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Crystal ball what will happen on Thursday?
Tuesday 05 February 2002 15:10:00 by Andrew Ferguson

It seems The Telegraph started a frenzy of media interest, with various newspapers, and sites like Register all picking up on it and finding different slants etc.

What do we know - well that Ben Verwaayen will make his inaugural speech presenting the Q3 results for the BT Group. Beyond that nothing is concrete - no requests for approval on a price cut has been made publicly to Oftel, i.e. price changes are approved by Oftel and take 28 days, with the pricing been available via BT's pricelists. This is to give competitors and the regulator time to decide whether the new pricing isnt anti-competitive.

Several scenarios's:
(a) No price cuts, announces formally the Wires-only products and how BT hope these will stimulate demand by freeing ISP's from the 12 month contract and hardware restrictions.
(b) A range of price cuts over time, e.g. £5 now on all BTwholesale ADSL products, this is likely to draw lots of attention from LLU operators who will see their margins shrinking. BT may just be able to convince Oftel that the price cut is needed to stimulate the market to ensure broadband doesnt stall.
(c) Announce a massive 50% price cut in a number of ADSL products primarily those aimed at home users. Oftel would certainly want to think on this, and within hours I'd expect the first complaints to arrive on Oftel's fax machine. Certainly a wholesale product at £15/month leaves little margin for LLU operators. Looking into this could take a couple of months.
(d) Announce the resumption of an ADSL rollout using small/cheaper DSLAM's to extend coverage to 2000 exchanges by the end of 2002. It's odd that this option hasnt been mentioned elsewhere.

Of course announcing large price cuts in the consumer products may be an attempt to ensure large takeup, therefore ensuring the scale of economics comes into play, but if these were blocked and BT was publicly forced to sell ADSL at a higher price who would appear to be the big bad wolf then?

But then think about it - who has seen the LLU companies touting for consumer business? Are any of the 150 LLU lines with a consumer, the majority will be business lines and priced as such, i.e. strong SLA's, guaranteed bandwidth things that a home user just would never be able to afford. So perhaps BT should be left alone to decide it's own pricing on the 'home' range of products.

Whatever happens, Ben Verwaayen will reveal his character on Thursday and the press will judge and deliver comment, the shareholders reactions will be seen in the share price. It would be nice to see a £5 price reduction on Thursday, but a £5 cut for the summer is much more likely.


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