Margin Squeeze

After Talk Talk's complaint to OFCOM I tried to get my head round the costs via a spreadsheet

Any corrections or suggestions welcome - I only looked at the 40M products to start with. I gave up trying to find the upstream on Sky and TT fibre and Sky's line rental upfront offer is beyond comprehension.

It does show Plusnet and (to a lesser extent) BT Retail working on skinny margins, so I guess TT want to see these retail prices forced up.

I'll have you know 29p is a lot of money to a Yorkshireman.

Is price always the deciding factor in choosing an ISP. I think not. I would not join Talk Talk even it was free

In reply to a post by shalom2005:

Is price always the deciding factor in choosing an ISP. I think not. I would not join Talk Talk even it was free

For a lot of users, yes it is. They fall for the "we are cheapest" line from them and believe their claims about quality. Remember, this is the company which claimed that they had "bought all the BT exchanges" before being caught out lying.

In reply to a post by shalom2005:

Is price always the deciding factor in choosing an ISP. I think not. I would not join Talk Talk even it was free

Would you join BT or Plusnet if they offered you Carrier-Grade NAT?

Must've missed the announcement where TalkTalk as a company rather than some random customer service / tech support / sales person claimed that, do you have a link to it?

the argument seems a farce.

It seems talktalk are saying they have some divine right to undercut BT, if they cant then BT have broken some rule somewhere?
Talktalk of course also did heavy loss leading when they started offering adsl, if I remember right they were the one's who effectively trashed the adsl market.
Any market where a reseller is able to undercut the wholesaler shows something is wrong (usually either the wholesale having large margins on their own retail product, or the reseller loss leading). to me it seems natural BT are able to sell for less than talktalk as its BTs infrastructure.

Of course if ofcom decide that talktalk are in the right even tho sky in the same position are doing fine, BT could respond by dropping BT wholesale prices a bit to increase BT retail margins and then talktalk are still no better off.

It seems to me talktalk lack innovation, they only can sell by been the cheapest. It woudl be a mistake by ofcom to rule in their favour because it would be to stifle BT's business case for FTTx in favour to satisfy a company that is just piggybacking of BT and trashing the market.

In reply to a post by Chrysalis:

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It seems to me you completely miss the point. On the one hand you want more regulation in some ways while in others you think that BT should be able to sell at a retail loss, taking advantage of their vertical integration to ensure overall profit.

TalkTalk aren't complaining about not being able to undercut BT, Ofcom wouldn't care less about that, they are claiming that it's impossible for a 'reasonably efficient operator' to make a profit charging the prices that BT Retail are for FTTC/P.

Have a read of previous margin squeeze cases for background.

TalkTalk weren't loss leading, they took advantage of MPF LLU and offered a heavily restricted and throttled broadband package. The actual cost increment given the same hardware was supplying both phone and broadband wasn't actually that high.

It did start a race to the bottom however that bottom, given the unlimited broadband services we have available and the prices that we have them available for, doesn't seem to be all that bad. It's a commodity now not something nerds have in their bedrooms and spend all their money on. Hardly a bad thing?

BT Wholesale/Openreach are not supposed to favour anyone (BT Retail or other) because they enjoy a unique position in that they own and operate the exchange facilities where the equipment has to be hosted and have to be paid to provide the copper//fibre link to the customer premises as far as I understand it.

Sky are doing ok because they make the bulk of their money from their satellite TV service and they also own a well respected business ISP, easynet so they can take a bit of a hit on the broadband side of things.

TalkTalk's only business is the provision of telecoms so am not really surprised to hear they are kicking up a stink.

If you think BT Retail is championing the consumer think about this.

I'm in an area where FTTP is being rolled out, now I have 0 need for a 330 Meg internet connection but I'd quite like an FTTC connection of up to 76 Meg and there are some good deals on these but alas I cant take advantage because BT has decided in this area its FTTP or ADSL only and I've not yet been able to get a price for FTTP when it comes out of the trial phase as the ISPs I have spoken to have told me they will be creating different pricing plans for FTTP as its likely BT will be charging a lot more for it.

Is that really fair?

I'm in an area where FTTP is being rolled out, now I have 0 need for a 330 Meg internet connection but I'd quite like an FTTC connection of up to 76 Meg

I am led to believe that in areas where its FTTP only, then you can still take 40/80/110 download products, this is certainly the case in Deddington in Oxon, which is to be the UK's 1st 'FOX' fibre only exchange, so can't see why CP's can't offer these products if FTTP is all you can get.

I do wonder if, in some part, the reticence of CP's to embrace FTTP/FTTPoD is causing a slow down in its roll out. Without orders on the books, Openreach will happily drag its heels.