Tiscali has announced a new 150kbps ADSL service. The price point is £15.99 (inc VAT) per month, a £25 set-up fee and a free modem, a 256kps service is also available for £19.99 a month and a £50 activation fee. The 150kbps is described as a limited offer, with no indication of when the offer will end.
We feel it needs pointing out that the 150kbps product is not the result of a new speed of access product from BT Wholesale, it is simply a normal BT Datastream Home 500 line that is throttled at 150kbps in the backhaul from the exchange. This means that any benefits that could be made from extension to the range of the service due to its lower speed are not possible. Though since the user will already have a 500kbps service to the exchange it should be easy for Tiscali to move customers around their product ranges.
The main selling point of the product is its always on nature, any attempt to market it as a broadband service is likely to run into problems of the service not meeting expectations of the customers. People will start to try and watch what is labeled as a broadband video stream and find its only running marginally faster than dialup. There is a risk that if masses of people move to a entry level speed ADSL service that they may become disillusioned if the contention of the service results in speeds of less than 100kbps too often, this could actually result in people moving back to dialup or failing to recommend it to friends.
In terms of pricing Tiscali makes some interesting comparisons, they do not compare their services to anyone selling at under £24.99 a month. The sorts of prices that Tiscali are really competing against are, Plusnet with a 500kbps service retailing at £18.99, Freedom2Surf at £22.50, and Pipex at £23.44. If you compare the cost of the first 12 months of a service, Tiscali including connection, modem and service is £216.88, whereas Pipex for three times the speed works out at £298.85. Compare a Tiscali 256kbps service and it becomes more interesting, for 12 months of a Tiscali connection it is £289.88, which is only marginally cheaper for half the speed.
Is this new entry level product from Tiscali going to drive the demand for broadband? While it will undoubtedly sell well due to the marketing it will receive, and BT Wholesale will enjoy seeing more ADSL ports been sold, the picture in terms of a broadband UK is not so rosy. If products like 150kbps ADSL become the norm then it is an admission that the UK is to remain a third world broadband country for the next few years. Will a service this slow allow you to do what broadband should allow you to do, and experience the Internet as a more visual medium rather than a text and audio based system. There are probably sound economic reasons for a Datastream provider to offer a lower speed service, since it will increase the amount of revenue and help to offset the relatively high costs of starting a Datastream based service around the UK.
If the 150kbps service was really about converting dialup users to ADSL, then it would be around the £11.99 where to not upgrade would be stupid. We would also be seeing a much more aggressive pricing policy on the 500kbps service, £21.99 with free modem and activation would actually get people like Freeserve and BT Yahoo to take notice and the complacency of some larger providers might then disappear.
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