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Wholesale broadband pricing rules removed for 70% of UK
Wednesday 21 May 2008 12:50:45 by Andrew Ferguson

Market deregulation has now arrived in the UK broadband market. Ofcom has decided that for 70% of the country that the regulations governing the price of BT Wholesale services can be removed. Precisely what will happen now is unclear, as the removal of regulation makes it much harder to predict the path forward. The Ofcom press release provides more information and a link to a long (155 page) document reviewing the market. Ofcom has produced a map showing the parts of the UK that face deregulation. The red areas which represent Market 3 are where the rules are changing.


Click image for larger version

Ofcom has previously indicated it was looking at the UK as 4 distinct market areas, and the largest area is where no single wholesale provider holds a significant market power. Unsurprisingly this is the area where Virgin Media, BT and the various LLU operators offer services. In these areas as of December 2007, BT Wholesale had a 38.3% market share, Virgin Media 29.6% and LLU 32.2%.

"This is a major step forward in the UK broadband market reflecting the success we have had in promoting effective competition. It shows that we are determined to deregulate wherever we can do so in a way that is consistent with the broader public interest. We now need to build on these foundations and see timely investment and a competitive market emerge for next generation access as well."

Ed Richards, (Chief Executive) Ofcom

The above statement from Ed Richards reveals that Ofcom hopes that by removing the regulations it may kick start investment in true next generation access products which in turn may see connections speeds of 100Mbps becoming affordable to consumers. Whether this is what will happen is impossible to predict, and the current economic environment may actually put paid to large investment projects. It should be noted that this is not refering to 21CN and WBC as next generation products. Given the penetration of ADSL2+ across the UK already, WBC is currently BT Wholesale playing catch-up.

Removing the regulations on BT Wholesale may see the differences in pricing for its WBC and IPStream products for different parts of the country widening, which may see even BT Wholesale based providers offering two teir pricing in the country. One can presume that BT Wholesale will charge less in the densely populated areas in an attempt to compete with LLU and cable services but with the removal of the rules one wonders what measures are in place to ensure the continued availability of wholesale products. BT Wholesale could simply wind up its operations over time for parts of the country and the BT Group could only provide DSL based broadband via BT Retail. The effects on the smaller sub 150,000 customer providers could be dramatic if the way forward is to make wholesale agreements with LLU providers but still retain a smaller access network from BT Wholesale for the remaining 30% of the country.

Perhaps the plus side is the idea that we may see the BT Group more likely to start investment in fibre deployments especially if the requirement for wholesale access is removed. Though given that LLU controls would appear to still be in place it seems unlikely that BT could rip out the copper local loop and replace it with fibre. Any fibre deployment would have to be alongside the copper loop.

Just as with the introduction of Capacity Based Pricing in 2004, it took some years for the full effects to be felt as providers lowered prices by reducing the amount of over capacity they had, though at the time the vast majority welcomed the lowering in retail prices.

Who knows, Ofcom may have its wish and see more investment in next generation access, but given the market pressures to compete at the retail price level it seems likely that if we ever see widespread 50Mbps and 100Mbps product options that they will be highly contended perhaps at 100:1 or even higher levels. Some ADSL providers already contend at levels like this to keep prices low, so those who wish for fibre with its high connection speed and reliability may get their wish, but actual performance during normal waking hours will probably be no different to a 2Mbps connection of a few years ago.

Whatever happens, by using different rules in the different parts of the UK the danger of widening the digital divide is greater than ever. Three years time should see some 50% of UK households with the option of 50Mbps services from Virgin Media and possibly a patchwork of 50Mbps or faster services from other providers, but the remaining 30% look set at present to be left with ADSL2+ from BT Wholesale as the maximum offering for some time.

Comments

Posted by CARPETBURN over 9 years ago
Ooo now the fun begins, currently happy with my LLU ADSL2+ cant wait to see what someone else offers next for similar cheap money :D Nice one ofcom... Better deals and choice for the customer (hopefully) less cash in share holders pockets :)
Posted by herdwick over 9 years ago
This change only affects BT, if someone else wanted to offer something cheaper they can do that now and nothing changes. They probably don't want to increase their losses though.
Posted by edajc1964 over 9 years ago
People always assume that deregulation leads to benefits for the consumer - how wrong. The power industries only offered cheaper prices when regulators forced them to, this will be no different when the various providers start to co-ordinate their activities and there are only a few big, foreign owned groups working together.
Posted by absent over 9 years ago
I believe there is already a two tier pricing structure for BT's 21CN. To quote Entanet's wholesale trial's costs:

End User access:
Band 1 exchanges £6.28 per month
Band 2 exchanges £8.04 per month

Assured EU charge:
Band 1: £0.40 per month
Band 2: £3.40 per month
Posted by andrew (Favicon staff member) over 9 years ago
The two tier pricing exists for IPStream as well, just no a wide enough gap for providers to offer two pricing at the retail level for those that use just IPStream.
Posted by c_j_ over 9 years ago
I don't understand this.

The only serious bit of a BTw-based ISP's costs which is geographically based is the "line rental" (mentioned above). (Let's ignore 21CN regional pricing for now; it doesn't map cleanly to Ofcom's map anyway???)

The (ridiculously huge) cost of Centrals has no geographic component, so how can Ofcon say there are different kinds of market in different places and expect a sensible result?

Oh, I remember, he has a different definition of "sensible" from every other broadband user and ISP (except BT).

This could be as bad a move today as CBC was in 2004.
Posted by andrew (Favicon staff member) over 9 years ago
It probably is going to have minimal impact on IPStream, which in some ways is entering an end of life phase now. With regards to WBC there are regional aggregation points and we may see these varying in price potentially.

Posted by chrysalis over 9 years ago
cj beat me to it, someone on el reg also mentioned it. But as I understand it the line rental part of the cost is now unregulated but the part which needs overhaul the bt central part is likely to remain the same. What we may see is isps running double tier pricing but I think it will only be £5 month difference maximum. BTw wont withdraw services they be throwing lucrative BT central revenues away if they did.
Posted by c_j_ over 9 years ago
"IPStream ...is entering an end of life phase now."

Who else besides Enta is likely to be playing WBC in the foreseeable 21CN future?

Afaict, the remaining non-LLU ISPs either need a WBC wholesaler (hello again Enta) or somehow they set up a suitable equivalent to Enta's WBC wholesale network, so today's ISPs can connect to punters regardless of geography. Or they leave the connectivity business to someone else?
Posted by andrew (Favicon staff member) over 9 years ago
Or they just abandon some parts of the UK...e.g. where they cannot compete on price due to the price wars.

IPStream has a life of a couple of years but is probably going to see less and less investment.
Posted by c_j_ over 9 years ago
I know you're only reporting it, so pls forgive tone...

"abandon parts of the UK"

Which parts does that leave? Smaller ISPs will have no affordable access to most non-LLU areas (they'll be BT Retail's patch?), and in LLU areas the sensible ISPs may still play but as you say they'll have to give up the crazy price cutting game


"less and less investment"

If BTw had been in the "investment" game for IPstream, there'd have been no need for Exchange Activate, no red VPs for months on end, we might even have have had ADSL2+ as a BTw service by now...
Posted by CARPETBURN over 9 years ago
quote"If BTw had been in the "investment" game for IPstream, there'd have been no need for Exchange Activate, no red VPs for months on end, we might even have have had ADSL2+ as a BTw service by now..."
You at some point had the same dream as me, except when i woke up i realised it was a nightmare they keep making promises but nothing really improves so i jumped ship, IMO ALL areas of BT could do more for the whole country to have a better broadband experience.
Posted by chrysalis over 9 years ago
one example of non investment from BT in ipstream is the abandoning of the connection steering thingy that would have meant more efficient use of central capacity for isps. They will invest the minimal needed to get a product to sell after that they probably wont justify any expense.
Posted by rustythespian over 9 years ago
I write this in total frustration, today is a good day I am actualy on 1.4mbps, the worst it has ever been was under.5! all the talk but nothing ever happens!76 years of age, take me back to the old days when we had pigeons!!!!! Bt broadband is about as much use as an ashtray on a moterbike!! all that money for so little.................
Posted by Somerset over 9 years ago
Ebbsfleet pricing:

https://www.btwholesale.com/pages/downloads/21_Century_Network_Community/WBC_FTTP_Indicative_Pricing_Slides.zip
Posted by comnut over 9 years ago
yes, the technology may be wonderful, but the management is still in the dark ages!!

BT has too many managers who have *no* clue, too many salesmen that know nothing about the competition's pricing, and *think* theirs are the best, even if you explain their mistake...
THAT is what made me say, VM and TalkTalk are better... tech is the same, but the management a *lot* younger...
Posted by CARPETBURN over 9 years ago
quote"Ebbsfleet pricing:
........."

And the real life adsl2+ BT pricing for the other 99.9% of the population is....
http://www.thinkbroadband.com/news/3559-retail-pricing-for-wbc-adsl2-service-starts-to-emerge.html
Enjoy LOL
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