NEWS BT's decision to hike the cost of some of its wholesale business-broadband packages has caused anger and alarm among many of the UK's smaller internet service providers (ISPs).
Over 70 of these ISPs have banded together into a new organisation called the UK Internet Federation (UKIF) in an attempt to fight the price rises. UKIF has argued that the situation flags up the lack of effective competition in the UK broadband sector.
"Since BT Wholesale has 90 per cent of the DSL market, Ofcom is at best ineffective and at worst supportive of the monopoly it is charged with regulating," said UKIF spokesman Stephen Dyer, according to ADSLGuide.org.uk.
"Allowing BT unconstrained control of the wholesale price of broadband will severely hinder the development of the internet industry as a whole, and can only serve to restrict consumer choice and raise end-user prices," Dyer added.
As previously reported, BT announced last week that it was raising the cost of several of its wholesale business broadband packages - known as IPStream - by as much as 30 per cent. These products are bought from BT by ISPs and then resold to individual businesses and home users.
ISPs have few alternative suppliers of wholesale broadband products apart from BT. Ian Fogg, European broadband analyst for Jupiter Research, said that this means that price rises for BT's products have a direct impact on these ISPs.
"A slight movement in the wholesale cost can damage the business model of these ISPs quite dramatically," said Fogg.
According to informed sources, BT had to make these price rises because Ofcom will soon rule that the telco has been pricing its various broadband products unfairly.
The regulator is expected to rule later this summer that IPStream products have been too cheap relative to Datastream - a separate product that rival operators can use to compete with BT Wholesale to offer their own alternative broadband products.
BT has declined to go into too much detail about its motivation in bringing in such unexpected and unwelcome price rises, but it has said that the move was made "in order to meet our regulatory obligations".
One of the major factors behind the current boom in broadband take-up in Britain has been a sharp drop in prices. Some ISPs, including Entanet and Zen Internet, have already said they will not pass the price rises onto consumers. This, though, begs the question as to whether other ISPs will also be able to absorb the rises without risking financial ruin.
However, Fogg points out that these IPStream price rises are just one factor in a broadband market that is moving very quickly at present. Local-loop unbundling and Datastream prices both dropped recently, and could fall further.
"We're in a period of change at the wholesale broadband level."
"I would expect the processes and prices of a range of broadband services to change over the next few months. This isn't the end, it's just another step," Fogg said.
Graeme Wearden writes for ZDNet UK
Comments
There are 4 comments. Join the discussion
1. anonymous
The cost of Broadband in Britain is fantastically expensive. In France broadband costs about half what it does here. All we get from the market monopolist is that Britain has a competitive market (impossible under a monopoly!) and the regulators nod in agreement. We close our ears and shake our heads in disbelief. While BT continues to block progress for its own ends, the telecommunications infrastructure in the country will continue to slip further down international league tables.
2. David Jones
Just be thankful you're not in Australia. Internet access here is years behind even the UK in terms of cost and quality. We have a similar monopolist situation with Telstra compounded with demographics that are enough to make you shudder in terms of providing telecoms services to market.
3. royston
bt is sloweing down everything as usual by tacticle methods. there is definitly a monopoly going on here. its the business olympics with bt getting the golds as usual, and as usual by unfair means!..... hurry up for gods sake and unbundle everything and let everyone have a fair crack of the whip. the bad ones will naturaly fall by the way and the good ones will win....but watch them just in case they get swollen heads through stardom with the populace. pretty much like bt has been. they are too damn expensive .look at some of the eastern countries, they have voip and proper 4-8 mbt speed as standard. we as home users are stuck with the avaerage 512kbps....no comparison so we lose.......this country is always the same(uk) we cant even keep our sportsmen up an running we constantly let the people down in the eyes of the world...i am deeply ashamedof my country. we are behind in so many things when we used to be ahead
4. Chris Goodman
The Regulator seems to be failing to understand or appreciate that broadband is no longer a minority facility service, it is now a major part of the information and communication service and infrastructure. The high costs of two or three years ago may then have been reasonably justified in the small customer base. But today, with broadband serving a mass market, there is no genuine reason why the present high charges still prevail, be it cable broadband or ADSL on the telephone line. The Regulator should use his powers to drive down the costs and reduce considerably the cost of bandwidth to the consumer. Everything else in the ICT spectrum is dropping in price and gaining in quality and service and there is no reason why provision of broadband services should not follow this trend.
I envisage that the coming year should produce an uncapped 1Mb broadband connection for around £10 per month to the consumer, with either further price drops or bandwidth increases in the following years, thus enabling the scope of ICT and the internet to widen for the domestic user.