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TalkTalk raises concerns over BT fibre pricing
Tuesday 08 May 2012 20:04:37 by Andrew Ferguson

The Guardian has published an article where Dido Harding the boss of TalkTalk is urging Ofcom to look closely at the end to end pricing for the BT fibre services, from the price for a FTTC port, through to what the WBC charges are, and how much BT Retail charges its Infinity customers.

The article mentions £6.90 as the price for the fibre service from Openreach, but that is only the cheapest 2Meg upload service, the 40/10 product costs £7.40 per month, and the 80/20 service is £9.92 per month. We have attempted to compare the two retail providers 80/20 fibre services, and their equivalent ADSL2+ services. All the pricing excludes VAT and is on a per month basis, for simplicity sake we have not costed any bandwidth from the exchange, looking at just the fixed cost components.

  • BT Total ADSL2+ £37.92, made up of:
    • WLR £8.23
    • WBC Port £5.88
    • Total: £14.11
  • TalkTalk ADSL2+ £24.17, made up of:
    • MPF (Full LLU) £7.28
    • MSAN port - unknown
    • Total: £7.28
  • BT Infinity 80/20 £37.92, made up of:
    • WLR £8.23
    • WBC 80/20 port £16
    • Total: £24.23
  • TalkTalk 80/20 £36.67, made up of:
    • MPF £7.28
    • Openreach FTTC port £9.92
    • MSAN/GEA handover - unknown
    • Total: £17.20

Both providers have a myriad of offers and promotions/cashback deals, so we have tried to take the ongoing price. Some may conclude that the profit margins look massive, but we have NOT accounted for bandwidth costs, the costs of the anytime part of the package etc.

Looking at the retail pricing you can see the reason for the complaint, BT Infinity is being sold for the same price as the ADSL2+ service, even though with no bandwidth costs BT Retail is paying £10.12 extra a month (a promotion from BT Wholesale until 11th July 2012, means BT Retail gets the 80/20 service for the same price as the 40/10 product, i.e. £14 per month).

This is not the first time BT Retail has had such predatory pricing, in the early days of ADSL BT Openworld as it was then was the cheapest service for some time. Ofcom price controls eventually changed that, or it may simply have been that BT Retail chooses to make no profit margin on its new premium products for a period of few years.

Another possibility is that BT Retail is gambling on its FTTC users not downloading TeraBytes of data per month, which would push their WBC bandwidth costs up enormously. Traffic management can mitigate this to some extent.

As things stand TalkTalk currently has only 5,000 fibre customers, versus the 400,000 and rapidly growing numbers BT Retail has. A major part of this is the TV adverts, and the misconception that Infinity is the only the fibre provider doing FTTC, as in people are simply not aware of the FTTC service from TalkTalk.

Just under ten years there was an almost identical battle over the original 0.5 Mbps ADSL service pricing. The question now is whether Ofcom will see pushing fibre deeper into the local loop more critical than consumer level price competition. There is a delicate balancing act, as with limited public money to get superfast services to 90% of the UK, Openreach will fight tooth and nail to protect its prices.

History is worth a look, June 2001 saw the 0.5 Mbps ADSL from Freeserve increase from £39.99 a month, to £49.99. The price of the fibre products thus are not unlike what the early broadband adopters paid ten years ago. If you take into account, the extra speeds and inflation the current deals are even more attractive.

Comments

Posted by Kr1s69 over 5 years ago
Looking at the numbers you can't help but think BT Retail is taking a hit to ensure BT Openreach's fibre product is actually used.

Considering that the fibre is there, the cabinet is there and if it's not used no one is covering Openreach's cost to install.

Overall the BT group still get the same money for an ADSL product and a Fibre product. It's just the internal split that varies.
Posted by Somerset over 5 years ago
Maybe TalkTalk should advertise its FTTC product instead of putting up adverts about how much the UK would save if everyone switched to it.
Posted by timmay over 5 years ago
Agreed, TT can't complain about people not knowing about their offering if they haven't advertised. I've not seen a TT Fibre advert, but BT ones are on many times every day.

BT is clearly playing a game of steeling customers from other providers until there is a level playing field in terms of pricing. Their hope is perhaps the customers won't move away when they are forces to change their pricing by ofcom.
Posted by undecidedadrian over 5 years ago
Given that even at the "cutthroat" price BT retail is having potentially low take up.

Possibly due to people seeing anything over £20 a month too expensive given how low prices have gone for ADSL services.

Of course if Ofcom rule that BT retail needs to put the FTTC price up it could be a disaster for any more roll out.
Posted by Spectre_01 over 5 years ago
indeed, low pricing is part of the take up strategy, the hope would be maximum market saturation before they are forced to raise prices - either economically or by ofcom and people who are on FTTC will not want to switch back to ADSL as they are now used to the faster speeds. They may switch between service providers but not technologies.
Posted by New_Londoner over 5 years ago
Prhaps TT should focus on selling its own service3 effectively before complaining about the efforts of others. If it has a problem with the pricing for INfinity, why doesn't it purchase the same components to compete?

Odd coincidence that companies often resort to ill-definied regulatory complaints when not performing so well in the market!
Posted by herdwick over 5 years ago
I must dig out the Talk Talk strategy presentation where they showed how they would make decent money from FTTC using Openreach prices.

The above shows them adding £12.50 to cover less than £10 of extra costs FTTC vs ADSL2+
Posted by andrew (Favicon staff member) over 5 years ago
£2k one off cost for the GEA fibre link.

Also I presume they have costed for a higher CBR. Not clear if BT Wholesale/BT Retail have.
Posted by otester over 5 years ago
@timmay

Price doesn't sway everyone, some people prefer a decent service/customer support.
Posted by herdwick over 5 years ago
Talk Talk's strategy presentation did not mention any increase in bandwidth (or costs of same) for Fibre customers on their backhaul network.
Posted by UkRaptor over 5 years ago
Talk Talk are the last company to Criticise others with there rubbish rep and service

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