Has BTs price cuts killed off the fledgling DataStream market?
BT as a group has often been accused of only reducing prices when it feels threatened in a particular market sector. The recent BT IPStream price cuts appear to be another example of this sort of action. The BT Datastream product with In Span Handover was just entering a rapid growth phase, THUS is using it to provide low contention business products, with Internet Central, Nildram, Bulldog all using it provide a consumer based 1Mbps or 2Mbps products across the country.
The BT IPStream price cuts, for example on the 2Mbps service, from £80 to just £38/month has squeezed the price range down for any other 2Mbps product options. The standard retail price for the ISPs offering 2Mbps at 50:1 contention is between £40 to £60, which means these are now looking over contended and over priced. For a 50:1 2Mbps to appear attractive it would have to be a lower price than any 20:1 service, currently the retail price for 2Mbps 20:1 services start at £60. This means that a consumer friendly price for a 50:1 2Mbps service needs to be around £35 to 45 including VAT.
Some will recall a week ago, that BT Wholesale offered an olive branch to its service provider customers and offered an 8% price cut on BT Datastream products, unfortunately this was only for the end-user side of the product which costs a mere £8/month. The bulk of the costs in offering a BT Datastream product are the virtual paths that run from each exchange to wherever the service provider takes over. These have seen no price cuts at all, which is totally at odds with reductions in BT IPstream products. Cuts in the virtual path pricing in line with the IPStream Office range would seem to be what is needed. So far Oftel has just said in its early comments on this issue that it is looking into it, lets hope that this does not mean a six month wait for the next report.
Guy Bradshaw, from THUS has the following to say on this topic,
"The recent price cut for the Datastream End User Data Path (EUDP) is relatively insignificant when you consider that it only represents an 8% reduction, compared with the corresponding 50% drop in IPStream Office charges. The other vital cost element is the charge for the Virtual Path, for transport from the Digital Local Exchange (DLE) to the ATM interconnect. When you also factor in this cost, the 8% saving is further diminished compared with IPstream. The new volume discounts only apply to the EUDPs, so there is no benefit to be gained from achieving critical mass as far as the cost of the Virtual Paths are concerned. Fundamentally, both the EUDP and VP costs are essential to the Datastream model. Until there is greater guaranteed parity between the BT's pricing for IPStream Office and Datastream, the alternative network providers will always be in the position of having to anticipate BT's pricing strategy, rather than wholly focus on driving innovation for broadband development."
The cynics are saying and we would agree for once, that BT Wholesale is trying to ensure that the BT Group market share in the retail sector remains as large as possible, and is covering for BTs retail group until such time as BT Wholesale has its own Home 50:1 1Mbps and 2Mbps products. The service providers and consumers need Oftel/Ofcom to act now, not in 6 months time. If the Datastream market is not allowed to grow, we may never see LLU take off within the higher end consumer market place. Why does it affect LLU? Because Datastream is a half way house, it uses the BT Wholesale exchange infrastructure, but gives providers a near LLU level of control on the data. The next logical step once a provider has enough Datastream customers is to install their own DSLAMs and start to offer more speed variants than BT Wholesale.