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BT Group and TalkTalk at war?
Wednesday 16 January 2013 11:21:03 by Andrew Ferguson

An article in The Telegraph has the CEO of TalkTalk calling for tighter regulation over the next five years. This call arises because it appears TalkTalk are unsure whether the price currently pay for FTTC services from Openreach is the right price.

Product Monthly price (inc VAT
Up to 40Mbit/s downstream and up to 2Mbit/s upstream £8.28
Up to 40Mbit/s downstream and up to 10Mbit/s upstream £8.88
Up to 40Mbit/s downstream and up to 15Mbit/s upstream £11.94
Up to 80Mbit/s downstream and up to 20Mbit/s upstream £11.94

The table above breaks the Openreach price list down into monthly prices, we had added VAT to make comparison easier to what BT Retail, Sky and TalkTalk charge for their retail fibre services. The costs of MPF and SMPF are covered by the line rental that should be added to the broadband service cost.

This very much appears a war of words and one that has been going on since the original creation of copper LLU and the slow take-up of that until six years after ADSL first appeared in the UK. Ofcom has taken a very light touch with the FTTC and FTTP products, instead trying to allow the market to determine pricing and only to step in once the nascent market matures and to correct any anomalies.

TalkTalk and Sky are now advertising their fibre products on TV, and worryingly Dido Harding the CEO of TalkTalk makes no mention of the other large fibre player that is EE. The superfast broadband market of course is not just Openreach, there are many players the largest being Virgin Media who have their cable network available to almost half the homes in the UK.

While we can see the benefit of forcing down the Openreach pricing, in terms of competing with BT Retail and their share of the market it may not help, as BT Retail would be able to also cut their prices due to the equivalence of pricing rules that apply to Openreach. Only if Openreach was forced into offering non-BT Group customers a lower price would TalkTalk benefit.

One major side effect of lower pricing for Openreach FTTC services is that it could actually increase the BT Group stranglehold on superfast services in the UK. Virgin Media would try to follow any price cuts and reduce investment in capacity, new entrants to the superfast market would find it harder to survive and those attempting to raise money for superfast broadband in rural areas could see the limited amount of investment from commercial partners vanish.

The big question is whether UK superfast broadband is vastly more expensive than what is sold in France and Germany, though in cases where the services are a vertically integrated solution not available as a wholesale proposition you can only really compare with people like Virgin Media.

A challenge for TalkTalk, EE and Sky, while Fibre to the Premises has limited geographic coverage from Openreach they should be marketing it. FTTP from Openreach in areas where available is available for the same price as FTTC, but as yet of the big providers only BT Retail is offering a 160 Mbps full fibre service.

So while BT may be evil and cunning in picking a price point for its Openreach fibre services that does not spur Ofcom to act yet, by not going too low it is allowing a market to develop that means providers such as Gigaclear, Hyperoptic, Rutland Telecom and others are able to do exciting things that may bring real local loop competition to the UK.

Comments

Posted by chrysalis about 1 year ago
this is nonsense, out broadband is already cheaper than the average worldwide, its too cheap and it stifles investment and promotes oversubscription.
Posted by chris6273 about 1 year ago
Rubbish. £11.94 for an 80/20 product is very good; if TalkTalk don't like it then maybe they should lower their overheads to make their prices more competitive. BT Retail and Sky don't seem to have a problem.
Posted by iand about 1 year ago
So SKY are making about 11 pounds per month and 132 pounds per year for the 40/10 service. Thats a lot.
Posted by Sonic21 about 1 year ago
It is about time Ofcom forced Virgin to offer/sell their services/network to other providers, the same as they have to BT!
Posted by Dixinormous about 1 year ago
@iand - So long as you ignore all the costs of getting the customer traffic from BT's network at the exchange onto the internet along with all the other things required to supply the service yes indeed.
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