By: MarkJ - 21 July, 2011 (11:37 AM) - Score: 1852 - Fixed Line Broadband
Internet providers across the country have today given a warm welcome to yesterdays news that Ofcom UK, the communications regulator, has ordered BT Group to cut its wholesale broadband charges by 12% below inflation in rural (Market 1) areas (full details).An ISPA Spokesperson said:
"Many ISPA members already offer broadband to rural areas in innovative ways, however, ISPA believes that the increase in competition will encourage further investment and encourage the take-up of rural broadband.
Whilst costs are reducing in rural areas there are additional costs being placed on ISPs by regulation which could potentially cancel out these savings for ISPA members."
"Many ISPA members already offer broadband to rural areas in innovative ways, however, ISPA believes that the increase in competition will encourage further investment and encourage the take-up of rural broadband.
Whilst costs are reducing in rural areas there are additional costs being placed on ISPs by regulation which could potentially cancel out these savings for ISPA members."
A BT Retail Spokesperson said:
"Unlike many ISPs, BT Retail already serves customers in rural areas and has never charged higher prices for consumer broadband there than in urban areas, despite the higher costs involved. We have no plans to change that.
Like all ISPs, we will be considering ways in which to continue providing our broadband customers with the best possible value for money."
"Unlike many ISPs, BT Retail already serves customers in rural areas and has never charged higher prices for consumer broadband there than in urban areas, despite the higher costs involved. We have no plans to change that.
Like all ISPs, we will be considering ways in which to continue providing our broadband customers with the best possible value for money."
A BT Wholesale Spokesperson added:
"This outcome is in line with the proposals that were widely reported on earlier this year. The impact on BT Wholesale will be non-material."
"This outcome is in line with the proposals that were widely reported on earlier this year. The impact on BT Wholesale will be non-material."
Simon Harper, Head of Marketing at Eclipse Internet UK, said:
"It’s fantastic that Ofcom has moved to assist the growth of broadband provision in rural areas. Demand for reliable broadband services continues to be strong across the UK with rural areas in particular looking to get competitive connectivity.
Businesses in rural or less densely populated areas can struggle to attain their full productivity potential when hampered by poor connections and slow speeds. With the increasing take up of web-based applications, rural broadband roll out is essential to ensure businesses in these areas have the tools to compete."
"It’s fantastic that Ofcom has moved to assist the growth of broadband provision in rural areas. Demand for reliable broadband services continues to be strong across the UK with rural areas in particular looking to get competitive connectivity.
Businesses in rural or less densely populated areas can struggle to attain their full productivity potential when hampered by poor connections and slow speeds. With the increasing take up of web-based applications, rural broadband roll out is essential to ensure businesses in these areas have the tools to compete."
A Sky Broadband Spokesperson said:
"Lower wholesale costs are good news for customers who will benefit from more choice, value and innovation in some rural areas not covered by the Sky Broadband network."
"Lower wholesale costs are good news for customers who will benefit from more choice, value and innovation in some rural areas not covered by the Sky Broadband network."
A PlusNet Spokesperson said:
"Plusnet welcomes a move which will ultimately reduce the cost of broadband for UK customers. We currently offer value broadband from just £6.49 a month to 78% of households in the UK and we are committed to bringing great value broadband to households across the UK; we promise that our headline rates will not be beaten on price across the UK on standalone broadband."
"Plusnet welcomes a move which will ultimately reduce the cost of broadband for UK customers. We currently offer value broadband from just £6.49 a month to 78% of households in the UK and we are committed to bringing great value broadband to households across the UK; we promise that our headline rates will not be beaten on price across the UK on standalone broadband."
Comment from Piers Daniell, MD, Fluidata UK:
"The issue in rural areas is the performance of the service delivered rather than the price. With prices being driven down over the past few years, the cost of broadband across the country is relatively low and, for consumers at least, there is quite a bit of choice between carriers. The issue that Ofcom is missing, and which then hampers take-up in rural areas, is speed, or where the promise of speed is made and broken. Paying a cost for a service which can achieve one speed in a town and then the same product in a rural community that is lucky to achieve half of that speed doesn't mean the user wants less cost (but a 10% reduction doesn't compensate for half the performance) they just want what they paid for. There are very few national players in the rural areas with their own technology other than BT so actually are we solving the fundamental issue with rural broadband with this reduction?"
"The issue in rural areas is the performance of the service delivered rather than the price. With prices being driven down over the past few years, the cost of broadband across the country is relatively low and, for consumers at least, there is quite a bit of choice between carriers. The issue that Ofcom is missing, and which then hampers take-up in rural areas, is speed, or where the promise of speed is made and broken. Paying a cost for a service which can achieve one speed in a town and then the same product in a rural community that is lucky to achieve half of that speed doesn't mean the user wants less cost (but a 10% reduction doesn't compensate for half the performance) they just want what they paid for. There are very few national players in the rural areas with their own technology other than BT so actually are we solving the fundamental issue with rural broadband with this reduction?"
Most of the ISPs above were keen to welcome the move, although we note that none have offered a clear commitment to pass such savings onto consumers. Admittedly most will only see a marginal benefit from the move as Market 1 users typically represent just 11.7% of UK premises.
The new charge controls will come into effect by mid-August 2011 and should last until 31st March 2014, though many consumers fear that the reductions will not be reflected in their subscription prices.
UPDATE 1:19pm
Added an extra bit to the ISPA's comment by request and also added a statement from Entanet.
An Entanet spokesperson said:
"The principle of greater competitiveness in all market areas is healthy but we'll have to wait and see what BT's reaction is to Ofcom's requirement and how it actually translates in pricing terms. Nonetheless, Ofcom seems a little over optimistic in its expectation that the move will result in ISPs providing more bandwidth for the same price.
ISPs are under increasing upward pressure on their costs even without the impending requirements of the DEA and now the UK government's plans for the introduction of the Communications Capabilities Development Programme."
"The principle of greater competitiveness in all market areas is healthy but we'll have to wait and see what BT's reaction is to Ofcom's requirement and how it actually translates in pricing terms. Nonetheless, Ofcom seems a little over optimistic in its expectation that the move will result in ISPs providing more bandwidth for the same price.
ISPs are under increasing upward pressure on their costs even without the impending requirements of the DEA and now the UK government's plans for the introduction of the Communications Capabilities Development Programme."
UPDATE 22nd July 2011
Added a comment from business ISP Fluidata above.
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Comments: 8
boggitsPosted: 21 July, 2011 - 12:07 PM
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With the increase in regulation and costs incurred by ISPs in the provision of services to end users there will be an argument inside ISPs that any savings from the changes in the BTwholesale/Openreach charges are retained by the ISP to cover the additional costs.
Wispa LimitedPosted: 21 July, 2011 - 1:08 PM
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<sigh> The ofcom fanclub is apparent - what a nonsense.
Less revenue for BT = less investment return
10% reduction in wholesale bandwidth costs wont increase the amount of rural suppliers or reduce the colossal cost to break out of a rural exchange (unnecessarily high and not controlled by Ofcom)
Millions of people to get cheaper broadband?
Nonsense
Millions of people disappointed that they have been let down again by those who are supposed to have a clue?
Priceless (as the cliche goes...)
Richard Brown COO
Wispa Limited
MarkPosted: 21 July, 2011 - 1:26 PM
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Let's look at it the other way around. If Ofcom had sanctioned a 20% increase in prices on such exchanges, given that they have seen no investment for many years, and given that we're in no position to dictate where that extra cash is spent - does anyone imagine that would lead to upgrades?
PhilTPosted: 21 July, 2011 - 2:28 PM
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I wonder if the Eclipse spokesman realised his company doesn't use the affected BT products and hence won't benefit. LOL.
Richard Brown from the chocolate bar - what are you talking about ? The RPI-12 price control is applied to the end user connection rental only, bandwidth is capped at RPI. This whole OFCOM regulation applies only to a legacy product - how can that redcue return on investment ? If anything it creates a greater return from replacing it with a new product free of the price cap.
BobPosted: 21 July, 2011 - 6:56 PM
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Cutting the price in rural areas is hardly likely to increase competition as costs are higher and demand lower. It is doutfull that ISP's will be rushing to roll out new products in rural areas
MichaelPosted: 21 July, 2011 - 10:09 PM
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The complex economic and technical nature of copper distribution in rural areas is always tricky, and this move is 1 part of what may occur next.
ADSL which is now 10 years old has worse signal to noise capability than ADSL2+
UK is moving its Access Network Frequency plan to enable better VDSL2 services on copper from cabinets.
BT openreach will want to handle these "bundles" of signals to get more bandwidth. So they will want to retire ADSL.
To help the economics for this any growth in take-up helps shift the move to both ADSL2+ and FTTC/VDSL2 matters for wholesale and retail companies.
This has been playing out across the world in rural areas for the past 2 years, and is cheaper than government intervention - up to a point.
Also there is a growth in rural home femtocells that can use ADSL2+, creating another natural market driver.
So I feel this announcement helps.
EricPosted: 21 November, 2011 - 11:58 AM
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In September 2011 Virgin increased my broadband charges by £5.00 per month because of the INCREASED charges by BT Wholesale they claimed they had to pay (and pass on to me) because we live in a rural area. Allegedly 7km by cable from our rural non unbundled exchange. I now have to pay over £23 per month for a service that gives me 500kb/s (with a following wind)
What price decrease?
What better service?
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