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BT DSL price cut undermines LLU competition

The telco giveth and the telco taketh away

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BT Wholesale is promising faster and cheaper broadband in a move designed to back its commitment to greater competition and flexibility in the UK's telecoms sector. It's looking to run ADSL trials up to 8Mb and run pilots for ADSL2+ technology to support higher-speed services of up to 18Mb. From April, BT's also intends to cut the cost of its end-to-end wholesale IPStream broadband product.

On the face of it, increasing speeds and cutting prices appears to be great news for consumers. However, there is a catch. The price cuts of around eight per cent will only be applied in areas where there is "a combination of high customer demand, high take up and lower costs". In effect, BT Wholesale will be passing on volume savings delivered by high demand. So far, 561 local BT exchanges have been earmarked for the rebates of between £1.10 and £1.40 per line.

However, industry insiders claim these exchanges are the same ones that rival operators are currently investing, in a process know as local loop unbundling (LLU). In effect, BT is lowering the cost of its own broadband service in areas where it will be competing head-on with LLU operators.

And industry insiders claim BT is already up to its old tricks. One senior industry insider, who asked not to be named, told The Register that far from being, as BT Wholesale chief executive Paul Reynolds put it, "fully committed to seeing LLU a success", BT is "demonstrating its ability to undermine wholesale competition and LLU".

Today's announcement shows that the former monopoly can change the pricing for its own products "on a whim". By changing prices at a stroke, BT can effectively change the economic viability of LLU.

Operators looking to spend cash installing their own kit in BT exchanges to provide services direct to customers will have no guarantee that BT won't pull the rug from under them and chop its own wholesale prices as it sees fit. This becomes especially likely if BT manages to see "red tape rolled back", as it so desperately wants.

"It is entirely in BT's power to do as it likes," said the insider.

News of the speed trials and limited price cuts coincided with BT's formal response to Ofcom's demands for "substantive" changes, claiming its proposals form part of a regulatory settlement between the former monopoly, Ofcom and the industry, and provides "all players with the confidence they need and see red tape rolled back where appropriate".

"Central to the proposals are plans by BT to offer operators lower wholesale prices, faster broadband services and transparent, highly regulated access to BT's local network," said the telco in a statement.

A spokeswoman for rival telco Energis said: "Too little, too late." ®

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Ofcom orders BT price cuts for broadband rivals
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