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back to article BT wins pricing control over faster broadband

BT has convinced regulators to allow it to charge rivals whatever it wants for access to its forthcoming £1.5bn fibre network, following an intensive lobbying campaign. Ofcom said today that BT Openreach will have to offer rivals equal access to the network, as it does to existing infrastructure, but price controls will be …

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Flame

risk?

bloody risky that, of course the internets could fall out of favour at any time and leave BT with a load of unused bandwidth looking really stupid.

ooh I am sarcastic today.

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Ofcom allows BT to milk the competition

Ofcom is a joke.

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Paris Hilton

Twice damned rural user

... So as well as being disadvantaged by having no prospect of LLU in my 7000 line exchange, I am to be further screwed over by BT's Predatory pricing while OfcoN meekly stand by and allow BT further abuses of exchange monopoly. What a farce regulation is in the UK.

Paris cos even she isnt as thoroughly screwed as those of us on a market 1 exchange!

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Stop

So much for competition

Lets see how long competition lasts when BT artificially exagerate their costs to third parties.

Who's going to pay more for a worse product?

Ofcom are a complete waste of space.

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Paris Hilton

Fuck me Gently !

But do fuck me ( All ) nevertheless!

Even Paris would know when she's being shafted.

Goodluck Britan.

BTW, do not forget the usage caps and fair usage policy, even on resellers!

Extra bandwidth ? my ass.

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Anonymous Coward

OFCOM=chocolate fireguard

or some other equally useless thing

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Has anyone tried private investment?

I say this because there is a honking great BT building less than 2 miles from my home but my exchange is 6 miles away. How much does it cost to run fibre for 2 miles? Could my village gang together and get the cables laid ourselves? And then how do we persuade BT to connect us, and on what basis? There isn't a snowballs chance in hell that it'll happen by 2012 otherwise.

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@mighty Spang

Ahh that just leaves me more elbow room :D

dont like the idea that BT will have a bigger monopoly than they already have !!

anyway i live in horsham, 20 miles south of gatwick and the only exchange i know of is in the town bloody center !!!

Rural areas only my Ass

were getting screwed in the towns as well !!!

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So how are they are managing power?

Fibre to the home needs a power supply at the home end or a power cut means no phone.

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Go

Monopoly?

I would have thought that a fibre installation would be new wouldn't it - not on existing infrastructure?. I fail to see now that is an abuse of a monopoly. Why shouldn't BT be paid back for installing it?

After all, all I want is a fibre based internet connection (like most of the rest of the world) and not have to go to Virgin. I'd rather have an infrastructure in there that allowed other companies to provide.

Perhaps Ofcom should allow other companies to use the existing fibre network that is Virgin after they have spent to put in the fibre. After all, they currently are the ONLY cable firm in the UK.

I just want it sorted so that they can start laying it down.

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Coat

Rural connectivity

How about Fibre to the postoffice (FFTPO) and then wireless connections from there, monthly subscription helping to keep the postoffice open!?

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exchanges...

@Lionel - http://www.samknows.com/broadband/exchange/SDHRSHM

There is an exchange in Horsham, and quite a few services running through it.

I'll be happy just to get a semi-decent connection, just escaped from VM's adsl offering and boy, what a shower of w$%^*£s they are...

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Boffin

2012 - LAME!!!

Thus laid it's network in 2007, C&W now own that network, plus their own, covering every major city with high speed broadband, linked to Livingston in Scotland and Bracknell... BT are way behind but they hold the residential monopoly so we only ever hear about them...

BTW, Demon broadband is switching over from BT's lines this year to the C&W network, so you might want to consider that move

(no name, my boss would be pissed if he knew i was posting about the company)

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Maybe problematic, maybe not

Looking on the optimistic side, if OFCOM actually do their job it should work out ok due to this statement...

"Ofcom said BT Retail must be treated without favour."

Hence BT wholesale can charge whatever it wants but BT Retail will be paying it too. Anything else would be treating with favour.

This is exactly how it should be. You risk billions of your own cash then you can charge what you like for usage. The bit about parity between BT Retail and other wholesale clients would be because the majority of this roll out will be making use of the final copper loop and it's link back to the exchange - the bits provided by the tax payer.

FTTH fit-outs become a little harder to justify sharing although are monopolistic in nature - you're unlikely to have 5 competing fibre links running to your home. I think there is a valid argument for this to be provided and owned by the State. Stick this asset into a UK entity along the lines of Oz's future fund (to prevent history repeating itself vis-a-vis privatisation) and let it reap the rewards. Oh, and make sure all the State is doing is providing the pipe - no monitoring thanks.

Bloody unlikely to ever happen though.

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Unhappy

storm in a teacup

What is the point in FTTH when the backbone network is already saturated at times? It will make no significant difference to the video enthusiasts that they can download a file in 1 minute instead of 10 minutes, there's only a finite number of hours in the day to watch it anyway!

The real need is to upgrade the rural areas, exactly what is NOT being planned. That's where ordinary telecommuting folks already suffer with 1Mbit/s or less. Bring back the Universal Service obligation, OfCom should make them get *everyone* to 10Mbit/s before they upgrade anyone to 100.

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Stop

Not always the nearest exchange

i've got a friend who just got a broadband connection installed in Glasgow. her local exchange is a 5 min walk from her house but instead she's connected to the Barrhead exchange which is 3 1/2 miles away. why doesn't thew government take over BT Wholesale and lay the fibre network themselves and it would mean the network is nothing to do with BT

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Anonymous Coward

Not allowed to show favour to BT Retail

Okay, so BT Openreach will be able to charge what they like to other ISPs, but aren't allowed to show favour to BT Retail.

So they could, in theory, choose two or three other ISPs (one of which is BT Retail) and give them a significantly better deal than anyone else. In that way, they're not "favouring" BT Retail as other competitors will also be getting the better deal.

However it's an abuse of market domination as they will effectively be making other ISPs much less of an attractive offering for consumers and shareholders, thus potentially reducing the number of competitors in the market. They could also choose lesser competitors without the sales/support infrastructure they have to give the lower prices too.

Have OFCOM really thought this one through? BT still very much have a monopoly and are in a position to abuse it. I'm not saying they shouldn't be rewarded for investing in the market - but OFCOM should review and set appropriate price controls rather than removing them totally.

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Pricing

As this will be competing with existing copper loop (including LLU) and cable networks then it will have pricing competition. Yes, you can't get 40mbps out of an existing copper loop to the exchange, but if the premium for faster speeds is too high then it just won't sell.

People also need to be aware that this is all still subject to the various Competition acts anyway - if it was significantly underpriced, then it could easily fall foul of the opposite issue. That is predatory pricing. Imagine a case where a 40Mbps service competed very strongly with LLU offerings at less than half the speed. The LLU operators are not going to be too happy if their investment is undermined, and if there is a hint of predatory pricing, then expect the competition authorities to be called in.

It is also a wholesale service (but an OpenReach one - not BTW), but LLU operators are still going to wish to maxzimise their part of the total cost package.

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£29 Billion

£29 Billion for every house to have a dedicated fibre connection? Sounds like a bargain to me... how much cash was throw at banks and the iraq war?? If this country was completely fibred up it would be a massive boost to the economy. Why aren't they doing this?

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Flame

@So how are they are managing power?

Simple, a requirement (from BT) to have FTTH will be that they insist a power socket is provided within 1 metre of the proposed location of the FTTH box. (i.e. they're not!)

If there's a power cut you will have to use your mobile phone won't you!

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Stop

Other options

Lots of criticism here, but what's the alternative? State investment ? Virgin aren't going to invest at the level BT can afford to. Other favourites (e.g. Zen) are so minuscule they stand no chance.

BT need incentive to invest, the "without favour" restriction is the best OfCom could do. We could ask the government to do a "Railtrack" on the infrastructure and change the competitive landscape but that is a major step and the government are cowards (too concerned about the opposition and cries of "Old Labour").

I don't work for, and have never worked for BT but use BT Broadband and have had good service from them; I'm more concerned about Phorm and will leave them for that issue alone. I get 5Mbit/s (on a published 8Mit/s rate) and I'd be happy with 20Mbit/s by 2012.

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Alert

Better coverage of rural areas

I hope they'll be able to improve coverage to rural areas. Madness that anyone who lives more than a few KM for an exchange can only get 512k broadband. It's hardly like we're talking the Highlands or something here, you can be within walking distance of a town and as far as BT are concerned you are in the middle of nowhere!

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Re: So how are they are managing power?

Having used Comcast and their digital voice system in the US, what you get is a termination box with a built-in battery backup that should last for several hours. After that you're on your own.

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Black Helicopters

You will opt in to Phorm.

BT Whoresale offer access to their flashy new network at a premium price to all ISPs, including BT Retail. The smaller ISPs can't afford it so get marginalised - BT Retail and the other big ISPs win. With less competition in the market, the consumer faces higher prices and no alternatives if the remaining ISPs all decide to recoup some of their outlay by selling all their traffic to Phorm, which BT can help them with. And OFCOM/UK.gov won't interfere as it adds to the surveillance society they're so desperate to create.

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Anonymous Coward

BT must be split up

BT has need to be split into 2 companies, wholesale and retail. OFCOM have been pacified by BT each time this is raised. ISP in general would prefer this as well as the perception is that rightly or wrongly that even though in theory it shouldn't happen BT Retail gets a significant advantage.

So BT threaten to remove investment? That would be put as another case to split them, an purely infrastructure/whole sale company would have it in their interests to invest.

It's this large BT group which is the problem.

OFCOM, ISP having been saying it for years... it's time to break up BT.

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g e
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They're already laying it...

From what I've seen which is Openreach, BT and Optilan vans all over my village & Rugby in general. A LinkedIn contact told me earlier that they're installing an all-IP fibre backbone into a new softswitch.

So why did my ADSL sync rate actually DROP 30% ... ?? Now I gotta try get someone to reset my DSLAM connection... ho hum.

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Alert

One reason why they should bother?

They are only going to insist on lots of stupid penalties to wholesalers and also follow the government dictats of ensuring that "Ph**ked" is allowed to run riot over the new network, gathering data on everybody. Additionally they won't give anything for nothing so you know that having seen the ADSL lines get maxed out for cheap prices, they will automatically put in traffic shaping all the while advertising a lightening fast BB service ( "subject to fair use" )!

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@Mark

Yes they have to charge BT Retail the same wholesale price, that will fix all the monopoly worries won't it.....

Lets stop and think about this, we Have BT Group which owns BT Wholesale and BT Retail.

Now they could charge a wholesale price of £200 per MBit making it uneconomically viable for everybody. However does BT retail care? BT Retails buys at £200 per mbit and sells it to customers for £1 per mbit making a loss of £199 per mbit for every line they sell. BT retails end of year look pretty horrific as they make a big loss, but BT Wholesale make a killing of £200 per mbit.

BT group take the loss from BT Retail and absorbs it with the profit from BT Wholesale making an overall profit of £1 per mbit. Excellent, all competition crushed, everybody on BT lines and they have followed OFCOM's instructions to the latter. Give it a couple of years and everybody will be using BT and the competition will be dead and they can lower the wholesale price to something reasonable, or just whack up the cost for end users who are now stuck with BT....

What if competition starts up when they lower wholesale costs? No problem, we just whack wholesale up to silly prices for another year and watch the competition go out of business and then drop wholesale prices back down again, rinse and repeat ad infinitum.

Still not worried about the monopoly that is BT?

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@Not allowed to show favour...

BT still very much have a monopoly and <snip>are in a position to</snip> abuse it.

|

V

BT still very much have a monopoly and abuse it.

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Anonymous Coward

Fibre

BT should have laid fibre years ago. Instead they stalled and eventually gave us ADSL (which is always a stop gap technology).

When are they going to offer real competition in the UK?

BT are a really slow monolithic giant and do this country no good. If you've ever worked with BT you soon develop a disliking for them.

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Anonymous Coward

@AC - Rural connectivity

Fibre to the post office? That would only work if uk.gov hadn't allowed the Royal Mail to close all the rural post offices.

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Faster Broadband Hyperbole

Why will it be "a massive boost" to the economy?

Access to reliable connections (of a reasonable speed) enables email and interaction with suppliers of goods and services. This need can pretty well be served via uncontended 64k ISDN links, rather than nominally 2Mbps+ links (assuming that there are not pages of flash animations).

Once you have a reliable connection (of almost whatever speed) then surely the economic impact of increasing speeds is minimal.

Where high-speed connections with decent QoS would make a difference is in official digital content delivery (e.g. the media, TV, VoD, VOIP, iPlayer, software), and also in unofficial content delivery (e.g. P2P, Torrents).

This would only affect a relatively small part of the economy, such as the paid-for content providers and the ISPs/telcos (and maybe advertising brokers/market intel firms like Google/Phorm etc.).

Unofficial content delivery (as it's all free) will not have a positive economic impact, and at higher speeds may be negative as more free stuff could then be downloaded more quickly.

The economy dependent upon delivery of Physical goods and services would be unaffected (assuming that their existing connections are reliable for transactional interchange).

Why then is faster broadband going to be such a magic economic bullet? At least the railways and roads can move physical goods from A to B.

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Anonymous Coward

@AC

The pricing has to be non-discrimatory. That is not favouring any service provider over any other. It's all covered by the Competition Act anyway.

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Anonymous Coward

@Mark

There are plenty of people here who need to read up on the Competition Act. Companies with "Market Power" are simply not allowed to make a profit on the Wholesale charge and take a loss at the Retail end. Making comments is one thing, but at least do a little bit of basic research first. The fact is that no shareholder or bank, especially in the current climate, is going to finance billions of pounds of investment without there being at least a reasonable chance of making a return. The goverment is hardly likely to go around investing in this when they have banks and other industries to bail-out and a montain of dept the size of the Eiger to look forwards too. The reality is that network investment is going to remain a private sector matter with a tiny bit of state investment, whether that's mobile, broadband or whatever.

As for those who expect their rural locations to be upgraded (and, presumably, at the same price as towns), then you need a dose of economic reality. As long as roll-outs are commercially driven, investments will go to the places where you get the best chance of a return. That's why LLU, cable and this FTTC rollout will go to urban areas first. Providing the same facilities to more remote, less populated areas at below the cost of provision is called a cross-subsidy. The regulatory framework, as it currently exists, does not allow for such a cross-subsidy as it is very much orientated at pricing the infrastructure are the lowest level possible. There is simply no "fat" for such a cross-subsidy. As it happens your copper loops are cross-subsidised by towns as that 10km of copper loop connecting you to the exchange over sparsely occupied poles costs a great deal more to provide and maintain than it does to supply a 1km loop to a densely occupied suburban area.

Frankly, if high speed Internet is the most important thing in your life, then you are in the wrong place. You get the advantages of less congestion, cleaner air, lower price housing, peace and quiet but forgo other things like fast rail, good public transport and the like. Life is a balance - you can't have everything (unless you are Fred Goodwin). Things will get upgraded over time, but that's the key - time. You want a fast pace, then move to a big city.

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Stop

simples

uk.gov start investing in the countries future.

Power

Rail

Telecoms

When the future comes we actually have some assets worth something....as much as i hate to say it, like the french! We could even sell things like power to neighbouring countries.

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MnM

who would you like to do it?

BT? Virgin? Gov?

Out of these three options (any others?):

3rd Virgin. Stardust has failed to ice this NTL turd. Shudder at the thought of NTL memories of old. I would not want them responsible for this at all.

2nd Gov: would be great if they could do IT, what with it being the 21st century and them responsible for running the country. But they're at best a purchaser, and a bad one.

1st BT: by elimination. They are at least now used to running a wholesale operation, which I don't think Virgin would take to well.

I'm also against having streets ripped up more than once to get this stuff laid.

One other thing. What's the point of the increased speed? I mean what's the killer app? Real world (London) 8Mb/s ADSL gets you up to streaming in moderate resolution/quality, when contention is within bounds. You could prob do an awful lot by reducing contention on 8Mb/s, and that wouldn't need any new infrastructure. What will 40/60 give, and will it be enough of an improvement to make it worthwhile?

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@AndyC

ohhh thats the one im using !

I will be bookmarking that for when i move house !!!

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High Fibre diet

"BT should have laid fibre years ago. Instead they stalled and eventually gave us ADSL (which is always a stop gap technology)."

Nah, BT got pissed off at having to let everyone else use the network they put in and were so heavily restricted it wasn't worth them even bothering.

Why all those who moan about BT networks aren't clamouring for the existing fibre networks to be made LLU I have no idea. Maybe y'all just want to moan and not press for useage of the kit that's alread there.

(BT were able to transmit telly down copper pairs back in the 1970's but the Tories killed that one off. )

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Well I Got A Question Through

Q. Do Ofcom have any plans to encourage infrastructure competition in the UK rather than retail / resell competition only? I'd be interested in how BT and Ofcom call 40Mbps 'super-fast' while other countries are deploying 100Mbit and 1Gbit.

From @ignitionnet

A. The plans we have set out today on superfast broadband ensure that there is scope for wholesale competition - which will offer flexibility and scope for innovation as well as ensuring that there is scope for further infrastructure upstream should companies wish to invest in competition of this kind. It's important to keep both forms of competition available as we believe both will be important to a successful superfast broadband market in the UK. While the next steps will see much higher data rates, around 50mbps, we expect to see development beyond that in the future to higher speeds.

You know we're in a fantastic state when Ofcom are kissing up to BT over offering 40Mbps while various other places are merrily rolling out more than double that speed.

BT Openreach need to be split from Wholesale / Retail, we may actually see a company more interested in infrastructure than shareholders. This is the company offering a measly 1.5 billion on 'super fast' broadband while happy to piss away more than that in a futile attempt to prop up this laughably run company's share price through share buybacks and dividends.

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Waste of resources

56kbps is enough for anybody.

Where is all this glass coming from anyway? Not off my beach, thank you.

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Anonymous Coward

@Fibre to the post office

That's a really good idea, why doesn't your village club together and lay its own line to the town that it controls and maintains, doesn't have to go to the PO..

Oh, that's right, you want the rest of us to pay for it.

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Boffin

£29bn for fibre everywhere - horseshit

£29bn represents digging up every road and laying new fibre, but that doesn't happen. You simply attach the new thin fibre to the old fat copper and pull the fibre in whilst pulling the copper out.

Today copper is in the region of £2500 per tonne and will probably be closer to £5000 when they pull it from the ground.

Mostly it would pay for itself.

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@High Fibre Diet

I also remember something about BT being willing to fibre up homes or provide some whizz-bang service provided the Gov would allow them to provide TV as they were currently prevented from doing so (in the 80s I think). Tories said no, BT said bollocks to innovation.

I think if one does a little looking BT have provided quite a few technical innovations - customer service just isn't one of them.

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Anonymous Coward

@Private Investment

Typical costs for laying duct are £130 per metre. That's just under £210k a mile. The cost could be much higher depending on the type of road you lay it alongside and whether you need to manage traffic etc.. For your two mile run I'd budget on £0.5M

You'd then need suitable electronics on each end and a cabinet to put it in - £10k. You'd need to power that also, so add in the cost of the electricity company providing a feed.

All you'd then have though is a fibre run from your village to a BT building that may or may not have a network connection. The usual model in the UK is of radial coverage from each node so it's most unlikely that your line would be 6 miles long if a building 2 miles away could serve you.

Anyway, you've got to a building we'll presume has onward connectivity. You'll then need to pay for backhaul (don't know how big your village is). If there's 100 of you and you all want uncontended 100Mbbs access then you need 10Gbps of backhaul capability to an ISP.

Looking at Openreach's price list that's going to cost £14k to install and then £12.5k rental per annum. You've still not got to the Internet yet.

Assuming you'll pay back your investment over three years, that's £1866 each per month for three years, and that excludes an actual Internet connection or getting into each of your premises or the customer kit. There's no maintenance included in that figure, budget on 10-15% of your capital outlay.

I think you're looking at roughly £2.5k per month each, all in.

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Anonymous Coward

@ horseshit

And what happens to the customers when you've yanked out the old copper and are commissioning the new fibre and electronics? Won't they mind being out of service for a few weeks while you try and commission all the customers served by the thousand-pair cable that's just been removed?

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Help BT/Ignore real problem

Having looked at fibre business cases in several European countries, the business case for fibre can be made to work in cities (just look at Germany) so I am not sure why BT needs any help or protective treatment in cities or for that matter regulation. The business case is more marginal in suburban areas but where ducts are in place and some fibre the transition to NGA can be made commercially (just look at Virgin). Where alternatives exist, then I feel no help for BT or regulation is needed as a supplier is established and BT is well placed to provide competition if it wants to survive. Where this report falls down is addressing how high speed broadband will be rolled out to areas where the commercial business case is more challenging. Here the report seems to contain a big fat zero as there is no help for BT or any push for them to do anything.

My view is that there should be two levels of regulation/incentive.

1) Dense urban or suburban where digital cable exists - free competition between BT and newcomers with light regulation concentrating just on ensuring no anti-competitive practises as the business case for fibre is equal between parties.

2) Suburban/other - regulated service giving BT a sufficient return for the investment it makes. In these regions it could be too expensive to deploy parallel networks. Mobile broadband would provide limited competition.

However for this to work, the government will have to give money for build out in the more rural areas as the business case is nearly impossible. I would also note that providing a wholesale service is in BT's interest as 3rd party distributers have proved much more effective at selling BT's product than they have (just look at broadband pre and post wholesale).

What we need to avoid is any party get protection and support to build out in areas where the commercial business case works on its own. That commercial case does exist look to Sweden, US, Germany, France so why is this ignored in the UK!

Alex @ Neu Mobile

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