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Standard User Ignitionnet
(knowledge is power) Sun 15-Jun-14 13:02:43
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BT braces for regulatory blow on superfast broadband pricing


[link to this post]
 
Torygraph link.

BT is braced for a blow to its dominance of superfast broadband, with regulators poised to unveil a test of whether its pricing means its rivals and wholesale customers, BSkyB and TalkTalk, are unable to make reasonable profits in the burgeoning market.

Ofcom is expected to publish proposals imminently that will gauge whether the difference between BT’s wholesale and retail pricing of superfast broadband is narrow enough to amount to a “margin squeeze” on competitors.


For me this is a massive advertisement to completely split Openreach off from the rest of BT. A lot of industry watchers think that part of the reason Openreach's network ambitions were scaled back was to free up capital to fund free footie for BT's Retail customers.

Separating Openreach entirely also eliminates any opportunity for 'creative accounting' to allow Openreach revenues to subsidise the links above them in the chain, and Retail to benefit from that subsidy to offer cheaper deals.

I hope, however, that this ends up with the retail price of BT's offerings going up rather than the wholesale price going down. It could be said that it's quite cheap enough as it is and I would much rather see Ofcom press BT at retail level, not discourage investment at Openreach level, something that really doesn't need discouragement.
Standard User Gadget
(committed) Mon 16-Jun-14 09:10:44
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Ignitionnet] [link to this post]
 
My reading of the article suggests that the margin squeeze is at the BTWholesale level and nothing to do with Openreach who are mandated to supply to all ISPs at the same terms.
The Openreach rollout is an enabler for the Infinity product (and all the other ISPs superfast products) so it doesn't seem to make sense to buy content rights if that means you would be reducing the investment in the infrastructure needed to deliver the content.
Standard User flippery
(committed) Mon 16-Jun-14 10:10:29
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Ignitionnet] [link to this post]
 
Could the same not apply to Sky. Who are offering two years free broadband if you take out Sky Sports subscription.


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Standard User partial
(committed) Tue 17-Jun-14 21:38:36
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Ignitionnet] [link to this post]
 
There is a chance that floating off Openreach will increase prices to OLOs as currently only BT Retail contributes to Openreach's pension deficit.

I can't see the regulator demanding Openreach split from BT Group. Their aim is to promote competition and there is more competition in UK broadband than any other country.

In my view competition in comms would be better served by looking into the Virgin and Sky monopolies.

If BT Group shareholders see value in splitting the group. that is another matter.

Edited by partial (Tue 17-Jun-14 21:44:47)

Standard User partial
(committed) Tue 17-Jun-14 21:49:02
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Gadget] [link to this post]
 
My view is that BT Retail are investing eye watering amounts of money in content and using it to successfully grow customers. It's clearly working as BT Retail are increasing market share. They will do this whoever owns Openreach.
Standard User partial
(committed) Tue 17-Jun-14 22:02:44
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Re: BT braces for regulatory blow on superfast broadband pri


[re: flippery] [link to this post]
 
In reply to a post by flippery:
Could the same not apply to Sky. Who are offering two years free broadband if you take out Sky Sports subscription.


Ofcom aren't going to be interested in Sky marketing, it's good for competition.

However, I do find it strange that Openreach are on several New Build housing estates in my area, building FTTP that only BT Retail are offering FTTP services on. Openreach are then providing copper in tandem to allow Sky and TalkTalk to offer their copper based services on.

It is clearly perverse that Openreach are being forced to build copper in fibre areas solely for big beasts like Sky and TalkTalk.

I think it is possible that a separated Openreach would be in a better position to force Sky and TalkTalk to upgrade to FTTP, after all Sky and TalkTalk are holding back investment in FTTP by clinging on to last generation services.

But this is something for BT shareholders to think about, whether they want to invest and Ofcom to think about, whether they want to support multi million companies holding back competition in FTTP .

Edited by partial (Tue 17-Jun-14 22:11:23)

Standard User Ignitionnet
(knowledge is power) Tue 17-Jun-14 22:11:04
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Re: BT braces for regulatory blow on superfast broadband pri


[re: partial] [link to this post]
 
In reply to a post by partial:
My view is that BT Retail are investing eye watering amounts of money in content and using it to successfully grow customers. It's clearly working as BT Retail are increasing market share. They will do this whoever owns Openreach.


I'm just wondering; how will they pay for it if they continue to charge the prices they do and are not receiving subsidies from other business units?

They're investing eye watering amounts of money in content and delivering that content at a big loss because they are backed by the BT balance sheet. That's kinda what Ofcom are looking at, whether any efficient operator could match this.
Standard User partial
(committed) Tue 17-Jun-14 22:17:18
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Ignitionnet] [link to this post]
 
Clearly BT Retail are not receiving subsidies from Openreach.That would be illegal and I would imagine the Group would be aware of this. crazy

BT Retail are investing in content because they judge this will be a good way of selling FTTC and defending their customer base. At the moment it is clearly working.
Standard User Ignitionnet
(knowledge is power) Tue 17-Jun-14 22:18:21
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Re: BT braces for regulatory blow on superfast broadband pri


[re: Gadget] [link to this post]
 
In reply to a post by Gadget:
My reading of the article suggests that the margin squeeze is at the BTWholesale level and nothing to do with Openreach who are mandated to supply to all ISPs at the same terms..


SFBB pricing is dictated by Openreach; the complaint isn't against Wholesale, the major complaint is that Retail's price is too close to their upstream costs.. There's no complaint that the price Wholesale is charging is too close to the price Openreach are charging.
Standard User Ignitionnet
(knowledge is power) Tue 17-Jun-14 22:21:02
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Re: BT braces for regulatory blow on superfast broadband pri


[re: partial] [link to this post]
 
In reply to a post by partial:
Clearly BT Retail are not receiving subsidies from Openreach.That would be illegal and I would imagine the Group would be aware of this. crazy


Clearly.
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