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BT Wholesale sounding out big changes to ADSL pricing
Friday 16 April 2004 10:49:00 by Andrew Ferguson

Just as 2004 was starting to settle in BT Wholesale has thrown a cat amongst the pigeons. Many rumours are flying around as to changes in the UK ADSL market place, and it seems BT Wholesale has some ideas up its sleeves and at present some of these are due for launch in June and November 2004.

Three major ideas and changes to the current systems are being hawked around the service providers at present:

  1. The release of a capacity or usage based charging model for BT Centrals/Central Plus.
  2. Variable speed control for ISPs/End-users.
  3. Quality of service options.

The first item can be sort of be guessed at, due to the recent profusion of providers coming out with usage based charging models for end-users. Charging per GB between ISPs and BT Wholesale is new though, and could possibly open up the market to lower priced entry level usage services, or dull the enthusiasm of early adopters. A little explanation on each of the current, and proposed methods is shown below:

  • Standard pricing, the current price model. Which involves an end-user payment for every ADSL line, and a flat-rate cost to the ISP for its BT Central product. For example a Home 500 line is £13/month, Office 2000 is £43/month and the ISP pays £3,750 per month for a 155Mbps BT Central which holds up-to 8000 sessions. One ADSL line is equivalent to one session.
  • Capacity based pricing. This option reduces all the end-user line costs to the same fee e.g. £9/month, but the BT Central price rises to £26,350 a month for the 155Mbps L2TP product. The pricing is flat-rate though, with ISPs controlling contention by how they populate the BT Central. BT Symmetric products would also switch to a flat rate cost perhaps around £100 per line per month, irrespective of the actual line speed. Expected launch date is June 2004.
  • Usage charging. Again a move to a flat-rate charge for the ADSL line port, i.e. Home 500 costs the same as Office 2000. The BT Central pricing remains at £3,750 for the 155Mbps pipe, but an element of usage charging is introduced. In this price model BT Wholesale is suggesting the usage charge would be cost neutral if the average use of the BT Central product was 20kbps per user (20 kilo bits per second per user). This equates to a daily download of 200MB (Mega Bytes), or 6GB per month. Expected launch date is November 2004.
  • BT Central Plus. The product used solely by BT Broadband and BT Yahoo under the BT Retail umbrella is also set to change, proposed pricing is £28,500 per 100Mbps of capacity, and as more bandwidth is used the montly rental will automatically increase. Each 100Mbps block will carry a £30,000 connection fee.

At present ISPs have the option of staying with the standard pricing, but it is probable that at some point in the future the existing pricing will disappear to leave a choice of capacity or usage charging options. For ISPs where the average user is using less than 200MB a day it may make sense to go for the usage model. Though looking at the average download per day that ISPs are seeing the indications are that usage pricing would not be cost neutral for many ISPs, daily averages of 300-400MB (Mega Bytes) are not uncommon.

Therefore the question is why is BT Wholesale doing its sums on a 20kbps average per user? In the past it has been accused of underestimating the daily average per user, the problems when Home 1000 was introduced are a case in point. Most ISPs have realised that the days of bursty Internet use are gone, people are running applications that are always-on more and more. This is not just peer to peer applications, but VoIP, instant messengers, news tickers, online-gaming, radio/video streaming.

What of the other potential developments, well it appears that BT is making a proposal for a system whereby lines are installed at 2Mbps where it will be supported, or 0.5Mbps otherwise. We would hope that at the same time this would include a new testing limit for 1Mbps, so that 1Mbps connections will be more widely available. The actual throughput of the line is then governed by the ISP or end-users, either of whom can change the speed in a matter of seconds. For example you could leave the connection running idle at 64kbps, and raise it in steps upto 2Mbps for when fast downloads are wanted. Giving the users control over the speed, and combining this with the usage based model would allow ISPs to offer 2Mbps services at prices more like the existing 0.5Mbps services. Unfortunately there appears to be no mention of any speed options beyond 2Mbps at this time. The statistics of many ADSL modems suggest that the current 2Mbps attenuation limit could actually support lines of 3 to 4Mbps, though whether this would fit into the nationally agreed Accepted Network Frequency Plan (ANFP) is unclear.

The final proposed change is that Quality of Service (QoS) options, for downstream initially, and upstream soon would be launched. Whether these are just in the BT Central area, or also cover QoS for the actual ADSL line is unclear. With the rise of Voice over IP telephony, the ability to guarantee a level of throughput on a connection is becoming more important. If the pricing is right, QoS options may find a market.

These changes may be called innovative, but if one looks at other DSL markets they are not totally new. In fact a lot of the changes proposed appear to be making the IPStream products much more like the Datastream product range. This may draw the attention of Ofcom who are concerned about BT Wholesale squeezing wholesale competitors out of the market place, especially if it squeezes the margins for LLU operators. Some ISPs may well embrace the changes, and others not like them. At this time it is not totally clear what precise effect the changes will have on costs to the end-user, only once final pricing is released will that be possible.

What appears to be clear with the capacity model, is that while it is still unmetered, it does favour the larger service providers. This is because they are likely to have the 5000 plus users on a BT Central to actually share the cost. Having just a few hundred users on a large BT Central was costly previously, but it is soon to become commercial suicide. One final possible sting in the tail, is that BT Wholesale appear to working on upgrading the number of supported sessions on some BT Central products, e.g. the 155Mbps L2TP product currently supports 8000 sessions, in the future this will rise to 16,000 sessions. We hope the switching hardware is up-to the task, and would note that one likely side effect is that the days of almost non-existent contention may be over with 16,000 users sharing 155Mbps.

NOTE: We should point out that all the pricing is subject to change at this time, it is believed the pricing hinges heavily on the reaction of service providers and other interested parties like Ofcom.</>

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