Operators demand larger broadband price cut

By Graeme Wearden, ZDNet.co.uk, 8 May, 2003 12:41

NEWS

BT's decision to cut the price of its Datastream products doesn't go far enough, according to rival operators who are calling on Oftel to take action against the telco. Thus, Energis and Tiscali have already demanded a larger cut, amid accusations that the telco has attempted to block competition in the wholesale broadband market. For its part, BT is suggesting that the Datastream price cut will not actually be passed onto end users. On Wednesday, BT announced a 70p per month cut, or almost 8 percent, in the cost of Datastream, which telecoms operators can use to sell ISPs different broadband services to those available from BT Wholesale. This was prompted by an Oftel investigation into BT's recent decision to cut the cost of its wholesale broadband products -- which are based on a product range called IPStream -- by up to 50 percent. Operators claimed that BT was acting unfairly by making this cut to IPStream without making a similar reduction for Datastream. IPStream was cut by up to £2 per month, and BT's rivals are pushing Oftel for a similar reduction for Datastream. "We take note of the 70 pence reduction on wholesale DataStream prices that has come only as a result of the volume of complaints about IPStream price cuts," said Sergio Cellini, UK chief executive of Tiscali, in a statement. "We are still far from satisfied with this as it is only 40 percent of the recent wholesale IPStream price cut (£1.75 to £2) and continues to promote an unfair differential between the two products," said Cellini. Cellini also claimed that the 70p per month cut was "a clear manoeuvre" on BT's part to pre-empt Oftel's investigation. Energis went even further, with chief executive John Pluthero claiming that the cut was "another illustration of BT's monopolistic behaviour and failure to open up wholesale broadband to full competition." Pluthero urged Oftel to insist on a larger price reduction for Datasteam, as did both Cellini and Ian Hood, director of communications and regulatory affairs at Thus. BT, which denies that it was bounced into making the Datastream price cut by Oftel's investigation, has claimed that the reduction will be swallowed by network operators rather than reaching end users in the shape of lower prices. "It'll be interesting to see if these cuts are passed on to their customers, or go towards paying their creditors, sorry, shareholders," said a BT source. But Thus claims that such talk of retail price cuts is "bloody ludicrous", given the immature state of the UK's wholesale ADSL market -- at least in terms of meaningful competition to BT. "It's very early days for Datastream, and we're still in the process of putting products together," explained Thus' Hood. "The IPStream cuts made it far harder for operators to provide consumers with real competition, as it made the margins wafer-thin. The (70p per month Datastream) cut goes some way to restoring the balance but we're pushing for more," Hood explained. Hood added that Thus also wanted Oftel to force BT to provide a migration path from IPStream to Datastream. Without it, he explained, there is a "serious disincentive" for ISPs to move from reselling a BT Wholesale broadband product to one offered by another operator. Steve Horley, ISP & business development director for Tiscali UK, echoed Thus' view that it is too early to say what the impact of the 70p per month cut will be. "It is particularly rich for BT to claim we are hanging on to our margins, when they have only recently raised the broadband activation fee back to £50 from £25. We can see absolutely no justification for this level of charge, which we regard as an effective broadband 'tax' on ISPs," claimed Horley. It's unclear whether Oftel will be inclined to force BT to make a larger cut to Datastream. In a statement on Wednesday, director general David Edmonds said that a 70p reduction was in line with what the regulator would have imposed, had the investigation -- which is still ongoing -- found against BT, as sources claim would definitely have happened.

See the Broadband News Section for the latest on cable modems, ADSL, satellite and other high-speed access technologies, including a comprehensive guide to the best deals out there. Let the editors know what you think in the Mailroom.

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