Broadband prices may fall after Ofcom adjust wholesale charge controls
This gap between the cost of broadband rural and urban exchanges looks set to narrow with the latest news that Ofcom is to make BT Wholesale significantly reduce the price of its ADSL (up to 8Mbps) services by 12% below inflation each year. The hope here is that this will encourage take-up of services in these areas and increase the level of competition between retail ISPs. An additional factor Ofcom raises is that even if an ISP does not lower its prices, it may decide to invest these savings in buying more capacity which would improve peak time performance.
What many people are not aware of is that some years ago Ofcom allowed BT to have differential pricing across the country for its broadband products, with lower pricing where multiple wholesale providers of broadband were available. Strangely only one broadband provider has passed this differential pricing onto its customers, Plusnet.
What is most interesting is that this price drop only applies to 8meg services using ADSL (IPStream Connect Max and Max Premium) on Market 1 exchanges but does not include the BT Wholesale ADSL2+ services where they are present at the same exchange. This may encourage BT Wholesale to continue its roll-out of ADSL2+ to further areas, and further withdraw the older IPStream services at these exchanges. While ADSL2+ offers little or no benefit to those with 5km or longer telephone lines, the extra speed for many can be a welcome boost. For small businesses the extra upstream speed available through ADSL2+ services makes remote working and sending digital material much faster.
There are some 14% of households in the Market 1 definition, with Ofcom suggesting some 3 million homes stand to benefit. Whether a price cut will stimulate more LLU penetration into these smaller exchanges is unsure, previous policy appeared to be to keep BT Wholesale pricing high to ensure LLU operators had it easy in acquiring customers. TalkTalk currently probably has the largest footprint for LLU around the UK, and is still expanding.
Whilst many will look at this as another possible pound or so off the price of their broadband bill, the ever increasing demands we are all making on our broadband connections mean that while some of the price cut may be passed on, some providers who currently provide highly contended services (thus perform poorly at peak times) will hopefully look at improving their quality of service. Oddly, the worst culprits for this practice are the LLU operators who give the customers who have no choice but to use the BT Wholesale network a very poor deal, often charging more and providing a worse service.
Update 11:30am: To clarify, IPStream Connect product range is a variation of the IPStream range, which gives providers the option to pick up traffic at the IPStream BRAS. Smaller providers are often still using the original IPStream system of buying BT Central access components.