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BT Calls on UK Gov to Help Subsidise Social Broadband Tariffs

Wednesday, May 12th, 2021 (10:13 am) - Score 2,064
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The CEO of BT’s Consumer ISP division, Marc Allera, has today called on the UK Government to help support the industry by making it easier for home broadband providers to launch new social tariffs via targetted funding or subsidies, which could come in a number of different forms.

Over the past few months’ a number of MPs have called on Ofcom to introduce a regulated social tariff (here), which could potentially require all broadband ISPs to offer a cut-price internet and phone service to those on benefits. The regulator itself has already indicated that they were considering the introduction of such a tariff and have similarly been busy encouraging providers to make a greater effort (here).

BT is currently one of only a handful of providers (other examples come from Virgin Media, Hyperoptic and KCOM) to offer a social tariff for such groups (BT Basic), although earlier this month they announced plans to launch a much more attractive fibre-based (FTTC / FTTP) replacement for that called BT Home Essentials. The new tariff will go live next month.

The new at-cost social tariff will give eligible customers a 36Mbps “fibre broadband” service and 700 minutes of included phone calls for just £15 per month (or £20 for 67Mbps). Some 4.6 million homes, specifically those where the bill payer is on Universal Credit and other means-tested benefits, could be eligible.

In a new blog BT’s Consumer CEO, Marc Allera, has called on “all fixed broadband operators” to implement a similar social tariff, costing no more than £200 per year. But he also wants the Government to do a lot more in support of that (i.e. as opposed to merely relying on the generosity of big commercial operators).

Marc Allera said:

“BT alone cannot make our society digitally inclusive, even as we continue to invest in our networks to keep up with unprecedented customer demand for data in this new world of connectivity. So, we are calling on all fixed broadband operators to implement a social tariff costing no more than £200 per year, which offers speeds of up to 10mb upload/40mb download where available, for customers on low incomes and Universal Credit.

We are offering BT Home Essentials at cost price to help those who might struggle to afford broadband and landline. At the same time, we know that for some families £15 per month is still a stretch. If, as a society, we want to do more to help those people, Government support will be crucial.

Funding or subsidies for social tariffs could make a very significant difference, in the same way that winter fuel payments help vulnerable people with their energy costs. Removing the VAT from bills for those on social tariffs could also be a big help to those who need it most.”

Naturally BT would benefit if more ISPs launched such tariffs because that enables the burden of supporting those groups to be shared, although it’s probably not realistic to expect every ISP to launch such a product. Broadband provision is a business of very low margins and such tariffs would thus be particularly difficult for smaller providers to deliver, without also putting their business at risk.

Meanwhile, the idea of encouraging the government to support such tariffs via complementary measures, such as removing VAT from bills, is one that is likely to resonate with a lot of people, while simultaneously also shifting some political responsibility back to those who may be seeking such tariffs.

At present there have been no solid indications that the Government might actually go down such a route, but certainly such ideas must form part of the debate. However, ISPs that offer such tariffs also need to work on doing a much better job of advertising their existence to consumers, which remains a weak point.

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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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6 Responses
  1. - says:

    The thing is a simple fixed price ‘at cost’ tariff should cost more than a standard ‘offer’ price (i.e first 18 months for £30 then £40 a month after that if you don’t renew).

    ISPs have a 5-10% IRR on products like this, and I can tell you almost all of this comes from those on high speed tariffs, ‘add on’ services, and most importantly the price rising after the minimum term ends with fairly substantial satistical reliance on this element to contribute to that return.

    As such a social tarrif might be £32 a month fixed, but the offer price for the same service commercially may be £30 a month for the first 18 months.

    All these social tariffs are actually sold at a loss, ISPs are not going to be reducing profit margins so this will just mean regular connections will see a price rise to make up for it, i.e stealth taxation. Governments always love that – there is no chance they are going to be paying out of general taxation for this.

    I think we would be better as an industry lobbying for 5% VAT (at least on domestic connections) if we are now considered a utility and have all the same obligations, rights etc.

  2. xxx says:

    You’ll notice that all of those offering a social tariff are vertically integrated/own the access network. BT Group as a whole can afford to offer such a capability because they can just look at the incremental cost of providing it when setting the tariff – BT Consumer may make a loss, but the payments they make to Openreach are “wooden dollars” as the profit from Openreach offsets that loss at a group level. There’s a risk of cannibalising their own revenues from their commercial service, but value-conscious customers will already be using TalkTalk or Vodafone etc, so on the whole it will be other providers’ customers they pick up.

    In contrast, other ISPs have to pay Openreach and make a profit from the retail revenues (or at least not make a loss). Given Openreach’s fees are around £15/month depending on technology, that leaves no revenue whatsoever for the ISP to provide their service – it’s inherently loss making.

  3. Archer says:

    Quite frankly in my opinion this is mute discussion. I get unlimited 5g data, all calls and all texts from my mobile provider and it only costs £30 a month.

  4. adslmax says:

    I agree as VAT should be removed for all low income benefits for all water rent, gas and electricity and broadband with line rental and mobile as well.

    1. WibbledOff says:

      What would you do in return for this reduction?

  5. Ian Wigg says:

    It’s worth noting that anyone who would be eligible for one of these tariffs but is currently in contract with BT cannot take advantage of the offer. Ditto anyone still in contract with their current supplier so very few people will actually be able to benefit.
    Just a PR exercise.

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