TalkTalk has a go at Openreach over line rental costs
It seems TalkTalk has BT well and truly in its sights- today saw the arrival of a press release claiming "BT PRICE INCREASES WILL LOCK MORE THAN 1.8 MILLION PEOPLE OUT OF BRITAIN’S DIGITAL FUTURE". On closer inspection it actually relates to the proposed rise in capped prices that Openreach can charge for various line rental products that was announced in December 2008, and whose consultation period ran out on 20th February 2009.
Some sites covering the press release are suggesting that the price rises may see broadband bills rise by £30 a year, but the reality is likely to be different. TalkTalk is the largest single user of fully unbundled lines (MPF), where the price may rise by £10 a year, and this covers voice and broadband. The more popular form of unbundling is shared LLU (SMPF) where only the broadband is unbundled, this looks set to only rise by 60p a year. Wholesale Line Rental (WLR) is the product that over 5 million lines in the UK use to give people a choice of who they pay their voice line rental to, and this may rise by £4 a year.
Looking at the price changes one can see how TalkTalk may feel hard done by, particularly as the margins are so tight in the retail sector it is involved in and its competitors have slowly but surely narrowed the gap so that the 'free' broadband element is not as big an attraction as at its original launch in 2006. Additionally consumers may have also become more savvy about the difficulties and costs of leaving a fully unbundled TalkTalk service to move to another provider even when outside their contract.
"I conclude that either BT is much less efficient than it should be, or it is exaggerating its costs or it is being allowed to make excess profits by the regulator,"Dr Chris Doyle, Warwick Business School
Is a comment we tend to agree with, but then when you create lots of sub divisions within a large company such as BT and actually have rules where one part of a firm has to behave exactly like a competitor from elsewhere in the industry how can one expect a fine tuned business machine. Some will support the notion BT is making excessive profits, but surely if this were the case there would be little delay in rolling out its FTTC/FTTH solutions, since to do so now would steal the march on a number of small entrants to the market.
Talk is cheap, but as we all make less calls on our landlines, by switching to things like email or using bundled minutes on our mobiles, it comes as no surprise that the people running the network will try to compensate. The same applies to all the calls packages from the myriad of providers out there. If we all stuck to making only free calls the price of these packages would soon alter, but in practice we all forget to use the cheapest method to call at some point in the month.
So the question is, does the public value its broadband so little that a price rise for the telephone line of less than £1 a month will make them give up the telephone and broadband? There is some evidence a few people are doing this, but invariably they replace the services by using mobiles and mobile broadband.
Update 17:30 BT has issued a response to the TalkTalk press release stating a number of points reproduced below.
- The UK has some of the lowest broadband prices and the highest broadband penetration of any European country.
- While other Utility bills have soared, BT's wholesale prices have been at the agreed level or lower for four years. And there were a series of price cuts of up to 60% introduced just last month. These cover some of the principal products bought by Carphone Warehouse and other service providers.
- Any price changes introduced in the future will have to be approved by Ofcom. It will be up to service providers whether to pass these on to their customers or not
- BT is not making excessive profits.
- BT is not exaggerating costs.
"It is astonishing and ludicrous to suggest that people will be locked out of Britain's Digital revolution by BT. The UK has the most competitive broadband market in the world, thanks in large part to the massive investment made in broadband infrastructure by BT."Emma Gilthorpe BT's Director of Industry Policy and Regulation