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ISP industry speaks out against BT broadband price rise
Wednesday 11 August 2004 16:05:00 by Sebastien Lahtinen

A week ago, BT Wholesale announced it will be increasing its IPStream Office and IPStream S-series prices in response to regulatory pressure. The 'margin squeeze' test has been blamed for the huge price increases that will cripple some smaller business-focussed providers who received only 28 days' notice of the increases as high as 32.6% taking place at the beginning of September. This will hit those ISPs who have one year or longer contracts with customers very hard, although even those with monthly contracts object to the notice period which causes many to run at a loss until they can pass on the costs to the end users.

Over 70 companies concerned over the unexpected price increases have joined a group named UKIF to put pressure on BT to withdraw the new prices and to get government to improve its consultation with the Internet industry as well as review the regulation given the incumbent's dominant position in the marketplace. BT have said that Ofcom's margin squeeze test leaves them with no option but to change pricing to meet the new criteria and avoid being in breach of their regulatory obligations however Ofcom is reported to have denied to UKIF that this is a certain outcome of the consultation from which the margin squeeze test originates from.

"We cannot blame BT for trying to protect its position and profits. Ofcom has a policy whereby it cannot apply downward pressure on BT Wholesale’s IP prices no matter how exorbitant they are. Since BT Wholesale has 90% of the DSL market, Ofcom is at best ineffective and at worst supportive of the monopoly it is charged with regulating. Competition, innovation and a diversity of suppliers is vital to driving down the cost of broadband services and promoting choice for consumers, and thus the UK Government must maintain a regulatory framework which encourages rather than stifles this. Allowing BT unconstrained control of the wholesale price of Broadband IP will severely hinder the development of the Internet industry as a whole, and can only serve to restrict consumer choice and raise end-user prices"

Stephen Dyer (Chairman), Mailbox Internet

The focus of the price changes on standard charging (excluding capacity based charging) means that the effect is to hit smaller ISPs. It is difficult to see a justification for the price rises on the IPStream services and the move is hindering increased adoption of high speed broadband.

Companies with BT Central Pipes are encouraged to join the UKIF discussion group. Further information and to join, e-mail Stephen Dyer (steve@enovi.com).

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