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Flash bang wallop - what a photograph
Thursday 20 June 2002 10:55:00 by Andrew Ferguson

Some press releases are talking of flash points and others of trigger points, some industry bodies say 300 users per exchange is economically viable, others say 40. Who is right? Who is wrong? One common conception is that very few press releases talk about the mix of business and home users, or have attempted to relate what they think the costs are to BT Wholesale.

It appears from BT's Press Release material that it has no desire to enable any more exchanges until it is guaranteed to get its return and is currently looking for a 3 year return on the investment. BT cannot seriously expect to get the levels of pre-registered demand in an area where very few people have seen ADSL working, the people who will pre-register are the classic early adopters, the average consumer simply will not bother until they've seen the technology working somewhere. If BT cannot afford to enable any further exchanges or risk it taking more than 3 years to break even, then perhaps a couple things will have to happen, the price may have to go back up or financial help be provided to BT or another broadband provider to assist in the capital costs of getting broadband to an area.

From data taken from a Silicon.com article, Ovum has suggested that just 40 users paying £30 a month over 3 years could break even on an exchange, so if the BT Wholesale price stays static in the UK that would be ~80 users paying £14.75 each. Interestingly this is from a survey of global service providers, which means that other costs may well be lower - the classic problem of the fact that everything seems to cost more in the UK raises its ugly head.

If you work from the Easynet numbers for LLU, which Ovum also give, figures of 20 businesss at £3000 each per year or 100 residential users at £30/month are given. If you take these figures and work on the BT assumption of break even after 3 years, you end up with an exchange break even sum of £180,000 and £108,000 for busines and home users respectively.

Now, obviously to anyone who knows BT Wholesale prices they aren't getting anywhere near that money from each user, a maximum of £80/month from a business DSL line and £14.75 from a home user. Do the sums and the number of users start to look strangely familiar at 62 business users or 203 home users.

Everything is suggesting that unless BT can produce some solid data as to why some exchanges need double the demand of other exchanges, then BT needs to look seriously at how much it is paying for services, both internal and external. Do some exchanges really cost nearer £0.5 million to enable? Back at the start of the rollout perhaps it did, but in BT's own words, advances in hardware has drastically reduced the costs - line cards can now support up to 30 users.

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