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'Broadband Tax' is not new, it has existed for years
Tuesday 18 August 2009 11:55:24 by Andrew Ferguson

Recently, several news sources have reported on concerns that the implementation of the Universal Service Commitment (USC) in the Digital Britain Report  will result in price variations across the UK in the range of broadband services. This is often pitched as an urban vs. rural battle, without considering the prices consumers currently pay for their broadband services.

The problems of broadband speeds and availability are far from a rural/urban issue but are more complicated. There are many in towns and cities with broadband access problems and equally villages with exceptional broadband services due to the proximity of the telephone exchange. The access speed situation is akin to a postcode lottery across the UK, where the dice was rolled when the General Post Office (GPO) originally located the telephone exchanges when the telephone network was being built. is one of a number of publications that discusses the issue of rural consumers being expected to pay more for their broadband, but this situation has existed since 2006. For example, TalkTalk has a surcharge of £15 per month if you are not at one of their 'unbundled' telephone exchanges, which in effect means those in less populated areas will pay more. O2 charges around £10, Sky £17, PlusNet £6 and the list goes on.

So why this variation already? Primarily the costs of providing a service over Local Loop Unbundling (LLU) has allowed providers to deliver cheaper broadband services due to economies of scale which are achievable only in those markets where there is significant demand. In these locations, the pricing regulations on BT's wholesale services make LLU a very desirable option, provided the exchange is relatively close to the major backhaul routes. For providers such as Plusnet who do not use unbundling, the reason for the lower prices is due to  Ofcom's definitions of a number of Markets in the UK, and allows BT Wholesale to charge lower prices where the level of competition is greatest.

One big danger is that if we as a nation remain obsessed about price alone and insist on lowest possible price for our broadband is that as we start to go faster, the overall capacity will not be expanded resulting in more congestion at peak time. There is little point in having a 2 meg connection if when you want to use it, its performance is the same as your old 0.5 meg connection. The outrage when average speeds are published shows perhaps that the link between price paid per month and the amount of capacity made available to people at peak times has not being fully explained yet.

We may look abroad and complain that a particular country has broadband at 100 meg for just £4.50 a month and believe the PR that says everyone gets good speeds, but forget that every taxpayer in the country may have already paid for the infrastructure. In the UK compared to other entertainment costs broadband is one of the cheaper elements, with one trip to the cinema with popcorn and drink costing the same as one month's broadband from a wide range of suppliers.


Posted by cyberdoyle over 8 years ago
and korea deliver 1000meg for a tenner a month... how do they do that?
o yes, they use fibre to the home instead of trying to get an obsolete victorian phone network to deliver 'up to 2 meg'. my dad pays £19.99 for less than 2 meg in digitalbritain... says it all really.
time we moved on. The world is changing, and we are getting left behind.
Posted by andrew (Favicon staff member) over 8 years ago
The problems are not technical but financial, i.e. who pays for the fibre to the home to be installed in the first place?

South Korea has seen two waves of government money on broadband. Not being left behind but lagging at roughly the same rate as we have been for some years.
Posted by timmay over 8 years ago
Broadband it's self is cheap however you have to still pay for something you don't want/need to get broadband! A BT line is usually needed, at £122.50 install and £11.25 per month the first year costs £257.50 just for a phone! Where as broadband cost is only between £120 and £180 for the best deals. It's not broadband that is expensive it the fact that broadband is additional add on another to an archaic, unneeded and more expensive service, the BT phone line!
Posted by timmay over 8 years ago
Add to this that newer packages are more expensive and with less usage for those in rural areas due to the lack of competition! Living in a rural area you can often be better off by not changing to a new provider now that there is this clear cut urban/rural pricing divide.
Posted by Aqualung over 8 years ago
I have for some time thought it only fair that BTw should only be able to charge pro rata for the tail connection.This might push them look at ways of getting higher speeds to people further from the exchange.As it presently stands they dont give a damn.They get paid whatever it is.
Posted by andrew (Favicon staff member) over 8 years ago
The phone maybe archaic but how many millions of minutes of phone calls are made over it?

Some 45% of the country can opt for a NON-BT line or equivalent solution via Virgin Media cable, but oddly it can be more expensive if you don't take their phone service too.
Posted by Dawn_Falcon over 8 years ago
cyberdoyle - And the moment you make our population map look like Korea's, you might be able to provide it here. Our urban areas /sprawl/.

Aqualung - BT allready have to heavily subsidise LLU, now you want them to be penalised for the physics of ADSL? They'd certainly not be rolling out fster services under that plan, they'd be guaranteed loss-makers.
Posted by NetGuy over 8 years ago
@timmay - I dislike phone line rental but part of that covers maintenance + repairs. I know they charge a lot for home visit if you have bad wiring, but the line is there and usable 24x7 and cost for all the staff needs to be covered.

As for rural users not having competiton, would be nice to get FTTC (see and then at least they'd get reasonable speeds.
Posted by NetGuy over 8 years ago
@Dawn_Falcon - How does BT "subsidise LLU" ?

They have no different cost whether a line has ADSL on or not. They get rental fee for line (even if some other firm charges customer). No subsidy on the line then.

Openreach charges a fee for linking line to kit, whether it is BT kit or LLU from competitor. No subsidy there, either.
Posted by Dawn_Falcon over 8 years ago
BT has massively subsidised LLU. Firstly, it's unable to recover its true costs for working on LLU lines, since OfCom have refused to adjustr rates which were allready too low, the linking fee is also set at a fraction of cost, the cost to adapt BT's exchanges to LLU kit environmental tolerences was extremely expensiver and born only by BT, the cost of extending some exchanges space likewise...
Posted by Aqualung over 8 years ago
Dawn what i want is a system where it is in BTw's interest to provide a best efforts service at present they have a take it or leave it attitude.I am certain that the potential loss of revenue would see a different mindset with speeds suddenly improving for many people.
Posted by Dawn_Falcon over 8 years ago
I simply don't follow your argument. BT retail is interesyed in providing a stable connection. Your experience with higher speeds requiring intervention to fix them is typical, and shows why BT retail's approach is sometimes more useful.

Unless you're able to change the physics of ADSL, all cutting their revenues will decrease their interest in network upgrades. It as bad enough the government chose LLU over FTTH for them...
Posted by AndrueC over 8 years ago
@Aqualung:So your theory is that by cutting the money BTw make they will choose to invest huge amounts of money to make life more difficult for themselves by carrying more data?


If I was your employer I would give that a try. I'd cut your wages by 50% and ask you to work a sixteen hour day.
Posted by AndrueC over 8 years ago
The only way anyone is going to invest in our network is if they can see an opportunity to make more money. Even then in the current climate it's hard to start on the project if you don't already have a good level of profitability.

Putting the financial screws on providers is the exact opposite of what we need. It's time to let prices rise to a sensible level (£30pcm average would be a good start I reckon. £50pcm average might see an FTTP roll-out start next week.
Posted by Aqualung over 8 years ago
Andrew my assertion is that by investing exactly zero in new kit and better management of what they have they could significantly increase speeds for many customers on medium length lines.

As for the employment jest many employers although not as draconian as what you suggest are doing exactly that.
Posted by mikeblogs over 8 years ago
According to Ofcom, the combined £95pm the average household pays for TVlicence/fixed/mobile and internet is a bargain.

I am not arguing the £95pm, but would prefer more of it was devoted to better connectivity and less to the costs of collecting,checking, recording and billing for micro-events.

Better connectivity (fixed and mobile) should result in reduced reliance on legacy services, but no operator will invest to destroy legacy services, hence FTTC is a nice controlled step providing more best efforts but still lacking the true potential of what is possible.

Posted by mikeblogs over 8 years ago
Although the commercial case for a FTTH £27bn investment is hard to make given subscription TV is delivered on satellite, the case of a public investment in better connectivity, given the numbers in the action plan for digital inclusion remain compelling.

While Digital Britain opens the door and provides some fillers, it equally points to a thirst and expectation of 24x7 connectivity which cannot be met where the emphasis remains on taxation rather than investment. Neither can industry expect to respond, given it demands the active replacement of legacy revenues.
Posted by Dawn_Falcon over 8 years ago
mike - Sure, but FTTH would need serious government investment. Even Verizon's rollout has major tax breaks on the backside.
Posted by Pigmaster over 8 years ago
"Sure, but FTTH would need serious government investment."

I wish they would just divert the extra £50Billion that the BoE is giving the ecomnomy and divert it to BT to say "Build us a fantastic network" better than giving it to the Banks that just squander it on Jollies and back slapping bonuses
Posted by Dawn_Falcon over 8 years ago
Well, I'm pleased you're not in a position to impliment if your grasp of economics is that shaky, then.
Posted by cyberdoyle over 8 years ago
What nobody seems to grasp is the return on investment that delivering ftth will give this country. Digital content/services are our greatest opportunity for economic recovery. Thanks to us having first gen broadband for so many we are fairly well up in the game, but if other countries get 100meg or gig connections they won't want to wait for us.. to innovate and grow we need next gen access. Initial investment will pay off in the future. think on the future needs of the generation coming up...
Posted by Dawn_Falcon over 8 years ago
Great, persuade the government to invest then.
Posted by mishminx over 8 years ago
"It's time to let prices rise to a sensible level (£30pcm average would be a good start I reckon. £50pcm average might see an FTTP roll-out start next week."

Simply not feasible, as fantasy goes though, who do you suppose will allow prices to rise? There is nothing to prevent an idiot tax. Any ISP could charge premium rates and boost profits. Without an agreement to invest, who would be fool enough to pay more for the same.
Posted by AndrueC over 8 years ago
@mishminx:I agree that in today's market it would be impractical. If one ISP breaks the current 'low price' model they will either fail for lack of interest or be swamped by rich abusers.

What is needed I think is a change in how Ofcom polices things. Introduce a rating system that emphasises what an ISP actually delivers. It should combine contention /and/ postcode variation.

The idea is to highlight those ISPs with poor coverage and/or oversubscribed networks.
Posted by AndrueC over 8 years ago
..cont'd. /Maybe/ there's a way to offer incentives to ISPs that score highly based on the results of that system. I'm not sure though as that sounds dodgy.
Posted by Dawn_Falcon over 8 years ago
Very. Because it's extremely hard to track stability, so it'd lead to ISP's boosting connections to unstable speeds. And tracking core network "conention" encourages traffic shaping so browsing etc. seems seamless, but...
Posted by c_j_ over 8 years ago
"If one ISP breaks the current 'low price' model they will either fail for lack of interest or be swamped by rich abusers."

Do AAISP, Zen, and a handful of others fit in the current 'low price' model?

There is no place for affordable "flat rate, unlimited" UK-wide services, not while Ofcom are allegedly regulating BTw anyway.

"highlight those ISPs with poor coverage and/or oversubscribed networks. "

Who cares about coverage other than at their address(es)?

Wrt oversubscribed networks, aren't Samknows/Ofcon doing some realworld testing on that subject?
Posted by michaels_perry over 8 years ago
The false assumption that they have to dig holes in the road to get fibre to rural areas is a serious concern for those of us who live in the countryside. Fact is that fibre can easily, and cheaply, be strung on the existing overhead lines supported by the existing poles. There is little of no need to dig anything! Another example of the 'urban myth' mentality of politicians and supposed 'regulators'.
Posted by Dawn_Falcon over 8 years ago
Great, link me to the paper with your soloution to the weight and flexibility soloutions, ty.
Posted by brush-head over 8 years ago
Mmmm realistic charging eh? 10+ years ago I was paying £30pcm for 512Kbps & no phone. But that was before LLU got a hold. The investment I made in router & wireless wap & cards (all b) was about 300+ GBP. As is the case in techie things, perf goes up, cost goes down, volumes inc. I'd be quite happy for GB to spend 10B gbp on FTTP. The benefits to business alone would be worth it.
Posted by Dawn_Falcon over 8 years ago
Sure, Brush. The thing is, though, it's not GB being asked to pay, it's BT. Who would lose cash hand over fist on it.
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