'Free' broadband possibly from Carphone Warehouse
It seems that at the announcement of the deal, the free part of the broadband service will apply to the first three months, with a rate of £4.99 per month after this. To qualify for this rate people will also need to subscribe to the companies fixed-line service which has a line rental of £9.99 per month. There are no details on the line speed, or whether any pay as you go element will be involved.
We presume that this deal will only actually be available on an exchange that Carphone Warehouse has its own LLU kit installed at, so the deal will have limited geographical coverage. This may make things interesting for a product that may be retailed in the high street, since if the local exchange does not offer LLU that store will not see many sales.
If Carphone Warehouse does launch the service as described, and it does provide a credible reliable to the major providers like Wanadoo, AOL, Tiscali and BT then broadband for £4.99 and a line rental cheaper than a standard BT line could prove popular. Though it is likely that the big providers are not the ones that will be hurt, generally these companies are not the cheapest now, but they continue to thrive. The providers hit most will be those in the current bargain basement range of £10 to £15 a month. The biggest risk is that some small low priced competitors will try to compete on price alone, and rack up large debts.
Cost wise the basic price from Carphone Warehouse may not be covering all their costs, the cost of a fully unbundled line is £7.83 (inc VAT) per month, leaving the company £7.15, which drops to just over £6 a month once VAT is accounted for. Out of this £6 each month, they have to install and pay for a DSLAM, cost of backhaul onto a network, and employ some staff to sell the product and provide customer support. What will make this price point work is if people actually make telephone calls that generate income.