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ISPA - Concerns Over BT Price Hikes

Posted: 28th Aug, 2004 By: MarkJ
The UK Internet Services Providers’ Association (ISPA) has echoed fears from the UKIF regarding BT's business broadband ADSL (IPStream) price hikes, stating that they could force smaller providers out of business:

On the 3rd of August 2004 BT made an announcement, that there would be a rise of up to 32 per cent in the pricing of its “IPStream S” and “IPStream Office” products. BT is only required to give its wholesale customers 28 days notice of such increases.

ISPA’s consultation showed that small and medium sized ISPs (SME ISPs) are likely to be significantly affected by the price increases. Such an escalation implemented on this scale and in such a time frame may mean ISPs will be forced to charge significantly more for their services, diminish service levels or even close. This would offer less choice of provider for end users, cause a negative impact on competition in the Internet industry and potentially cause SME ISPs to offer services that are not on a par with their larger competitors.

Ofcom launched a consultation about such pricing and published a Direction which justified the BT IPStream price increases on Thursday 26th of August (entitled Direction Setting the Margin between IPStream and ATM Interconnection Prices). ISPA believes that Ofcom should seriously consider the manner in which it conducts industry consultations and ensure that it takes account of small and medium sized ISPs when conducting such consultations.

Several examples have been showcased, such as providers that offer long contracts, which typically work both ways (discounts not passed on and increases absorbed). Sadly the margin for some providers can be so thin that the larger discounts (32%) may force some to run at a loss:

The options for SME ISPs appear limited. ISPA sees three alternatives for small ISPs:

- ISPs may have to reassess their business plans and opportunities to grow their businesses

- ISPs may risk losing customers if their prices are increased in line with BT’s price rises

- ISPs may try not to pass price rises on to their customers but may have to downgrade their standards of service.

Once again a request to delay the hikes has been issued, with the ISPA pleading for BT to recognise the importance of its SME customers. Alternatively:

BT could assist SME ISPs by easing their transition into the new pricing structures. Offering incremental price increases in IPStream services over the next year, developing new or interim IPStream products for the SME ISP market and offering financial assistance and support via discounts and promotions would ease the transition of SME ISPs into different pricing structures.

In addition, BT should consider special redundant pipe services with their IPStream services so that SME ISPs can economically offer backup services to their customers.
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