Monday, August 20, 2007

How to compete with BT in the Openreach model?

Comments on my previous post and the whole debate about BBC iPlayer have got me thinking. According to Ian Wild of Plusnet, see his comments, the amount of money that a Wholesale Broadband Access (IPstream)-provider will need to pay for backhaul is £180 - £200 per Mbps per month. The use of PPPoA also makes that you can't keep local traffic local and keep it off the backhaul. This can get very expensive very fast, since traffic per customer will grow 50% per year, minimum. (To get an idea if you need to budget 100kbps traffic per customer for peak times at £20, next year it will be £30 and the year after it will be £45. (Unless the regulator regularly pushes the prices down). So this is a no-win-situation for the ISP's.

What I am wondering now: Under what conditions is BT charged in area's where there is no ULL available? Is Openreach charging BT the fee they would charge the Wholesale Broadband Access providers? If so, than why doesn't BT complain about the iPlayer seriously hurting margins? Or is it a ULL provider everywhere in the UK and doesn't it feel the pain on its backbone? Doesn't it need to pay the high backhaul charges. Or better yet part BT's backhaul is paid for by the rising charges for the backhaul of the WBA-providers.

Maybe somebody can explain things to me. There might very well be no conspiracy here. :-) And though it might explain the position of the likes of Tiscali, it still doesn't put them in the right. (It might put Ofcom on the spot!)


Alex said...

Well, it makes no sense to talk of BT being a non-LLU provider or whathaveyou; it doesn't have to ATM tunnel traffic on its own network, clearly.

But it does have to pay Openreach (but then, this is an accounting shuffle within BT).

Jeremy Penston said...

Hi Raindeer,

Sorry I just got to this piece now - I had a holiday at the end of August and that seems so long ago!!

Simple answer to why doesn't BT complain: because they are the ones benefiting from the the £150 per Mbps (through Wholesale). Yes their retail arm also pays this figure (nominally) but that is zero sum to BT Plc, right?



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