BT Increase Broadband Wholesale Costs

With the next generation of broadband products from BT based on WBC (Wholesale Broadband Connect) expected to be available to 40% of the UK by March 2009, BT have announced price rises on the older IPStream based infrastructure to try and encourage take up of the new products. This includes the withdrawal of the rebate scheme that is applied across exchanges where there is a large amount of competition.

This comes as a bit of a surprise following an offer for free Installation on BT IPStream Centrals due to the delay of the launch of WBMC with IPStream Connect, and may well be enough to offset that reduction. WBMC with IPStream Connect will allow an easy migration for service providers from existing infrastructure over to the new 21CN, but with WBMC on IPStream Connect not expecting to surface until possibly September 2009, ISPs will be forced to run both the old and new systems side by side, and face these higher costs.

The numbers indicate some price rises in December 2008, and some falls in January 2009. The monthly rental per end user will fall in January by £0.29 for IPStream Max and IPStream Max Premium products, but costs will rise for those still using the legacy fixed rate IPStream products. Central prices are increasing in price from 1st December, and the rebate that was applied to qualifying exchanges is being scrapped in favour of “customer specific offers”.

Taking an analysis of the pricing and the adjustments in prices since May 2007, we have produced the following table based on CBC (Capacity Based Charging) IPStream Max end users on a single 622Mbps BT Central pipe which gives an idea of how prices have varied. The figures show a cost per user which includes a proportion of the cost of the Central pipe, and includes rebates averaged across the all users. Service providers will currently be on the ‘CBC Jan 08’ pricing.

Number of Users CBC May 07 CBC Jan 08 CBC Dec 08 CBC Jan 09
5,000 £26.83 £21.18 £25.03 £24.74
10,000 £17.14 £14.28 £16.46 £16.17
20,000 £12.30 £10.83 £12.17 £11.88
30,000 £10.68 £9.68 £10.74 £10.45
40,000 £9.88 £9.10 £10.02 £9.73
50,000 £9.39 £8.76 £9.60 £9.31

Whilst the numbers are simplified, it shows the increase in costs that are involved, following a trend of price reductions. We note that whilst 50,000 users on a BT Central is above the concurrent sessions limit, some ISPs may contend the number of users with the understanding that not everyone is online at the same time.

So could we be set to see price increases? ISPs will no doubt be studying their books to see what adjustments need to be made to their product pricing, particularly at the lower end of the market where margins are already very tight. We may perhaps even see more providers looking at alternate wholesale providers such as Tiscali or Cable & Wireless who are able to offer competing services.

One has to wonder if the changes were decided many months ago when at the time it looked likely that service providers would be migrating over to WBMC and IPStream Connect to backhaul their legacy customers, but the bean counters haven’t taken into account the delays and when the product team are actually making things available.

As a small consolation for the few providers who are currently deploying 21CN services, WBC monthly end user rental is set to get a reduction of between 3.6% and 4.7%.

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