In reply to a post by camieabz:

Well since the smaller exchanges have been paying top dollar for the lesser services for the past ten years, perhaps it's time the medium to large exchanges paid their way too.

How obscene are the profits on your exchange? Can you elaborate on the pricing scheme?

If you could explain how small exchanges subsidise large urban ones that would be great.

If you could also explain why LLU operators choose to operate in urban exchanges rather than the smaller exchanges which are subsidising these urban exchanges that would also be good as it makes little sense, if the smaller exchanges are where the money is, wasting it enabling subsidised larger ones.

Also a bonus would be some explanation why BT largely cater to urban exchanges with WBC rather than the smaller exchanges which are subsidising them, as again wouldn't they want to follow the money?

In reply to a post by Ignitionnet:

If you could explain how small exchanges subsidise large urban ones that would be great.

Markets 1, 2 & 3. - Pricing in rural and semi-rural areas is higher.

More info: http://www.kitz.co.uk/adsl/broadband_access_market.htm (the map sums things up)

In reply to a post by Ignitionnet:

If you could also explain why LLU operators choose to operate in urban exchanges rather than the smaller exchanges which are subsidising these urban exchanges that would also be good as it makes little sense, if the smaller exchanges are where the money is, wasting it enabling subsidised larger ones.

LLU has to compete with non-LLU. As such it has to be in places with high concentrations of people for the price to be competitive.

I didn't say the small exchanges are "where the money is". I said that smaller exchanges having been paying top dollar for a lesser service. If pricing was based on speed of service (1 meg, 2 Meg, 8 Meg, 20 Meg), most people would probably get a far better service, as ISPs and wholesalers would strive to speed said services up.

For someone in an urban area with a fast connection to whinge at all amazes me.

In reply to a post by Ignitionnet:

Also a bonus would be some explanation why BT largely cater to urban exchanges with WBC rather than the smaller exchanges which are subsidising them, as again wouldn't they want to follow the money?

See my previous comments, RE: top dollar / lesser service / markets 1, 2 & 3.

We're not talking about rural areas getting 20 Meg or 100 Meg. We're talking about them getting something better than 0.5 Meg or next to no BB at all in some cases. Obviously the setup costs will be higher (hence why many are not getting decent speeds), and many in rural areas understand and appreciate that, but why should one person pay the same or more money for a lesser service?

If you take the analogy of a road and a delivery truck, once the road is built (network installed) the maintenance costs are less than the initial cost (in the case of networks, far far less). However there's no fuel costs, vehicle wear and so on, so why should the Markets 1, 2 & 3 even exist? Perhaps the rural people are paying for their service more than the urban people are.

What next? The argument that rural areas don't even need broadband, since the people must be slow-witted bumpkins? It's a 'them and us' situation, and when those with the better deal whinge about it, something's amiss.

I would doubt anywhere has 100% takeup of broadband on phone lines, so the concept of 100% taking FTCC is silly.

I think it's about 50% of lines that are ex-directory, don't see all of them giving up their number to door knockers either.

Again could you explain how rural / semi-rural are subsidising urban please?

You appear to be basing it on the presumption that because the retail prices are higher for non-LLU and there's a marginally higher wholesale cost in Market 2 / 3 there's subsidy there, in doing that you're assuming that it costs the same to provide services in market 1 as market 3.

EDIT: Just one way in which this is not the case is demonstrated here. Less expense at Tier 1 MSAN sites as no long distance fibre, which has to be rented from Openreach, along with the required switching kit, transmission kit, etc, to get to the Tier 1 sites, just an ODF.

I believe it entirely appropriate for people in urban areas to complain as in many urban areas people are relatively more poorly served than those in similar environments in other countries while we have relatively good availability and our average performance in non-urban areas is actually quite good relative to our competitors.

In many capital cities in Europe there is widespread fibre to homes and/or cabinets, London is not even 1/4th covered by FTTC, there are more homes as a % passed by FTTP in Paris than FTTC in London. Compare this with like-for-like rural areas, you'll likely find that the services offered in the UK in 'Market 1' areas are of similar or better price and quality to those in many other places.

Your service is more expensive from BT Wholesale because it costs more to get backhauls to exchanges, there are less customers to amortise the cost of hardware between. This pricing is set by Ofcom and is based on the costs to provide the service, the actual difference is relatively minimal given its' impact on retail pricing.

The bigger issue is that there's no LLU. There's no LLU because LLU operators don't see a business case, to get LLU many Market 1 exchanges would require subsidy.

The map looks grim, doesn't it? The majority of the population are Market 3 though.

I'm not saying you aren't right to be complaining, I would be, but to suggest that rural areas are subsidising urban ones because they pay a couple of pounds per line per month more for the line rental part of their ADSL is crazy. If there were subsidy there the regulated cost+ pricing would be lower and other operators would set up their own wholesale LLU operations.

Edited by deleted (Fri 31-Dec-10 16:40:39)

Thanks to the internal systems of BT you will never get figures in black and white. I don't actually think they have them as they only look at the top line which is probably reasonable when you are running such a large company.

What I was shown were those costs to put in the ADSL equipment and upgrades, guestimates ( thats how they do it apparently!) on data/operational costs. Set against this were fees coming in. Again guestimates as they don't reconcile numbers down to individual exchanges very well, or at least thats the data the person I spoke to had. BT is a very large beast and often one department doesn't know what another is doing!

As take up rates have been far higher then expected revenue has been far higher then expected. They have been making returns of 75% a year approx on capital deployed which isn't a bad return! Even if some of the figures were slightly out it is clear it has been a good investment for them. Certain costs are hard to find such as R&D.

Why has no one else come in to exchange. There are high fixed costs for another operator as they can't use BT's infrastructure in the same way.

Overall if you look at BT's accounts broadband has been a company saver for BT. Without it they would have gone under I am told. Global (IT) arm has been a disaster for them and without broadband they would have been very short of cash flow.

Of course what I was told might be a load of rubbish. Given the nature of BT even if you think you know what is going on you almost certainly don't!

In reply to a post by Ignitionnet:

Again could you explain how rural / semi-rural are subsidising urban please?

but to suggest that rural areas are subsidising urban ones

Yet again, I didn't say that, nor did I infer it. I said that rural areas pay more for a lesser service. What the bean counters do with the cash is their affair. My concern is that as FTTx takes off, many rural areas don't even have ADSL+2, and there's no sign of it happening soon on many exchanges. Why should rural areas pay more for a lesser service? If it's only a couple of quid, as you put it, then why are urban area people moaning about the same amount, considering the service they can get?

All I want is for everyone to have a reasonable service at a reasonable price. You make it sound as if I want the urbans to pay for the rurals or that I said the rurals pay for the urbans. What's wrong with everyone getting, say, 4Meg down / 1 Meg up as a standard minimum? Some rural folk would love that, and many seem to think they should pay through the nose for it. In some case there will be an initial outlay, but the costs after that should not be any more than urban areas (unforseen maintenance aside).

Ofcom do not serve the rural areas, and BT are milking them into the bargain with the lack of competition.

I never said smaller exchanges were subsidising urban exchanges.

What I said was that medium size exchanges (those stuck on the original 20C network) are having to pay their costs and the costs of many tiny exchanges which cost a fortune to operate because of their small user base. Urban exchanges don�t have to provide this cross subsidy.

The problem isn�t one of BT�s making but OFCOM�s.

When LLU came in it was obvious LLU would cherry pick the most profitable larger exchanges. OFCOM�s response was to deregulate BT on these exchanges so they could compete with the LLU operators. It was obvious at the time that this would leave those on non LLU exchanges paying higher prices for a worse service. Of course OFCOM sold it as urban exchanges getting a �discount� rather then medium size exchanges paying a premium as no one should pay a premium in this country for a basic service.

As a result many on the 20C network, i.e. medium size exchanges, are paying far more then their fair share as they have to provide a large �subsidy� to meet the costs of the many tiny exchanges which will never be profitable under any working model. Urban exchanges on the 21C network don�t contribute, as they are in a different market, and as a result the money they generate can be used to provide better services to remain competitive with LLU in their area. If BT don�t do this the market will be taken away from them by the LLU operators cherry picking again.

I accept backhaul costs are higher for medium size exchanges for LLU operators then in many urban areas. Therefore LLU won�t go in these as it would involve putting in new fibre or renting off BT at high prices which are not market competitive.

For BT themselves I am not convinced backhaul costs are that much higher as adequate ducting etc is already in place to smaller exchanges. When ADSL went in how many roads were dug up to put in new fibre? Not many. Have new ducts been put in as demand for ADSL exploded? Not where I live. Existing ducting was used and therefore the marginal extra cost to BT to put in the backhaul must be very low. It could even be cheaper in rural areas as there is often a higher cost of operating in urban areas which are much more crowded and complex to operate in.

BT have probably pulled the wool over OFCOM�s eyes and convinced them operational costs are higher so they can milk the larger non LLU exchanges for as long as possible. They are desperate for cash flow as some of their other areas are struggling, Global IT, and they have a massive pension cost to pay. OFCOM don�t want to make waves as long as the majority don�t have to pay.

FTTC and FTTH is an interesting technology as it changes some of the cost landscape
Much of the back haul is now already in place. As a result it should be no more expensive to put in the infrastructure for FTTC or FTTH in semi-rural then in urban areas. Housing density in many small market towns mirrors that in urban areas. To my eyes green BT boxes look the same size in urban areas as they do in many smaller towns and larger villages. (The ones in my village look very full and in places extra ones have been added.) They probably serve the same number of people as well. Therefore there should be no big cost differences in installation costs per line

Obviously on many rural/town exchanges there are often outer lying areas not found in urban areas. Reaching them may be very expensive on a cost per line basis so why not just NOT put in FFTC or FTTH for them. If 60, 70 or 80% of an exchange can be converted cost effectively lets get the majority done. Sorry for the remainder but we have to do something to rebalance the imbalance developing between semi-rural and urban areas. If a subsidy is needed for the remainder take it from all broadband users (BT, virgin, LLU or A N other providor) not just those unlucky enough to be on the same exchange!


As the discrepancy grows small businesses are being penalised because of where they are based by BT. Either everyone pays a fixed price or the price should reflect the cost to provide the service.

What we have is a crazy system which, whilst it meets the needs of majority in urban areas, leaves a significant minority paying too much and a much smaller minority getting a very large cross subsidy from this minority. Utter madness in my opnion.

Edited by deleted (Fri 31-Dec-10 18:23:02)

how many ISPs have regional pricing in their retail products ? Arguably it is the ones without differential prices who are benefiting in the urban areas as they get a wholesale discount they don't pass on.

In reply to a post by camieabz:

Yet again, I didn't say that, nor did I infer it. I said that rural areas pay more for a lesser service. What the bean counters do with the cash is their affair. My concern is that as FTTx takes off, many rural areas don't even have ADSL+2, and there's no sign of it happening soon on many exchanges. Why should rural areas pay more for a lesser service? If it's only a couple of quid, as you put it, then why are urban area people moaning about the same amount, considering the service they can get?

All I want is for everyone to have a reasonable service at a reasonable price. You make it sound as if I want the urbans to pay for the rurals or that I said the rurals pay for the urbans. What's wrong with everyone getting, say, 4Meg down / 1 Meg up as a standard minimum? Some rural folk would love that, and many seem to think they should pay through the nose for it. In some case there will be an initial outlay, but the costs after that should not be any more than urban areas (unforseen maintenance aside).

Ofcom do not serve the rural areas, and BT are milking them into the bargain with the lack of competition.

Just as a reminder you said:

In reply to a post by camieabz:

Well since the smaller exchanges have been paying top dollar for the lesser services for the past ten years, perhaps it's time the medium to large exchanges paid their way too.

So if medium and large exchanges aren't paying their way something must be picking up the tab, smaller exchanges by process of elimination.

Though I did miss a bit of a post.

In reply to a post by camieabz:

Obviously the setup costs will be higher (hence why many are not getting decent speeds), and many in rural areas understand and appreciate that, but why should one person pay the same or more money for a lesser service?

This would be something that applies much more to line length. However another question could be why should one person pay the same as another person for a service even though it costs more to provide it to them?

Ofcom are a regulator not an ISP. They aren't being taken for a ride by BT - if they were line rental in areas where the line is some 5km pole mounted monster with the pole shared with about 3 other people would be higher - if they were provided a service at all.

If you want the same service as urban areas, regardless of price of providing the service, a subsidy from those cheaper areas to serve is exactly what you would be asking for.

You may have to pay more for a lesser service because it probably costs more to provide the service to you. Less economies of scale, higher maintenance and backhaul costs.

Urban areas, regardless of ADSL2+, have a ton of areas which are heavily speed restricted due to distance from the exchange. That's the major source of complaints from urban areas. Urban areas are not some panacea of ultra high speed, low cost services. As I mentioned according to the broadband quality surveys it is the broadband provision in rural areas which props up the UK's ranking by compensating to some extent for the relatively poor state of many urban areas.

The main reason why urban areas have better services is simply competition. The costs of unbundling exchanges vary due to backhaul ranges, just as the cost of providing ADSL over BT Wholesale varies, if there's no competition it's because OLOs don't see a return in the exchanges, I've no idea how to remedy that in a way that's legal and doesn't involve spending tax payer's money.

thats a logical reason at least thanks, 100% still seems crazy tho unless BT's numbers are out by a big %.