Further cuts in BT's wholesale prices "would go a long way" towards promoting more competition in the broadband market and encouraging greater take-up, according to research from the Institute of Directors (IoD).
IoD members believe if efforts by ISPs to cut the amount they currently pay to BT in order to lease the telco's telephone lines prove successful, it will lead to an increase in real competition in the market.
"At present, other ISPs pay BT a fee of around £13 per customer per month. Many ISPs claim that, once they have added a further charge on top of this to cover their own overheads, they are unable to compete with BT's own retail broadband services," said the IoD's survey, Broadband: Its impact on British business.
The telecoms regulator Ofcom will play a pivotal role in deciding if BT should in fact lower these wholesale prices, according to the IoD.
The report's author -- Professor Jim Norton, senior policy advisor at the IoD -- claimed that Ofcom has indicated that it will look favourably on a formal complaint by Wanadoo that BT is in breach of the Competition Act. "BT was given eight weeks to respond. The most likely outcome would appear to be a further cut in BT's wholesale prices," he said.
At the beginning of September Ofcom announced that it believed that BT has infringed competition law in its pricing of broadband services.
The decision, which BT is contesting, dates back to a complaint filed over two years ago -- since when many of the main players have changed their names or ceased to exist.
Freeserve (now Wanadoo) alleged in 2002 that BT Openworld, the telco's retail arm, was selling its broadband at a loss. If true, this would be illegal because BT is not permitted to cross-subsidise its services in this manner because it would hamper competition.
The IoD research also confirmed that lack of rural broadband availability is still a problem for some members. 13 of the 409 respondents to the survey claimed that high-speed services were still unavailable in their areas despite BT's claims that broadband will be available in 99.4 percent of homes by 2005.
"In my opinion it is entirely unacceptable for BT to have a monopoly position and at the same time postpone providing a modern communications system at a time when so many people work in part or full time from home," said one survey respondent.
Talkback
It's a case of yet more media hype in an attempt to get BT to cut even narrower margins.
Consider the fact that BT Wholesale can actually charge as little as £9 per month per customer, with a maximum of approximately £15 - that's for the basic service alone.
When you consider the mark-up certain big-name ISPs generate on this, they can't really argue with the wholesale price (some make almost an extra £8.50 per customer per month). If you add this up over the year and take into account all the other connection costs ISP face from BT Wholesale, they still make a profit of £90 per customer per year.
It's a case of wanting something for nothing. Further price cuts at the wholesale end will do nothing more to stimulate competition - of course ISPs want the price to decrease; they can decrease their own price but still make the same margin or increase.
It's disgusting. This is not a profitable industry, so even taking into account the other costs an ISP business faces, they shouldn't expect to make huge amounts of money from what they do. That's why additional content can prove such a lure to some ISPs, who use it to further artificially inflate prices.
BT Wholesale is not the problem.
hi,
true competition for BT is the solution, this is made hard though when so many government bodies such as councils view BT as a public service, not a Private company.
BT appears to have a very agressive approach to competition as well which ultimately will backfire as Voice over IP and wireless radio/optical network providers keep evolving ever better solutions and eventually break the BT protection racket.
BT only have control over the consumer with its infrastructure of wires and the pointless "line rental".
They could do with co-operating with other providers instead of playing slow monopoly.
announcing a 2Mbps service trial is a prime example, 2Mbps has been available from ISPs for a very long time via the BT wholesale ADSL product.
Why announce it as if its something new and unique?