Business community angered by BT price hikes
Just months after a major cable fire in Manchester wiped out more than 130,000 BT phone lines in the city centre, BT's decision to hike the cost of its business-grade broadband packages by up to 33 per cent from September 1, has stunned the Manchester business community.
The prices of IP Stream, BT's wholesale business broadband packages, have been falling steadily over the past few years. So this change in direction has come as a nasty surprise to many small to medium ISP’s currently competing in the UK broadband market. Not least because the telco giant has given only the mandatory minimum notice of 28-days to comply.
As ISPs struggle to come to terms with the changes it looks likely that price increases will be passed onto end users. However, some ISPs have already said they will not pass the price rises onto consumers.
Lawrence Jones, Managing Director of UKFast says: “One of the major factors behind the current boom in broadband take-up in Britain has been a sharp drop in prices and we’re adamant that these price increases will not affect our customers. We’re one of the fastest growing ISPs in the North West and ADSL broadband is just one of many products in our portfolio. We intend to absorb these increases so our clients will not be affected.”
However, this raises an important question as to whether other ISPs will be able to take the same tack without being pushed out of business.
Refusing to go under without a fight, over 70 ISPs have now banded together into a new organisation called the UK Internet Federation (UKIF).
"BT Wholesale has 90 per cent of the DSL market, and Ofcom is at best ineffective and at worst supportive of the monopoly it is charged with regulating," says UKIF spokesman Stephen Dyer, according to ADSLGuide.org.uk.
"Allowing BT unconstrained control of the wholesale price of broadband will severely hinder the development of the Internet industry as a whole, and can only serve to restrict consumer choice and raise end-user prices," added Dyer.
So far, BT has declined to go into too much detail concerning the unwelcome price hikes, but its official announcement to ISPs cites “regulatory obligations” as the motivation.
According to industry insiders, the price review may have been prompted by an ongoing official investigation into competition issues by telecom regulator, Ofcom.
BT has refused to comment on the suggestion that it had made these price rises now because it knew that Ofcom would force it to make them anyway.
"Our intention is to enable other telco’s to enter the market. By increasing the cost of all business broadband tariffs, it allows greater headroom for the three or four companies wanting to compete with BT in the ADSL wholesale market," says Dave Clarkson, Technical Adviser and Project Manager for Ofcom.
Lawrence Jones, who has debated this matter with Clarkson, is not impressed with what he heard.
“Increasing prices to over a million business users in the UK, at this time seems quite wrong. We’ll shield our customers from them – and I’d be more impressed with BT’s behaviour as a supplier if they found ways of doing the same," says Jones.
"The changes being pushed through will sting all but the very largest of ISPs. Already I’ve seen newcomers to the market advertsing advertising prices in the Internet press lower than cost. Ofcom says it’s trying to increase competition but it is having an opposite effect. It's a blow to the entire industry," added Jones.
The UK's Internet Service Providers Association (ISPA) is currently locked in talks with Ofcom and BT to discuss the negative impact their announcement has had on the industry. But while the storm rages, there is nothing much the industry can do apart from hold its breath. This is a battle where nothing is what it seems, but one thing’s for sure - BT can expect a fight on their hands.
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