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Yorkshire Post highlights losses for Digital Region
Tuesday 17 January 2012 10:37:08 by Andrew Ferguson

The fibre to the cabinet network provided by Digital Region in South Yorkshire, went live in late 2009, but it seems according to a news item published by the Yorkshire Post that the project is not getting the take-up needed to make it self-sustaining.

The original projects aim was to ensure a 97% of premises coverage figure at a cost of £112m, but this has since been scaled back to 80%. Even with the reigning in of the ambitions it appears that revenue of £167,000 was overshadowed by losses of £9.2m in 2010-2011, resulting in a "material uncertainty" for the project to continue. The original business plan had the scheme starting to make a profit in the same year, to give the project more time to turn the corner the RDA Yorkshire Forward is providing a £4m guarantee to give the project breathing space.

The problems facing the project are several, it started to go live just at the point when BT Openreach started to develop its own FTTC product, and Virgin Media that operates in the area too has vastly increased its product speeds. This means the project has faced stiff competition for consumers business. Secondly there are no well known names signed up to provide a retail service, names like Ask4, Origin, RipWire, unitel and littlebigone may be known to broadband evangelists, but the average consumer will know little about them. The cost of the service, setup fees of £70 to £90 are likely to dissuade people from switching from an existing broadband service, particularly when they are used to free migrations between providers, add to this the plethora of services available for £5 to £10 in the more densely populated areas that Digital Region operates in and one can see the reluctance in signing up.

Low take-up figures don't just affect Digital Region, with Virgin Media around 70% of customers opt for the lowest priced product, even for BT Retail the take-up of its Infinity product has been low. This should come as no surprise, the same happened in 2000/2001 when broadband was new and more expensive than unmetered dial-up deals, and many saw little need for broadband speeds of 0.5 Mbps.

The question for Digital Region is whether it can make its products attractive enough price wise to compete with the low priced deals from Sky and TalkTalk. Removing the upfront setup and hardware costs would encourage people to at least give the service a chance, as would ensuring the wholesale pricing can support a low price, slower package that at least increases take-up and once people are connected as they sample improved speeds and service reliability the up-sell to faster and thus profitable packages may be possible.

One problem with the current 80% target, is that the area may end up with a BDUK project working to serve the remaining 20% of properties and as this is open to bidding, there will be scope for yet consumer confusion due a third set of retail options in the area. In terms of take-up the irony is that those in this last ten to twenty percent of the broadband population might actually have been more keen to sign-up to something like Digital Region.

Update 17/1/2012 5:45pm The BBC is reporting that Rotherham Council has started an investigation into why the take-up of the service has been so low. This should take six to eight weeks, though just as with the number of people signed up to the service, the report seems unlikely to be public, as it might help competitors to the Digital Region project in the area to make further commercial inroads in the area.

Comments

Posted by Michael_Chare over 5 years ago
In 2000/2001 BT based broadband was very expensive. It was not until 2002 when BT reduced the wholesale price that broadband became a 'no brainer' for people paying for a dial up service. If take up of Infinity is low, this is partly because they roll it out in urban areas where people can get very good ADSL2+ speeds. If roll out of FTTC concentrated on areas where speeds are low, they might get a much better take up rate.
Posted by martinald over 5 years ago
I think this is a definite problem for any provider/organisation that goes outside the BTw route for FTTX deployments. Even large LLU providers (perhaps apart from Sky) are going to struggle -- o2 with their ~600,000 customers has no scale to do these deployments.

Furthermore, it will be hard for a big LLU provider to wholesale to another big LLU provider. Would o2 really want Sky, TalkTalk or VM using their network when they compete in other business segments head on?

These kind of deployments definitely do tend towards a natural monopoly.
Posted by martinald over 5 years ago
@Michael; that's not strictly true. Most very good ADSL2+ lines will be exchange only lines and therefore won't get VDSL2 (for now).
Posted by Michael_Chare over 5 years ago
@martinald - maybe that depends on the definitions of very good. I see this from the POV of someone with a line which does not meet the 2mbs government target.
Posted by andrew (Favicon staff member) over 5 years ago
The not sures tends to be people with 10 Meg or faster lines, i.e. not sure whether speed jump is worth it.

Also people are very wary of speed estimates, and many who saw little improvement with the up to 8Meg move to up to 24Meg will be assuming little change, when reality with FTTC is very different.
Posted by pobrown over 5 years ago
I've had my Digital Region connection for 12 months and it's great. I'm getting 33Mb down and 8Mb up. The reason the project has low uptake, in my opinion, is lack of advertising. I have a large number of friends who are all interested in technologies such as fast broadband. Not one of them had heard of Digital Region before I had it installed. I think I only stumbled across it after an article on this very site. The poor range of ISPs signed up is also a factor and the communication quality from those ISPs has also been poor at times.
Posted by pobrown over 5 years ago
The £75+ installation costs are also off-putting to most!
Posted by panderson over 5 years ago
Is the price problem not due to the charges levied by BT to Digital Region for connecting up customers etc?

It is a shame that there doesn't seem to have been a bigger take up, I think it has a lot of potential!
Posted by andrew (Favicon staff member) over 5 years ago
In part the fact that the costs for the linking of the DR cabs does mean their costs are higher. But that was clear from day 1, so should have been factored in, as was the demand for very low priced broadband, rather than premium products amongst the public
Posted by jtthedevil over 5 years ago
They have made the mistake of every one of the Next gen rollouts, lets get past as many houses as we can. Problem is, most of these areas are getting up to 5mb and higher speeds already and there aren't the widespread products to force people onto higher speeds. Surely concentrating on areas that have little or no broadband would get a higher uptake to offset the higher costs of supply. Why not mail drop areas to see the expected take up, then supply those areas that actually want, need and will pay for the services. I would love to be able to pay £30 a month to even get 10mb and a good ping!
Posted by c_j_ over 5 years ago
"It was not until 2002 when BT reduced the wholesale price that broadband became a 'no brainer' "

Partly that, and partly Pipex's pioneering "we hide the BTw installation cost" no up-front fees tariff structure.

And back then, with line rental dependent on line speed, unlimited really did mean unlimited.

BTw have changed the rules since then, and not always for the better.
Posted by Somerset over 5 years ago
DR just announced a postcode already covered by VM and BT FTTC...
Posted by desouzr over 5 years ago
How did DR get EU funding when some/most of the areas they cover are not market 1, were already covered by VM or very likely (at the time of DR inception) to be included in BT FTTC commercial rollout?
Posted by nickkcin over 5 years ago
Remember the bidding process for DR started in 2005. Most of the area was not Market 1 and BT had not started rolling out FTTC (anywhere in fact and did not start until 3-4 years later). However, the project didn't get formally signed until 2009 and there in lies a lot of the problems
Posted by Swampster over 5 years ago
I'm on SYDR with Origin Broadband, and to say it's been a bit of a revalation since moving from BT's upto 8Mb, flakey at best product is a bit of an understatement.

As mentioned the problems with the network are pretty to obvious to most, no need for Rotherham council to spend 6 weeks thinking about it.

It's barely known about amongst the wider community, the up front charges put people off, lack of well known ISP and/or product variety. No triple play for example..

As for BT, they had little interest in providing FTTX to anwhere in South Yorkshire until this project got underway.
Posted by rizla over 5 years ago
Seems to be the same old story - with operators who weren't interested coming into the area with impeccable timing. Well its impeccable for some ;)

Public sector is (IMHO) the best way of funding this, then they should lease the management out. Alternative is recreating Kingston Comms again and again.

Posted by KarlAustin over 5 years ago
@rizla - Errr... that just how DR is, public sector, managed by Thales under contract and it is a right pigs ear.

The problem isn't lack of well known providers, the problem is price (stupid interconnect fees) and lack of providers full stop - created by very short term thinking and incredibly poor communication.

Took us months to even get an NDA, and they don't want to know unless you're a household name - but the household names aren't going to come to DR.
Posted by littlebigone over 5 years ago
We are a new ISP on the Digital Region network. We can add to some of the points discussed here.

"The £75+ installation costs are also off-putting to most!" - We have a special offer which is £25 installation, we don't think this is expensive?

Our average customer speed is 37Mb download. We have customers who have moved from less than 1Mb to these sorts of speeds. Customers are in both rural and urban areas.

Thanks, littlebigone.com
Posted by littlebigone over 5 years ago
There are also some comments here about lack of marketing. You are absolutely correct, this is what is needed. This is a job for the ISPs and as a new entrant, exactly what we plan to do. People of South Yorkshire will all be hearing about us very soon.

Thanks, littlebigone.com
Posted by walkerx over 5 years ago
i left digital region this month after being on the network since oct 2010 and have now gone back with bt infinity as it was far cheaper than moving to another provider on the network - so far the speeds down/up and ping have been on par if not better than being on digital region in my view.

Currently BT Infinity installs for consumers is higher than what they are for Digital Region and Infinity has only been available for just over a month where I live.
Posted by RandomJointer over 5 years ago
The drains are coming up on this massive waste of public money.

Yorkshire Forward made a massive mistake in awarding the contract to Thales rather than Openreach.

There are lessons to be learned here as BDUK money is allocated.
Posted by RandomJointer over 5 years ago
@Littlebigone.

The people of South Yorkshire have already heard of BT, Virgin, TalkTalk and Sky and I wouldn't expect them to be bowled over by £92 connection charges.

You are on the wrong platform. Digital Region has taken too long to roll out, has only delivered to areas already well served and is too expensive.

I'm a taxpayer. I want my money back. This platform is taxpayer squanderd toast.
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