wholesale
cost of broadband supplied by BT could be cut. But due to regulatory
intervention designed to underpin investment in LLU by rivals, this
can't happen. Instead, BT has engaged in "de-averaging" and won
regulatory clearance to cut the cost of its wholesale broadband
products in 561 exchanges in the UK that are buzzing with broadband
lines.

As a result, ISPs get a rebate of up to £1.40 for every broadband line
installed. Now, it just so happens that there is a clear overlap
between the 561 exchanges highlighted by BT and those chosen by the
industry that are ripe for LLU investment. The result, is that from 1
April, BT's wholesale broadband services are cheaper in some parts of
the country than others - effectively making a two-tier wholesale
pricing structure.

However, this approach was criticised by a recent parliamentary
committee which was concerned at BT's proposals to vary prices that
are currently applied nationally so that it can compete in areas where
LLU takes off. The price cuts of around eight per cent will only be
applied in areas where there is "a combination of high customer
demand, high take up and lower costs". MPs warned that "BT's decision
to 'de-average' wholesale prices - vary them from area to area - has
created uncertainty which may jeopardise future LLU plans".

That aside, now that ISPs are getting broadband cheaper from BT in
some key areas, will they be tempted to drop the prices in some
regions to compete with the likes of UK Online? Dunno, is the answer
at the moment. But a spokesman for BT Retail told us: "We have no
plans to reduce prices in some regions but that is not to say that it
wouldn't happen." ®
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On 13 Apr 2005 11:30:52 -0700, (E-Mail Removed) (scuffler) wrote:

>Mixed messages over cheap broadband offer
>By Tim Richardson
>Published Tuesday 12th April 2005 16:39 GMT

While I'm sure the writers for The Register don't mind having links to
stories posted, you are on dodgy ground posting a whole article simply
copied and pasted, without a single mention of the source. There's no
real need to do it - you might want to precis their article and give a
URL <http://www.theregister.co.uk/2005/04/12/broadband_offers/> and if
people are interested, do you think they've not found The Register for
themselves, or get to see about stories of interest from other (faster
and more comprehensive) services - the one I use searches almost 20000
news source every five minutes, and has subsections under Internet for
Broadband, Crime, Domain Names, Hacking, ISPs, Worms, etc. Peter M.


--
Plus.Net <http://tinyurl.com/5jpa4>
I recommend them and save some cash.

With a guarantee allowing new users to migrate if they're unhappy!

Peter which aggregation site do you use?