Yorkshire Post highlights losses for Digital Region
The fibre to the cabinet network provided by Digital Region in South Yorkshire, went live in late 2009, but it seems according to a news item published by the Yorkshire Post that the project is not getting the take-up needed to make it self-sustaining.
The original projects aim was to ensure a 97% of premises coverage figure at a cost of £112m, but this has since been scaled back to 80%. Even with the reigning in of the ambitions it appears that revenue of £167,000 was overshadowed by losses of £9.2m in 2010-2011, resulting in a "material uncertainty" for the project to continue. The original business plan had the scheme starting to make a profit in the same year, to give the project more time to turn the corner the RDA Yorkshire Forward is providing a £4m guarantee to give the project breathing space.
The problems facing the project are several, it started to go live just at the point when BT Openreach started to develop its own FTTC product, and Virgin Media that operates in the area too has vastly increased its product speeds. This means the project has faced stiff competition for consumers business. Secondly there are no well known names signed up to provide a retail service, names like Ask4, Origin, RipWire, unitel and littlebigone may be known to broadband evangelists, but the average consumer will know little about them. The cost of the service, setup fees of £70 to £90 are likely to dissuade people from switching from an existing broadband service, particularly when they are used to free migrations between providers, add to this the plethora of services available for £5 to £10 in the more densely populated areas that Digital Region operates in and one can see the reluctance in signing up.
Low take-up figures don't just affect Digital Region, with Virgin Media around 70% of customers opt for the lowest priced product, even for BT Retail the take-up of its Infinity product has been low. This should come as no surprise, the same happened in 2000/2001 when broadband was new and more expensive than unmetered dial-up deals, and many saw little need for broadband speeds of 0.5 Mbps.
The question for Digital Region is whether it can make its products attractive enough price wise to compete with the low priced deals from Sky and TalkTalk. Removing the upfront setup and hardware costs would encourage people to at least give the service a chance, as would ensuring the wholesale pricing can support a low price, slower package that at least increases take-up and once people are connected as they sample improved speeds and service reliability the up-sell to faster and thus profitable packages may be possible.
One problem with the current 80% target, is that the area may end up with a BDUK project working to serve the remaining 20% of properties and as this is open to bidding, there will be scope for yet consumer confusion due a third set of retail options in the area. In terms of take-up the irony is that those in this last ten to twenty percent of the broadband population might actually have been more keen to sign-up to something like Digital Region.
Update 17/1/2012 5:45pm The BBC is reporting that Rotherham Council has started an investigation into why the take-up of the service has been so low. This should take six to eight weeks, though just as with the number of people signed up to the service, the report seems unlikely to be public, as it might help competitors to the Digital Region project in the area to make further commercial inroads in the area.