In a move that was a shock to most service providers, BT have announced they are increasing prices of their BT IPStream Office (and the older BT IPStream S) products. Although most users won't be affected by these as they are not commonly used at home, this move is a very surprising one and hits those who have upgraded to faster 2Mbps services based on the IPStream product very hard, especially considering of the lack of an IPStream Home 2000 service.
The rises which will come into effect from September range from 10.5% to 32.6% for faster services raising questions over the flattening of the pricing structure that took place in April 2003, although the increases are still far from taking pricing back to their previous levels. The BT IPStream Office 2000 product increased by £5 in September 2003.
The reason for the rise is slightly ambiguous with references to meeting "regulatory obligations" raising questions as to the effectiveness of regulation in the industry which is seeing increasing costs. There is no doubt pressure on BT to provide DataStream services at a substantially lower cost than its IPStream services, so this may be to avoid reducing DataStream prices further, a pressure that has been on BT in the recent months. If this move is to soften regulatory intervention on DataStream pricing, it is only a short term solution.
Some larger providers may benefit from the price increases as the relative costs of capacity-based charging are better, whilst smaller providers are disadvantaged:
Other providers have expressed concerns over twelve month contracts which may in some cases result in a loss on the service as they were not expecting such price rises from BT whilst others are seeing this as a bringing forward the move to force them to capacity-based charging.
This price change is certainly a move in the wrong direction, further isolating BT ADSL services from others such as NTL which is increasing bandwidth and maintaining prices. The focus on business services will mean it will probably result in no mass protests. If a 30% rise was applied to residential services there would be an outcry. Despite the fact this seems to be the result of BT's competitors' issues with DataStream/IPStream price differences, it is bad news for smaller businesses who will be discouraged from adopting faster broadband services and to smaller ISPs who may be hit hard by reducing profit margins. [seb]
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