Broadband price war could threaten providers
The last week has seen Talk Talk and Sky exchanging shots through various media outlets, and a fair deal of speculation that 2006 may develop into a price war. It seems Talk Talk with its current broadband base of 75,000 are expected to take on the larger providers, and from where we are sitting it would seem the target is very much price, rather than technical innovation.
The UK has seen massive strides in the price of consumer broadband since 2000, then you paid around £40 to £60 per month for a 0.5Mbps connection, and £150 to have it set-up. Now most consumers are paying something in the range £10 to £30, and a large number have 2Mbps connections - of course things like fair use, bandwidth usage allowances and a like now prevail, but again for the vast majority they can find a product that meets their needs and is vastly cheaper than six years ago. It seems 2006 may be a turning point, if Talk Talk launch a product that combines phone line rental, telephone calls and broadband for £10 per month using a fully unbundled LLU line then it may have a winning price point.
Of course with a price like this, it is very likely that the other LLU providers will feel the need to respond, and reduce prices. Of course what usually follows is that companies then look to reduce their costs, and this can often mean experienced support teams are shelved, and outsourced but vastly cheaper deals are signed. While the massive providers who Talk Talk may be going head to head with can afford to offer cut price deals for a while, the side effect of this will be the smaller to medium sized providers will try to compete, and along the way we will see many more companies folding. Or worse not investing and squeezing every last ounce out of their networks, making the consumer experience, cheap but very nasty.
So does the UK need a broadband price war? Not really, people seem to be buying it in their droves now, and if the providers are concentrating on marketing and pricing it may mean focus over advancing the technology is forgotten. The UK has been playing catch up for some six years, and has gained some ground. If we see two or three years of price cuts, company acquisitions, companies folding then a hold will be put major investment in the technologies that could see communications services upgraded to cope with the next fifty or more years. In short if the UK embraces a 'free' broadband culture, what company in their right mind is going to invest in rolling out fibre in the local loop?