UK ISP TalkTalk Calls on Ofcom to Push BT for Cheaper Superfast Broadband

Internet provider TalkTalk, which established itself in the UK market by offering extremely cheap home broadband services over their unbundled ADSL2+ (LLU) network, has called on Ofcom to develop a new regulatory framework that would effectively force BT to cut the wholesale / rental cost of superfast broadband services to ISPs from 2015.

At present the majority of UK ISPs don’t have their own fixed line infrastructure like BTOpenreach, which manages access to BT’s national UK telecoms network. As a result any provider that wants to offer a superfast broadband (FTTC or FTTP) service must either buy a standard BTWholesale solution or adopt the Virtual Unbundled Local Access (VULA) variant. There’s also Sub-loop Unbundling (SLU) but that’s costly and better suited to niche rural deployments.

The VULA method allows competitors to deliver services over BT’s new Next Generation Access (NGA) network, albeit with a degree of control that is similar to that achieved when taking over the physical line to the customer (e.g. LLU / unbundling). But it’s not as flexible, cost effective or competitive as true LLU.

Dido Harding, CEO of TalkTalk, said (The Guardian):

“We need to get a move on otherwise the country will have spent a lot of money building infrastructure which no one is using. We must start a consultation this year on the regulatory framework structure once build-out is complete.

The regulatory framework today is a little too skewed to driving investment and not enough to driving competition. In 10 years’ time when the majority of consumers should have moved on to a superfast product the idea that I will be buying my largest product from my largest competitor is not a credible place to be.”

Naturally BT disagrees with TalkTalk’s assessment and warns that it could take up to 14 years to recoup their £2.5bn investment in the national rollout of superfast broadband services (this will take coverage to 66% of the UK by 2014 or possibly 90% with public funding). As a result BT claim their “wholesale prices are very reasonable given how expensive it is to deploy fibre“.

It’s easy to see why TalkTalk is concerned, its own superfast broadband packages have just a fraction of the customers (5,000) that BTInfinity has (400,000). But at least part of that is because BT has a huge advertising campaign and adopted an aggressive pricing strategy, which leaves little margin for profit. By contrast you’d be forgiven for wondering if TalkTalk even had a superfast broadband package.

But what of the future? Between 2009 and 2010 Ofcom, with support from the UK government, effectively gave BT, in return for its promised investment, some leeway to retain greater control over the pricing of their new NGA / Fibre infrastructure. At the time Ofcom also suggested that half-way solutions like VULA had only been designed to last a good 5 years and eventually a fully unbundled fibre optic solution or similar would be needed.

At the end of last year Ofcom finally recognised that superfast broadband ISP service uptake is still too low (here) and have been looking at various methods to tackle this, such as making VULA more flexible / cost effective and pushing BT to develop a self-install superfast broadband service (see yesterdays news).

On top of that the regulator is also investigating Wavelength Unbundling (wavelength division multiplexing) via fibre optic lines, which could improve superfast broadband competition by allowing providers to offer “differentiated services on the same single piece of fibre“; this would not be ready before 2015. Inevitably superfast broadband prices will come down but, as with the early years of ADSL, it can be a slow process.