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TalkTalk has a go at Openreach over line rental costs
Monday 09 March 2009 16:44:09 by Andrew Ferguson

It seems TalkTalk has BT well and truly in its sights- today saw the arrival of a press release claiming "BT PRICE INCREASES WILL LOCK MORE THAN 1.8 MILLION PEOPLE OUT OF BRITAIN’S DIGITAL FUTURE". On closer inspection it actually relates to the proposed rise in capped prices that Openreach can charge for various line rental products that was announced in December 2008, and whose consultation period ran out on 20th February 2009.

Some sites covering the press release are suggesting that the price rises may see broadband bills rise by £30 a year, but the reality is likely to be different. TalkTalk is the largest single user of fully unbundled lines (MPF), where the price may rise by £10 a year, and this covers voice and broadband. The more popular form of unbundling is shared LLU (SMPF) where only the broadband is unbundled, this looks set to only rise by 60p a year. Wholesale Line Rental (WLR) is the product that over 5 million lines in the UK use to give people a choice of who they pay their voice line rental to, and this may rise by £4 a year.

Looking at the price changes one can see how TalkTalk may feel hard done by, particularly as the margins are so tight in the retail sector it is involved in and its competitors have slowly but surely narrowed the gap so that the 'free' broadband element is not as big an attraction as at its original launch in 2006. Additionally consumers may have also become more savvy about the difficulties and costs of leaving a fully unbundled TalkTalk service to move to another provider even when outside their contract.

"I conclude that either BT is much less efficient than it should be, or it is exaggerating its costs or it is being allowed to make excess profits by the regulator,"

Dr Chris Doyle, Warwick Business School

Is a comment we tend to agree with, but then when you create lots of sub divisions within a large company such as BT and actually have rules where one part of a firm has to behave exactly like a competitor from elsewhere in the industry how can one expect a fine tuned business machine. Some will support the notion BT is making excessive profits, but surely if this were the case there would be little delay in rolling out its FTTC/FTTH solutions, since to do so now would steal the march on a number of small entrants to the market.

Talk is cheap, but as we all make less calls on our landlines, by switching to things like email or using bundled minutes on our mobiles, it comes as no surprise that the people running the network will try to compensate. The same applies to all the calls packages from the myriad of providers out there. If we all stuck to making only free calls the price of these packages would soon alter, but in practice we all forget to use the cheapest method to call at some point in the month.

So the question is, does the public value its broadband so little that a price rise for the telephone line of less than £1 a month will make them give up the telephone and broadband? There is some evidence a few people are doing this, but invariably they replace the services by using mobiles and mobile broadband.

Update 17:30 BT has issued a response to the TalkTalk press release stating a number of points reproduced below.

  • The UK has some of the lowest broadband prices and the highest broadband penetration of any European country.
  • While other Utility bills have soared, BT's wholesale prices have been at the agreed level or lower for four years. And there were a series of price cuts of up to 60% introduced just last month. These cover some of the principal products bought by Carphone Warehouse and other service providers.
  • Any price changes introduced in the future will have to be approved by Ofcom. It will be up to service providers whether to pass these on to their customers or not
  • BT is not making excessive profits.
  • BT is not exaggerating costs.

"It is astonishing and ludicrous to suggest that people will be locked out of Britain's Digital revolution by BT. The UK has the most competitive broadband market in the world, thanks in large part to the massive investment made in broadband infrastructure by BT."

Emma Gilthorpe BT's Director of Industry Policy and Regulation

Comments

Posted by SPOTTY over 8 years ago
Re Emma Gilthorpe comment...
Yes the market is competitive, its been engineered to be that way. Never mind the great god competition what about quality of service, consistency of service and transparency over technical issues for the poor end users. Huge dedicated efforts at customer service would be unnecessary if a quality product was being delivered throughout as a result of massive investment funded by your customers.
Posted by Dixinormous over 8 years ago
The market is indeed competitive. Well so long as you ignore that most of the operators are selling the same service.

Hardly a massive investment either, it's not like BT haven't been getting 3 figures per Mbps per month from their wholesale customers, oh the pain.

Rather take 5 operators selling very different products than the dozens of ISPs buying the same wholesale product. Competition comes down to two, Virgin Media and BT, some areas not even that.
Posted by Dixinormous over 8 years ago
As far as Talk Talk go, they made a very conscious decision to offer a cheap, nasty, low margin service. That it's biting them in the backside gets no sympathy from me. They cap heavily and throttle their customers into oblivion, as required when you allocate them 30kbps.

Our broadband market is quite broken enough thanks to the corner cutting in the persuit of lower prices, I guess Talk Talk will have to charge that touch more. Less than 50p a month causing 1.8 million to not be able to afford things, melodrama!
Posted by AndrueC over 8 years ago
Are there any privatised free market industries left in the UK that have actually delivered a high quality product?

I was never convinced by the 'increased competition=better for the consumer' argument. It only seems to favour short-term price cutting.
Posted by Dixinormous over 8 years ago
Exactly. Price cutting gets the punters to sign on the dotted line, offering a good quality service for a reasonable price not so much. It's all about making that sale and getting that contract around someone's neck, once that's done who cares what the service is like, they're an RGU now!
Posted by boggits over 8 years ago
"Any price changes introduced in the future will have to be approved by Ofcom. It will be up to service providers whether to pass these on to their customers or not"

Sorry BT gained market freedom for 50% of lines...
Posted by Spectre_01 over 8 years ago
For along time MPF line rental has been significantly cheaper then SMPF, not including the cost of wholesale equipment at the end of the line, just the cost of the wire pair from the exchange to the end-user. Obviously the running cost for MPF and SMPF is about the same so why should Openreach not charge the same?...
Posted by Spectre_01 over 8 years ago
<cont>...



Openreach priced fully unbundeled lines lower to promote LLU take-up and help LLU providers get a foothold in the market. The honeymoon period is now over with LLU providers being setup in all the exchanges they want to be in so now the artificial prices end, they can moan about it all they like but the LLU providers were given ample warning, this didn't just happen overnight and it would be unfair to non-LLU providers if the pricing bias continued.
Posted by alewis over 8 years ago
"...the notion BT is making excessive profits, but surely if this were the case there would be little delay in rolling out its FTTC/FTTH solutions, ... would steal the march on a number of small entrants to the market"

ignores the culture that has been pervasive within BT for decades. Did it push ISDN? Nope. Did it push ADSL? Nope.
Posted by Spectre_01 over 8 years ago
What do you mean BT didn't push ADSL? When they decided the time was right the rollout was comprehensive, granted BT wasn't on the cutting edge of technology but it went out to all the exchanges.

In anycase this line of discussion is going off-topic.
Posted by AndrueC over 8 years ago
"Did it push ISDN? Nope.". Yes it did.

http://en.wikipedia.org/wiki/Home_highway

The only problem with it was that apparently BT used software to combine the two streams and because of the load on the CPU in the exchange you couldn't get an 0800 number for 128kb.

Ah, happy days :)
Posted by AndrueC over 8 years ago
..there was quite a good A/D converter in the wall box. I tried using my USR 56k modem with it and got (IIRC) a 52kb sync. Not very useful though :)
Posted by Dixinormous over 8 years ago
AndrueC - I spent a few very pleasant months on 0800 dual channel Home Highway.

Also, BT did not combine the two 'streams', to BT they were discrete ISDN channels and the combining of them was done at the end points via MLPPP so the telephone number you were dialling was irrelevant.
Posted by kamelion over 8 years ago
Spectre I was under the impression that it was OFCOM setting the prices in order to promote LLU and ensuring that BT couldn't undercut everyone else
Posted by Spectre_01 over 8 years ago
Dosn't really matter who's idea it was, the exact pricing would have been negotiated between them and then set, just as it has now been re-negotiated and reset. Net result is the same.
Posted by kamelion over 8 years ago
The way you put it gives the impression that LLU was being subsidised and is central to your argument.

Prices have not been negotiated at all , they have been set, this time by BT and affects LLU and ISPs on BT infrastructure. BT getting greedy.
Posted by Dawn_Falcon over 8 years ago
LLU is subsidised by BT. That's what allowing third parties access to exchanges at government-negociated rates *means*.

And BT did heavily push ISDN for business users, and I used a single-line ISDN for about a year myself - it's much more pleasent than 56k (the alternative I had) because of the dramatically lower pings.
Posted by CARPETBURN over 8 years ago
quote"LLU is subsidised by BT. That's what allowing third parties access to exchanges at government-negociated rates *means*."

Good to see you are still paranoid.... Government negociated rates indeed ROFL

Oh and BTs so called reply..... equally as hillarious!

Posted by mishminx over 8 years ago
It was BT Surftime that caused problems for Home Highway users wanting dual channel access.

On the plus side though, £20 to Demon and £40 for surftime bought you a truly unlimited connection.

ADSL was only really pushed when too many people started taking the idea of splitting up BT a little bit too seriously. Heh, I remember the adverts for Homehighway though.
Posted by AndrueC over 8 years ago
@Dixinormous:There weren't very many 0800 numbers and the channel bonding information was in answer to a FAQ on BT's own website.

It's obviously hard to find a link to it but it claimed that it consumed too much CPU at the exchange.
Posted by Dawn_Falcon over 8 years ago
Carpetburn - It's called reading ability, not paranoia. Heh.
Posted by CARPETBURN over 8 years ago
LOL Dawn in that case BT are scummier than LLU companies as they are about to possibly accept a big government handout, disgusting giving BT billions of tax payers hard earned.... Why cant they give it to pensioners who fought in the war, the disabled, particularly children and other deserving causes.... Instead though I suspect in your eyes BT deserve a government subsidy but LLU should never be subsidised by BT??? Nice logic pfffft
Posted by Somerset over 8 years ago
'"I conclude that either BT is much less efficient than it should be, or it is exaggerating its costs or it is being allowed to make excess profits by the regulator,"

So he does not know which of the three?!
Posted by dragon1945 over 8 years ago
Dixinormous, I have talktalk. Certainly it's a lot cheaper than BT, but not nasty. For under £21 a month I get line rental, all my 01/02/03 calls, and calls to the USA and Oz 24/7. I get BB at 1.6 MB. BT say my phone line is only capable of 512 kbps! If BT could do this package cheaper I might be tempted. Pipex Homecall charged £30 a month - until Tiscali wrecked it, so I saved £108 a year by switching. My phone calls via BT cost me £30 a month plus line rental, and that was without BB. If talktalk would include 0845 and 0870 calls in the package, the service would be perfect.
Posted by Dawn_Falcon over 8 years ago
Somerset - He's allways been a critic of BT. He's ignoring the obvious issue of BT bleeding profit due to government interference.

And Carpet, handout? No, they don't get handouts, they are forced to spend with very limited returns by the government. Look at the actual figures. Wait, that'd require math skills.
Posted by Dawn_Falcon over 8 years ago
dragon1945 - It's not unusual for people to get higher speeds than BT's checker indicates. It's conservative and the very minimum which you'd get.
Posted by mikeblogs over 8 years ago
Just wondering (in future) the MPF (Sin349) has no commitment on Singal to Noise ratios in its definition, the determining factor in what Broadband speed is possible. Should any increase in MPF not be tied to improving the MPF for Broadband t various distances from the exchange?
Posted by mikeblogs over 8 years ago
sorry typing errors in last message.. Should any increase in the MPF prices be tied to improving the state of the MPF for Broadband usage. This points to a table of best practice signal to noise ratios achievable by distance from the exchange.
Posted by chrysalis over 8 years ago
The fact TT is making stupid noises about a price rise which is under £1 a month shows how messed up the market is. Most people I know willingly spend 20 times that that on smoking and/or drinking every week.
Posted by CARPETBURN over 8 years ago
quote"And Carpet, handout? No, they don't get handouts, they are forced to spend with very limited returns by the government. Look at the actual figures. Wait, that'd require math skills."

I suggest you come out of your insult bubble for a few minutes to comprehend the government may be giving BT billions, then try to comprehend your gibberish about BT subsidise LLU..... Ergo if BT subsidise LLU and then BT take money from government its actually government that is the key roll financially to BT for the future.
Posted by CARPETBURN over 8 years ago
I cant wait for the future and the competitive NON BT FIBRE AND SIMILAR products that will be available, looking forward to laughing at BT fanboys and their capped, limited and throttled so called 20Mb fibre ROFL Hope the at a rough guess 50 quid is worth a few seconds burst speed to use up a gig. Bwahaha
Posted by CARPETBURN over 8 years ago
Whens the next government negotiation for LLU rates Dawn? Tell me do they all get together on a saturday afternoon muching on BT funded custard creams and drinking PG tips to discuss what BT should give them this month LOL Ooooo I hope Mr Brown and his ministers say Ukonline can have more of BTs (err governments) money this month we have had a few email issues recently and need the extra tenner the gods called BT may throw in our direction.
{sarcasm and idiot level reply off}
Posted by Somerset over 8 years ago
CB - so you're back! Please try writing sensibly or you will be banned again.
Posted by Dawn_Falcon over 8 years ago
Carpet, the moment you stop using BT's last mile you might have a point.

If BT get billions (and given the rollout plan is for 1.5 billion, they won't) then it'll be tied to conditions. Which is the correct way of handling it, rather than the current situstion where they are forced to offer LLU without compensation for 100% of their costs. (Business!)

Non-BT fibre? Ah, so you're championing VM now. Rofl.
Posted by CARPETBURN over 8 years ago
quote"CB - so you're back! Please try writing sensibly or you will be banned again."

Why would i want to do that? Its far more fun to state my opinion which for some bizarre reason leads to cry babies complaining. I guess you and Dawn understood it completely as you are both already whinging like children.
Posted by CARPETBURN over 8 years ago
quote"If BT get billions (and given the rollout plan is for 1.5 billion, they won't) then it'll be tied to conditions. Which is the correct way of handling it, rather than the current situstion where they are forced to offer LLU without compensation for 100% of their costs. (Business!)"

Costs you say?? Funny how you are happy for them to spend my taxes which they will milk from this clueless government.

Dont talk to me about costs when i have no control over BT getting my cash
Posted by CARPETBURN over 8 years ago
Now run along Gordon and BT beggers need some more teabags for their meeting about LLU negotiations

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