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More than 50% think Ofcom should regulate BT Infinity pricing
Wednesday 15 May 2013 09:55:00 by Andrew Ferguson

The recent opening of a complaint by Ofcom on the subject of margin squeeze in the FTTC/FTTP products sold by BT Retail and delivered over the Openreach platform in the local loop prompted us to run a poll to see what the level of feeling was amongst the public.

Poll Results: Are Fibre (FTTC) services a reasonable price?
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The poll attracted over 1,300 responses, and while 42.9% agreed that the current price of FTTC services was reasonble, a higher 51.7% thought that Ofcom should regulate the retail price of the BT Infinity product so that competitors can under cut. In a market where the Openreach FTTC products are becoming more popular, the disparity in sales between TalkTalk, Sky and BT Retail was brought into focus by the BT Group financial results, where only 200,000 of the 1.5 million Openreach FTTC/FTTP connections are via someone other than BT Retail.

Poll Results: Is BT Infinity priced so competitors cannot compete?
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There does appear to be a slight dichotomy in the responses, as while 32.6% felt that BT Infinity pricing was priced so that competitors cannot compete, this was around 20 percentage lower than the number who thought regulation was needed. The explanation may be that people are looking at the bundling where the voice service is often bundled with the superfast service, and this can help to subsidise the broadband elements of the service, relying on the money made from the millions who vote in the various 'talent' competitions on TV.

One area that did surprise, was how closely the poll comes to mirroring the stated coverage for superfast services by Openreach. We had 52% saying they can get a FTTC or FTTP product from Openreach, and another 9.2% are expecting it to be available soon.

Poll Results: Should Ofcom regulate retail price of BT Infinity?
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Poll Results: Can you get a fibre product using the Openreach platform?
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With the BDUK local authority projects, if Ofcom was to regulate the pricing that Openreach makes its GEA-FTTC and GEA-FTTP products available at, this could have implications for the return on investment and gap funding calculations used. Any regulation that increases the retail price of BT Infinity as it stands runs the risk of dampening the embryonic super fast broadband market. Perhaps what is needed is for Ofcom to enforce a short term discount for a six month period and if TalkTalk and Sky can show in that timeframe that by having a lower price they can compete and thus drive significantly more sales on the superfast broadband products the discount becomes permanent.

Comments

Posted by WWWombat over 4 years ago
That's a hefty nail in the coffin for full FTTP - 48% think that the existing charge for fibre services is too high, and 43% think it is just right.

With that, the nation has in mind a "fibre premium" of around £5-£10 above existing prices.

That's barely enough to roll out FTTC, let alone FTTP, and won't convince investors to go ahead further.

It also means altnets stand no chance of pitching true fibre in an area where FTTC is present. Not for the masses, anyway.
Posted by WWWombat over 4 years ago
I think the high numbers wanting regulation may have been because of the extra at the end of the question - the "without running their services at a loss". That sentiment might be enough to get people thinking "of course I believe in that".

If the question had been "Should Ofcom regulate the retail price of BT Infinity so that LLU providers can undercut even though this may stop BT investing in the fibre rollout further?", would we have had the same response? The final sentiment there would direct answers in a very different way.
Posted by ValueforMoney over 4 years ago
Tricky one. The success of pro-competitive FTTP measures in some European cities, suggests Cities need better policies supporting investment in the transition to fibre access rather than removing the incentive to invest by doing the populist thing of assaulting GEA wholesale prices to suit Talk Talk, and Sky re-sale VULA models.
The hard but better road must be infrastructure sharing and incentives for fibre transition. The expedient road is lower GEA prices which looks a poor option for the anything beyond a 3-4 Ofcom market review period.
Posted by jumpmum over 4 years ago
I actually wonder if the 48% that think existing charges are too high the the ones that think the regulation is needed, hoping to to lower the price. When what is likely to happen is the BTInfinity prices would be raised so that Sky and TalkTalk could sell better at a higher price.
Posted by GMAN99 over 4 years ago
Proof it was ever needed, I've said time and time again, people in this country want broadband for next to nothing. How can we expect companies to invest if people will not pay the price.
Posted by GMAN99 over 4 years ago
VFM, but that's still all waffle if the end user will not pay anymore for a new service than what they pay now.

Hopefully the "fibre or nothing" crowd take note of the results
Posted by chrysalis over 4 years ago
why is it about infinity not plusnet? the latter has lower prices. Whats funny is people want broadband for nothing, yet if infinity does get regulated the prices are going up not down. Those voting yes probably thought yeah I get cheaper infinity.
Posted by andrew (Favicon staff member) over 4 years ago
With a chunk more work we can look at the 48% who think price is too high.

But lots of other things to do in the meantime.
Posted by purleigh over 4 years ago
Some of the inconsistency in the results may be due to people on "Market 1" exchanges.

I'm on a legacy ADSL product which had the same pricing where ever my exchange was.
IF the cost increase for FTTC was in the range £5 to £10, then I would consider that to be reasonable.

With the so called "Market" pricing, when I change ADSL product, I will have to pay an additional premium of about £7 because I am on a "Market 1" exchange (compared to Market 2 or 3), and then add £10 for the same product but connected by fibre.

So the £5 to £10 is a fair difference to pay for FTTC, but £17 is NOT !
Posted by andrew (Favicon staff member) over 4 years ago
By definition market 1 exchanges while they are many in number actually account for a relatively small share of people.

So unless we attract a disproportionate ratio I would be surprised.
Posted by GMAN99 over 4 years ago
Also lets not forget this is "BT" Infinity we are talking about and BT is everyone's favourite company to loathe
Posted by herdwick over 4 years ago
@Chrysalis after recent price drop BT Infinity is cheaper entry level than Plusnet.

Talk Talk and Sky have much bigger margins.
Posted by themanstan over 4 years ago
Hmmm... if OFCOM regulates any consumer pricing, then it has to regulate all consumer pricing.
If you prevent only one company in the market from choosing pricing and allowing all others the opportunity to undercut then you can artificially remove customers. This then allows BT to recover through the courts all the lost revenue. Which is not what is needed, more free money.
Posted by Dixinormous over 4 years ago
The arguments on RoI - on the flip side Openreach were working on a takeup of 20% which looks to be an extremely low estimate now and changes the numbers considerably.

Tricky one for sure.
Posted by Dixinormous over 4 years ago
No themanstan Ofcom don't have to regulate all consumer pricing, BT are a special case as they're a vertically integrated operator.

BT sell infrastructure and wholesale services to themselves allowing them to make profit as a group on customers despite selling at retail level at a loss.

The controls on pricing are there to ensure BT can't undercut a reasonably efficient operator by using the integration.
Posted by andrew (Favicon staff member) over 4 years ago
Dixinormous, while some cabinets are breaking 20%, the national average of 10% is not looking too hot, if you are the person who is paying for the roll-out.
Posted by themanstan over 4 years ago
@Dix,

not true on the integration front. OR has its own legal departments,finance, HR, etc... these costs then are recharged to all who buy from OR. Wholesale yes, but not OR.

But, it should be the case that any operator should be able to undercut each other. If one cannot then there market advantage given to all others.

Presumably, all other operators will open their books to OFCOM to establish who is reasonably efficient.
Posted by lockyatlrg over 4 years ago
I like my infinity prices as they are, I don't care if others are whining they're too low.
Posted by GMAN99 over 4 years ago
As far as I know its just TalkTalk that are whinging. I'm sure others like yourself would be none too pleased if your monthly charge rose just to satisfy TalkTalk
Posted by farnz over 4 years ago
I'm one of the people who voted for regulation - but I only want light regulation.

Specifically, I want Ofcom to audit BT's pricing, to confirm that BT aren't cross-subsidising between business units - in other words, that Retail have a gross margin after paying Wholesale at prices other providers can get, and that Wholesale have margin after paying Openreach at prices other providers can get.
Posted by Dixinormous over 4 years ago
@themanstan it's not just me who defines BT as being vertically integrated, it's Ofcom, via the Competition Act.

BT Group are both a supplier of services and a competitor to their customers, therefore vertically integrated.

Ofcom decide reasonable efficiency, there's zero reason to think Sky, TalkTalk, etc, are not reasonably efficient.

@andrew It's very early days yet. Experience in other countries relative to UK's speed of take up of NGA suggests 20% is very conservative and 40% of homes passed by 2016 is mid-range.
Posted by Dixinormous over 4 years ago
@WWWombat:

'"Should Ofcom regulate the retail price of BT Infinity so that LLU providers can undercut even though this may stop BT investing in the fibre rollout further?"'

If this were to be the case Ofcom would have a point in regulating.

The business case for FTTC is supposed to be focused around returns to Openreach, not what % of the customer base Retail capture.
Posted by themanstan over 4 years ago
And that competition act required BT to create Openreach to remove that part of the vertical integration. Hence, why the level of vertical integration is less than there was.
Posted by Dixinormous over 4 years ago
You're thinking of the Enterprise Act, which didn't require BT to create Openreach.

Ofcom accepted Undertakings from BT, Openreach being one of them, in return for waiving referral of BT to the competition committee under the Enterprise Act.

There are no 'levels' of vertical integration; even with BT complying with their Undertakings they are still considered a vertically integrated business. Paper walls do nothing to change this.
Posted by BTfanboy over 4 years ago
Here's gmann99 again running to the aid of his paymaster, if i were you i would wash your nose
The flies are starting to buzz around it.
typical fan boy.
Posted by CaptainHulaHoop over 4 years ago
It's not all about price. Some of the main reasons BT retail has such a large share of FTTC customers are down to being first to market, sky were about 2 years late to the party. Advertising, I've seen far too many infinity adverts yet not one for sky or talk talk fibre. And BT retail are actively encouraging existing customers to move to FTTC. I have friends on both sky and talk talk and neither have been offered upgrades to FTTC or even been made aware its available
Posted by WWWombat over 4 years ago
@andrew
Exchanges in phase 4 of the rollout are running at 15% takeup approaching 3 years.

The take-up curve for phase 8 is following it (except for a slow start, probably due to the bad weather that coincided).

Phase 2 was running slower, at 11%.

From annual results:
"- Phases launched in last 2 years showing
at least 1 ppt increase every 2 months
- Constant penetration growth rate for every
rollout phase - no sign of saturation"
Posted by WWWombat over 4 years ago
@Dixinormous
My point was that the added wording can direct people's emotions. Not that the conclusion was logical.

Anyway, every Openreach prediction on fibre coverage, penetration and income is slavishly prefixed with "Subject to an acceptable investment and regulatory environment".

They obviously feel there is a risk that Ofcom may regulate in such a way as to make the rollout impossible to continue.
Posted by lockyatlrg over 4 years ago
Also BT drilled into peoples minds with a clever marketing campaign saying they was the only provider with their infinity product.
Posted by ValueforMoney over 4 years ago
@GMAN99 capacity and potential rising, costs falling ever since the installation of the first sub-sea cable in 1856. Fibre access has more potential and lower LRIC than copper something BT proved to itself in c1986. Other countries have begun the transition, we now need to begin in Cities, but regulatory and investment regime needs to support Openreach.
Posted by otester over 4 years ago
Just another case of people wanting something for free (or cheaper).

If you try to shaft BT, they will shaft you in another way.
Posted by Dixinormous over 4 years ago
@WWWombat - Lucky that the commercial deployment has about a year to run then it's BDUK really!

They are required to put that kind of statement into their 'predictions'. Any company making forward looking statements has to caveat them properly to avoid getting sued by investors for misrepresentation.
Posted by Keyholder over 4 years ago
yes its far to expensive, lets get bt regulated by ofcom (for what its worth),lets put a halt on fibre roll out and stick to copper network and fall behind the times, lets get every other company to undercut bt so they can use the same network which isnt being maintained no more as bt have just been told off again & are loosing funds... all so people can get a cheaper BB service but at what cost ???

Bt will just charge isps more and more to use their exchanges, equipment, netowrk etc.

Quite frankly any fibre conection(FTTC or FTTP) is CHEAP ENOUGH as it is.
Posted by infinidim over 4 years ago
Lets look at this in business terms. BT Retail sells Infinity as their fibre product. The back end, once you have got through the Openreach is BT Wholesale. Any company can purchase from Openreach/BT Wholesale as BT Retail does. Regulatory BT Retail has to pay the same price as other companies for their base products.

If a company wants to implement it's own infrastructure then they will need to come up with the billions that BT Group has done over the years and that Virgin Media (and it's predecessors) have done for the cable services that it offers.
Posted by BTfanboy over 4 years ago
Works for BT, ignore this prat
v
v
Posted by GMAN99 20 days ago
Proof it was ever needed, I've said time and time again, people in this country want broadband for next to nothing. How can we expect companies to invest if people will not pay the price.
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