More on BT Wholesale price cuts
Monday saw the announcement of the first major price cuts by BT Wholesale since 2004, with these cuts scheduled to come into effect from April 2007, when the magic 1.5 million unbundled lines mark has been passed. Assuming Ofcom approves these changes we are going to now take a look at the impact on the changes, which affect both the monthly line port rental and the BT Centrals that broadband providers rent from BT Wholesale.
The price cuts look small, but once you do the calculations using both the port costs and proposed rebalancing of the CBC BT Central costs the savings to a broadband provider mount up. Currently under the Capacity Based Charging system used by most providers, a single fee is paid for the BT Central component, BT Wholesale are proposing to split this into two, an end-user bandwidth component, and the rest paying BT Central rental price. The proposed prices are shown below:
Remember these prices are only indicative at this time, and in particular the 2008 pricing is very open to change hence why a price range has been given.
In an effort to give people some idea of the effects of the changes, we have done some calculations for a provider with a single 622Mbps BT Central and varying numbers of users. The prices include the line card port costs, based on all the users subscribing to a BT Home product, the rebate schemes have also been allowed for, with a 30% eligible for the rebate in 2006, changing to 65% in 2007. The number of users in the calculations does exceed the session limit for a 622Mbps BT Central in some cases but reflects a real world situation where providers do not always have enough session capacity for all users to log on at once.
All prices exclude VAT at 17.5%
The notional usage allowances assume that all the users evenly spread their usage across a complete month, and thus what providers offer will vary depending on how much of their customers usage is crammed into the peak hours. The allowance was calculated by presuming that a provider rather than passing on the cost saving to its end-users reinvested this by increasing the usage allowance, by having less users on each BT Central.
We hope that service providers do not simply pass on the savings, but rather look at their complete service and consider the changing needs of broadband users. More and more people are accessing video over their broadband connection and this is going to increase, and if providers do not loosen the reins they may find more people leaving than they would like.