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Can UK ADSL get cheaper and stay cheaper?
Monday 10 June 2002 16:38:00 by Andrew Ferguson

Has UK DSL reached its cheapest point? We are seeing some offers starting to crop up at £19.99, mainly it seems resellers. This reduces the margins to a bare minimum - how sustainable this sort of price is will remain to be seen and what level of service it brings with it.

What is interesting is if you compare the UK's prices with those of the USA now. The Register ran an item with the average DSL price currently running at $51 in the US, and certainly in the North East Texas area the best I found was $49.95 per month. The UK pricing in dollars is around $33 to $44, so it looks like the UK is under cutting the US a most unusual situation. A large change from just 7 months ago.

Though like most of these things it's not so simple, it's fairly common to find that the installation and hardware costs are waived in the US, but then these offers tie users into a 12 month contract, or you simply pay a penalty fee to leave early. The area the US beats the UK is the downstream speed it's not uncommon to get a 1.5Mbps service for your $50, but this is RADSL in both directions, so you will see variable speeds depending on your line quality, so friends on the same service may see wildly varying speeds - also it's very rare to find a DSL service for home users that offers more than a single IP address, in the UK blocks of up to 8 IP address's are possible which for hobby/tele-worker users is great.

The largest surprise price wise was to venture into a Radio Shack store, they stock DSL filters for a faceplate with a filter and socket for just a phone it was $14.99 (£10.30) and a simple inline filter with socket for a phone was $12.99. Also a lack of DSL hardware in retail PC stores, cable modems were rare but did find one or two.

Now we hear the cries of it's easy to get DSL in the US, well it is if you live in California where over 10% of the country lives, try states like Texas, move out of Dallas and Houston and coverage becomes patchy again just like the UK, generally if the town is less then 20,000 in population then you will be lucky to get DSL.

Interestingly the approach to getting broadband out to the rural areas is taking a turn not unlike the UK, stay in the US for a few weeks and you'll see TV adverts for 2-way Satellite internet access, the costs $99 per month for 12 months and $99 activation OR $580 activation and $99 a month. This is with DirecWay part of the DirectTV service in the US.

The question is now that the UK is down to the same price overall and possibly lower with special offers and promotions where do we go from here? Will the demands on ISP's to ensure users get full speed downloads the majority of the time force them to re-assess the costs their service and start offering two tier service - will some of the ultra-cheap services just get snowed under and disappear the same way that unmetered dialup providers used to? Certainly I wouldn’t be surprised to see more ISP's adopt pricing not unlike Karoo - i.e. bargain basement price with restrictions and a few pound more gets you total freedom.

The only area the UK is behind in badly is the price differential between the basic access service and the higher speed 1Mbps and 2Mbps services. A premium wholesale service priced for home/hobby users with a 1 or 2Mbps speed and a contention ratio of say 30:1 would go down well with a lot of users, if it was in the £50 to £80 retail bracket.

To conclude we’ve seen massive drops in the price of ADSL in the UK in the last year, but also large drops in the margin available to ISP’s. Whilst this has meant that the economies of scale can be brought into play from the much larger take-up – does it mean ISP’s are pulling the belt tighter like a lot of the economy and perhaps things like customer service/support are starting to be affected?

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