BT Wholesale to charge ISPs less

BT Wholesale has announced plans to cut wholesale broadband pricing and help ISP customers compete with the local loop unbundlers (LLUs). From May 2007, the price of BT's most popular wholesale broadband product, BT IPStream, will be cut by nine percent, from £8.40 per line per month to £7.63, with a further reduction scheduled for January 2008.

BT Wholesale also said the rebate scheme that is designed to reflect the lower costs it incurs when providing broadband from so-called high-density exchanges will now apply to 1,015 exchanges, up from 561, and will be increased from £1.10 to £1.24, a cost reduction of 12.5 percent overall, BT said.

Current Analysis analyst Sandra O'Boyle said, "This gives BT reseller ISPs a bit more pocket money to play around with if they need to counter a strong LLU offer – but most likely they'll hold off on spending it."

The rebate for BT Wholesale's Datastream wholesale broadband package, currently at £1.15, will also be extended to the 455 newly eligible exchanges, reducing rental charge per end-user from £7.05 to £5.90.

BT Wholesale also said that it has started to purchase the LLU product from Openreach and from May 2007 would therefore be charged £34 + VAT for provision and similar for cessation of the line by Openreach. Customers moving to cable from broadband could therefore be hit by a cessation charge. BT Wholesale's products and strategy managing director, Cameron Rejali, said it would be up to ISPs whether they would pin this charge on the customer. ISPs using migration access codes to switch customers will not incur this charge.

The new pricing scheme has drawn fire from ISPs such as Tiscali, which is calling for a review by Ofcom. "Without a review of Datastream pricing the new wholesale IPStream pricing must surely fail the margin-squeeze test determined by the regulator and designed to encourage deeper competition," a Tiscali spokesman said.

Rejali refuted this, saying, "In formulating our pricing scheme we did share this with Ofcom and so I'm confident we did pass the margin squeeze test." The margin squeeze test links IPStream pricing to Datastream pricing to maintain a level playing field.