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TalkTalk names price it thinks it should pay for fibre services
Monday 14 October 2013 10:02:45 by Andrew Ferguson

TalkTalk only recently reduced the price of its entry level broadband service, with the result that it has made its fibre based (FTTC) available for £12.50 per month. In an interview with the Financial Times, Dido Harding CEO TalkTalk has made it clear what she believes the wholesale price should be for the base line product they buy from Openreach.

Dido Harding has nailed the price they want Ofcom to mandate on Openreach as £4/month for a GEA-FTTC service, if this is assumed to be the 40/2 product this is a large drop from the £6.90/month (+VAT) that the service currently costs. The 40/10 costs £7.40/month and the fastest product is the 80/20 service at £9.95 per month from Openreach.

TalkTalk has been calling for sometime for the entry level price to the FTTC (and FTTP where it is the only Openreach fibre service) be reduced significantly as they feel there is a margin squeeze at the retail end of the market with BT Retail. The big unknown is whether the current TalkTalk pricing for their fibre products is gambling on Ofcom forcing a lower price, or the margins are just paper thin.

The pricing for the GEA fibre products is due a review as the monthly rental has been unchanged for four years now and when the price was determined there was a plan for the more expensive to roll-out FTTP products to be available to more premises. The scaling back of the GEA-FTTP roll-out may give scope for a price reduction.

The dichotomy is whether to push the price down and increase take-up and thus push the average UK broadband speed higher and higher, or keep pricing relatively high (for the UK) and stick to the accountants previously planned payback schedules. As things stand the psychological target of £9.95 for a basic FTTC service is almost within reach.

The problem now for TalkTalk is to convince Ofcom to act, lowering the price of 40/2 service to £5.50 per month as a compromise is probably what will happen. When bargaining you always start off at the lowest price and work towards a consensus.

One thing we would like TalkTalk (and Sky too) to do is offer the GEA-FTTC speeds to those in areas where Openreach has its FTTP network as the only option, as currently for the average consumer BT Retail is almost the only visible option currently.

Comments

Posted by herdwick over 3 years ago
It's interesting that Talk Talk seek to make extra margin from fibre whereas some other providers don't. Hence TT add on £10 per month for fibre, a level at which they make more profit.
Posted by ian72 over 3 years ago
Surely if the wholesale price comes down then BT Retail could lower their costs. How does forcing wholesale costs down mean that it will fix a margin squeeze unless you also legislate on what BT Retail charge for their service? And if you can legislate BTR charge then why not just make them charge more if that is the issue?
Posted by herdwick over 3 years ago
I don't really follow their argument, perhaps it goes along the lines that BT Retail can afford to make a loss or smaller margin as elsewhere in the plc Openreach will make up for it.

But it doesn't really make sense as Openreach get the same either way. If it's a complaint about the cost of FTTC then it would be simpler to say so - ie Openreach are making too much - though it won't do much for increased coverage etc or thr BDUK projects if the revenue is cut.
Posted by Dixinormous over 3 years ago
The Openreach price for SFBB isn't regulated. Just claiming that it's too expensive won't achieve anything.
Posted by ScubaGirl over 3 years ago
There was some chatter that Sky was looking to gain access to the Fibre cabinets so that they could offer their own connection speeds.

IMHO this would open up the market considerably more and make things far more competitive.

As for supplying FTTP, this is currently quite expensive (installation costs are high) and many people won't be going for it. However I do agree that the main ISPs should all be able to offer FTTP as a standard part of their product line-up.
Posted by andrew (Favicon staff member) over 3 years ago
In the areas where open reach has it is Fttp product and no FTC option the costs to the provider are identical to fttc
Posted by vicdupreez over 3 years ago
Why is there even a 40/2 service from Openreach? It should all be universal, and the ISP should apply the speed... It should also be a fibre to the home product if you want to use fibre in the name AT ALL, but again... thats just me...
Posted by chrysalis over 3 years ago
I simply see it as talktalk want to trash the fttc market like they trashed the adsl market. They would sell fttc for a fiver if they could. Ofcom would do well to tell talktalk to take a hike, its hardly going to go down well with bt shareholders if a few years after rollout they forced to cut payback.
Posted by graybeard over 3 years ago
That is good news and justifies my wait and see for cheaper high speed broadband. £10 per month is , I believe, the maximum most people will pay. After all many people do not actually "need" higher speed. In my case I have 12M now. However I would consider a n upgrade for £120 per annum.
Posted by dragon1945 over 3 years ago
Talktalk phoned asking if I would like Fibre for an extra £10 per month. Reasonable? Yes - BUT - Fibre has not been installed here. The salesman insisted that we had Fibre according to their map. Fibre was installed to a Royal personages residence from the Exchange to his door. That's about 2 miles away. I used to get 2.1 MB but now it's usually 1.7MB. I don't have HRH added to my name so get no help. The 50 odd year old copper cable needs replacing as we get dropped calls.
Posted by graybeard over 3 years ago
During my recent talk to Talk Talk sales they insisted that their upgrade involved running a new fibre optic cable from the FTTC cabinet to my house - for that £10 extra a month. However the article above indicates prices should be coming down and getting more reasonable. For most people the quality and length of the copper to the FTTC box will be important and the way they sell the upgrade as if you were going "all fibre" is not helpful.
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