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.