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AOL hits out at BT

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AOL UK has taken off the gloves and given BT a bloody nose over its new pricing policy for its wholesale SurfTime product. Speaking exclusively to The Register, Matt Peacock, director of corporate communications at AOL UK, explains why BT's latest offering will be rejected by ISPs in Britain. Peacock's statement to BT: "This proposed product only covers the cost of half of the Internet call -- as far as the local exchange. It does not cover the other half of the call, from the local exchange to the regional exchange (DMSU), which is the point at which the connection to an ISP begins. In other words, contrary to BT's headline in their press release that this is "unlimited Internet access with no hidden charges", there are additional charges -- payable to BT -- for connecting from the local exchange to the DMSU. BT isn't paying for this bit of the call, it expects the ISP to do so. BT has not yet told the industry exactly what those additional costs will be -- so ISPs have no way of working out how this business model will affect their plans. And of course ISPs have not had a say in how they feel about this proposal in advance of today's announcement. So, BT wants to charge the consumer an unmetered fee of £20 per month to connect to the local exchange -- and it wants to charge ISPs an as-yet-undisclosed tariff (but probably metered on a per-minute basis) to connect from the local exchange to the regional exchange (DMSU). There is no competition in this offering -- BT is the sole supplier. That's bad news for the industry, and ultimately bad news for consumers. How can ISPs negotiate for the most competitive offering on behalf of consumers when there is no open competition amongst telcos at this level? This proposed product is available only from BT, which controls the connection from the doorstep to the local exchange of 85 per cent of the UK residential market. The connection from the local exchange to the regional exchange is also owned by BT. Competing telcos can lease capacity here, but at great cost and with limited viability. If ISPs don't like these options, they can of course buy modems in the local exchange. Er... from BT. There is no wholesale tariff for competing telcos. Competing telcos cannot take up this pricing structure and better it -- thereby denying ISPs the ability to leverage competition in the telco marketplace to the benefit of consumers. This proposed product has been announced even though the regulator (Oftel) is still considering it and has yet to pass judgement. This is the third time in five months that BT has announced the delivery of unmetered access. In that context, we would expect the regulator (and the industry) to examine this new proposal very carefully.

  • The first announcement, last November, turned out to be a mirage. It wasn't unmetered -- it wasn't even good value metered - and quickly disappeared from view.
  • The second announcement (SurfTime), one month later, quickly evaporated once the industry and regulator began to look closely at the model. One of the reasons that offering ran into the sand was the absence of a wholesale tariff. Guess what? This new offering doesn't include a wholesale tariff either...
  • Now we have today's announcement, which covers only half the cost of the call, doesn't yet explain how much the other half might cost, assumes that ISPs will take on that undisclosed cost without securing any advance indication from them that they are willing or able to do so, isn't available from any competitor, hasn't been approved by the regulator, and has added substantially to the already profound level of consumer confusion. Apart from that, it's just great. For 18 months now AOL UK has fought for simple, transparent, cost-effective, robust, competitive and sustainable unmetered Internet access for UK consumers. Where is the transparency here? How is this cost-effective and simple for consumers to understand? How does this compare to the simplicity of a typical $20 per month flat-rate Internet telephone access fee paid by US consumers? Answer: badly." If BT would like to respond to these criticisms The Register and its readers would be delighted to hear what it has to say. ®

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