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Entanet Calls on BT to Slash their Wholesale Bandwidth Charges for UK ISPs

Thursday, August 23rd, 2012 (11:31 am) - Score 1,028

Communications provider Entanet UK has warned that the new generation of superfast broadband (25Mbps+) services “will only be sustainable” if BTWholesale is forced by the telecoms regulator to cut wholesale bandwidth charges for ISPs.

The ISPs Head of Service Operations, Neil Watson, noted that the deployment of new services like FTTC (up to 80Mbps) and FTTP (up to 330Mbps) was welcome but had also increased the bandwidth capacity demands for providers around the country. A similar sentiment was echoed by AAISP earlier this year (here), which warned that it would “cost around £16,000 a month to BT alone” to deliver the full capacity of a true fibre optic 330Mbps link to home users.

Neil Watson, Entanets Head of Service Operations, said:

We don’t believe that superfast broadband will single-handedly bring us out of the economic downturn but, unsurprisingly as an ISP, we do believe that the investment in superfast broadband by the Government and UK ISPs will help to boost the UK economy. Only time will tell to what extent. However, we also believe that if we are going to continue to develop faster and faster broadband services then something also needs to be done about the cost of wholesale bandwidth. Otherwise smaller market players are going to struggle to keep up with capacity demands, which will lead to a lack of viable competition within the market, restricting consumer choice and potentially leading to monopolistic behaviour.

For example with the latest 330Mbps FTTP services one customer could potentially be using 330Mbps, where previously when customers had 1Mbps connections that same capacity would have supported 330 separate customers, significantly increasing the capacity requirements and costs for ISPs.”

In fairness Watson’s final example suggests a dedicated supply of bandwidth on a 1:1 contention, which is generally only applicable to the most expensive business packages. By comparison home users have to share capacity between lots of other users, which makes the package affordable and is one of many different reasons why so few ever receive 100% of what their line is actually capable of.

Certainly cheaper bandwidth would always be welcome and that’s one of the reasons why so many would like to see greater competition in the UK’s wider telecoms market, although Ofcom has so far opted to take a somewhat hands-off approach. On the other hand BT has a habit of putting prices up in other areas when it’s forced to cut them elsewhere, thus there’s no guarantee that Entanet’s idea would resolve the underlying problem.

At the same time Entanet has also called on the government’s superfast strategy “not to further isolate rural communities” by leaving them until last and to provide more education in order to “encourage people to get online“. In addition the ISP noted that it wasn’t just families with data hungry teenagers who stood to benefit from superfast services, with Entanet having experienced a “majority of interest in fibre products from business users“.

As usual it’s easy to forget that the real benefit from superfast broadband comes via the infrastructure improvement itself. For example, FTTC has already delivered significantly faster speeds into some homes that could previously only receive a handful of megabits. It might not always deliver the top speeds but many still experience a huge improvement over what they had before.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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21 Responses
  1. Chris Conder says:

    No point in having a fast service if you use up all your data transfer in an hour, and then face excess charges (via higher tariffs) or get throttled… That is the problem which is looming over us all. We’re still thinking scarcity, instead of abundance, and that is what will happen if we don’t get the fat pipes in and altnets who can peer and avoid openreach.

    1. Mark Jackson says:

      Well.. unless before you stood no hope of ever even getting close to using up your data transfer because the connectivity was so slow 🙂 .

  2. DTMark says:

    Where this is going, is obvious.

    In time, the only ISPs with any customers will be Virgin, Talk Talk, Sky and BT.

    All the small ISPs will be left servicing the ADSL connections a little like the way that some old ISPs are now niche dial-up providers going where nobody else wants to go.

    The big players also have the cross-subsidy model enabled by triple or quad play services, somewhere the smaller players have never really gone.

    The smaller ISPs rely entirely on the wholesale model in order to have the luxury of a business model using others infrastructure. This means that they are always vulnerable. If we had a concept of true markets in broadband, this would not be much of an issue, but we do not, and BDUK is doing a great deal of damage.

    Only recently was there an announcement of the smaller players getting together to form an altnet and bid for public money. Why recently? I’m not even in the industry and the endgame for the small ISPs was and is obvious. But then BDUK appears to have been designed as a funnel to pour money into BT anyway so it was probably pointless, the deck was too heavily stacked anyway.

    BT Wholesale is not a public company run for the good of the country, it is a private entity run for the good of its shareholders.

    Is Entanet also calling on C&W to drop their charges, too?

    1. Martin Pitt - Aquiss says:

      If Entanet had a relationship with C&W, then maybe they would be. Otherwise, your point appears moot.

    2. FibreFred says:

      Why don’t they move to C&W then? Its not a moot point, there are other wholesale providers out there.

      Or here’s another idea, instead of moaning about the costs of wholesale why not actually charge the customer more for their connection? They are after all getting a faster product, why not charge more, much more.

      UK Broadband is too cheap in the first place and this is the result

      Or… here’s a further idea. If you as an ISP cannot afford the bandwidth to back up a product, don’t sell it!

    3. Toonshorty says:

      Moving to C&W would be fine except that C&W isn’t available all over the country.

      It’s a tricky one to be honest. To reach the levels of coverage that BT Openreach do then understandably costs are going to be high.

      I’m not sure whether BT OpenReach is best as a private company taking state aid every time we need a large infrastructure upgrade (BDUK) or whether it would be better as a public service. Although, only through LLU could the country get 24Mbps. BT only recently started 21CN and that was purely to keep themselves up with LLU providers.

      Tricky one to be honest.

      Perhaps the government should provide every home with a FTTP link and ISPs can then install equipment to supply these areas. Public infrastructure with a privately based rollout. Since Fibre doesn’t get slower over distance then you could effectively link tens and hundreds of exchanges together and have three/four exchanges per county.

    4. DTMark says:

      ^ A very similar conclusion to what I’ve always argued is needed, and seems to be similar to what Australia is doing, and also, what the guy formerly from… C&W.. thinks in this article:

      “Why Britain’s broadband is heading for the slow lane”

      http://www.guardian.co.uk/technology/2012/may/07/broadband-britain-heading-slow-lane

      .. we have to change the model, says Francesco Caio, a former Cable & Wireless chief executive..”

      “..the government should recreate the kind of national company through which the state built the copper network before BT was privatised. This could be owned by the existing telecoms companies and need not involve piles of taxpayers’ cash.”

      “To get fibre to rural and sprawling suburban areas, TalkTalk, BSkyB, Virgin, BT, and perhaps the state could jointly invest. The new company would concentrate on laying the pipes and have no direct relationship with consumers.”

  3. Martin Pitt - Aquiss says:

    FibreFred, C&W (confirmed via our account manager only 2 days ago) still have no interest in supplying FTTx based services either via WBC, GEA etc.

    I still don’t see the link between C&W, Entanet and the original article. DTMark, any chance you can expand upon your C&W thoughts?

    1. DTMark says:

      Perhaps my misunderstanding, so I welcome your point.

      I’d thought that backhaul from the exchanges was, actually, one of those rare parts of the broadband network where *genuine* competition really existed.

      So if ISPs didn’t like BT Wholesale’s prices, then they could go for C&W instead and entirely bypass BT Wholesale.

      As you clarify, though, if C&W aren’t going to be supplying via the GEA route, then that’s not a possibility.

      In the days of LLU there was also the choice of BE, but it looks like they’ve said goodbye.

      How straightforwsrd is it for a provider with LLU equipment to migrate that to GEA access at an exchange? Why is it that C&W and BE seem to have decided to just run their businesses down and fade into obscurity? I think that’s the key point I’m missing in my understanding.

      My take on the FTTC rollout in the way in which it was done, was to get a “product” up and running just prior to handing the begging bowl to BDUK and lock in a model which kills LLU completely and outbids everyone else on price/value to kill the competition, and also regains line rental too.

      Then, with our (taxpayer’s help), go head to head with Virgin Media cable with public money as far as possible to kill off the very last few elements of competition that existed.

      If I were BT, that’s the approach I’d pursue, because that’s the correct approach for an entity which is a privatised monopoly. Which is why i don’t really understand these “pleas” to BT.

      Someone needs to decide whether it’s a public company supporting a competitive model, or a private company. And BDUK decided that for us. It’s neither and that’s how it will stay.

    2. Martin Pitt - Aquiss says:

      DTMark, there is progress being made in the GEA model (apart from C&W). We talk to all the main wholesale networks, and have contracts with many of them. TalkTalk are trialing GEA, so too is Sky (though no wholesale access, presently). O2 Wholesale (BE’s parent company) are testing GEA, with plans early next year for rollout to start. There is also a couple of main ISPs who are bypassing BT Wholesale and going GEA themselves (for respect of management teams, I won’t mention names).

      The general comments we are getting though from all those working with GEA is the costs seem out of wack. One network designer for one of the companies named above told me in private that even though with GEA (LLU) the SP was dealing with 75% of the costs (there own kit, backhaul, engineers, support etc), BT still managed to charge way more than the 25% left over (as much as 80% in some models). His view was until these costs reflected fairly who was doing what, he could not really see other routes to market really being pushed. The models in his view were still weighted in BT’s favour.

    3. DTMark says:

      Firstly, if I seem to come across as a little aggressive to “smaller ISPs” please don’t misunderstand where I’m coming from. And much respect for posting as yourself, from, by all accounts a very highly regarded ISP, and not making up some pseuodonym pretending to be a “punter”.

      But perhaps I take a highly purist view, that of “companies are either private or public, a hybrid won’t work” (in regard to BT/Openreach).

      I am not sure how BT’s prices can be “unfair”. It is a private company who rather than being recapitalised with taxpayers money, rather, is being allowed to entrench its position by being handed same.

      In such a situation, I wouldn’t have thought it improbable to see BT Retail start making losses and BT Openreach declaring higher profits. The Group still profits, and other players are squeezed out. By the time the opposition responds, people are locked into nice long dual line rental/broadband contracts. And the view that “BT does all the broadband” is then further entrenched. All the cabinets have the BT logo on them, after all.

      That’s what I’d do if I were placed in such an advantageous position since my legal responsibility is to my shareholders, not to “fairness” or competition, if anything, quite the reverse.

      What puzzles me is why these things are still at trial stage two years after the start of the FTTC rollout and the effect on, say, BE/O2’s subscriber numbers is very apparent. Perhaps they’re just not too bothered about it and don’t mind their business flaking away. Is it some standoff where other players are sulking and refusing to “play the game” any more? Might we expect some rather major announcement at some stage that’s being kept secret in the meantime?

      Rather like the PIA thing, BT will (correctly) drag things out for as long as possible (until the reglators hand is forced, maybe) to disadvantage their competitors every time. Which is why I have always held the purist view that this weird sort-of-private company model for BT/Openreach only disadvantages just about everybody except BT and that’s where BDUK went so wrong from the very start.

      All that said, some rather promising sounding hints in your post!

  4. AR says:

    C&W was aquired by Vodafone to service their 3G/4G network and facilitate their business telecommunications products. If anything they will be moving away from the residential arena entirely…

  5. Entanet have a valid point here: lately, BT seem to have been loading up the backhaul pricing relative to access charges, with the result the bottom-feeder ISPs are able to offer ridiculously cheap connections – provided you don’t use it at all. Not unlike the situation with line rental versus call charges in the 80s and 90s.

    To adapt The Matrix: “What use is a fast broadband line .. if you can’t afford to transfer data over it?” Unbundling helps to some extend, bypassing the main BT backbone, but ISPs seem quite constrained there at present.

    1. Gadget says:

      But unbundling an exchange does not guarantee bypassing the main BT backbone, although there are a number of other backhaul providers out there such as Global Crossing and GEO. As for “quite constrained” I think you’ll find that the Talktalk unbundling coverage equates to over 90% of UK households.

    2. Somerset says:

      So how do Talktalk exist with high numbers of LLU exchanges and FTTC? Why can’t others?

    3. Deduction says:

      More than likely because when it comes to Talk Talk the CPW division and mobile phone sales basically subsidise their broadband product (have you seen how cheap it is?) Same goes for Sky with TV products subsidising their REAL unlimited broadband.
      Ofcom are due to review pricing structures again soon, hopefully enough ISPs moan about the costs and they get lowered.

    4. FibreFred says:

      But even if they lower the prices at what point will these other ISP’s be happy, never I dare say.

      They should be looking to charge the end customer more (after all its them that are using up the bandwidth) 330Mbps should be priced sensibly not the rock bottom prices we have now and have a fat usage allowance attached, say 500Gb per month. Go above that and you have to pay £XX for another 500Gb for the month.

      Its just not realistic to chip away above all the time (oh PIA is too pricey, oh back haul is too pricey) the main problem is that UK broadband is too cheap

  6. Sledgehammer says:

    @ FibreFred

    Ok if as you say prices charged by ISP’s are too cheap, lets see BT state this and lead the way with a TRUE PRICE to be paid by everybody whoever their internet provider. Otherwise stop bleating on about it’s too cheap.

    1. FibreFred says:

      Why should BT lead the way? BT has been the most expensive ISP for years, its only during the past few year we’ve seen them drop their prices to be similar to others. Why doesn’t Sky or TT lead?

      I’m not bleating on, it is too cheap. The prices the smaller ISP’s charge are more realistic to be honest, probably a bit high but certainly better.

    2. Deduction says:

      Its called leading by example. Something BT dont know how and have never known how to. Thankfully even if they tried to lead anything most that are sensible would just ignore them.

      Ive no idea why you even mentioned 330Mb that just enforces things more, where the poor little guy will have to pay extortionate bandwidth prices to BT and a massive install charge.

      Finally i dont see why any ISP should price things more “accurately” than BT do. BT if anything should be the first that should be pricing things correctly, they are the ones taking 90% of various funds for next gen roll outs.

      Then again im not shocked you have took to your typical defend BT view point.

  7. Curious says:

    The thing is, people want it now, they want it fast and they want it cheap.
    Unless people are prepared and willing to pay a higher price for broadband (which my time working for multiple IPS’s shows this isn’t the case) then you will see only a niche market for these ‘higher speed’ services, meaning all the money pushed into rolling out these networks will see little income, so they will need to reduce their prices to reel people in.

    People need to understand that that everyone needs to pay a fair price for their service, and I firmly believe that internet prices are too low now, and still will be if/when GEA becomes the norm in years to come.

    Then you have the big hitters who will simply resell this at a loss to be a big game player, making profits on other services that people have no problems paying for (TV/phone services) to back up their losses on the broadband field.

    Again, it all comes down to penny pinching, and people need to finally understand if they want something then they are going to have to pay for it rightly.

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