The new pricing structure is intended to come into effect from May 2007 - at which point BT believes the UK will have achieved 1.5 million LLU lines – and will be implemented in two stages. The unveiling of the proposals will enable service providers to plan ahead.
From May 2007, service providers will see the rental charge for the most highly used wholesale broadband product – BT IPstream – reduced by 9 per cent, with the price coming down from £8.40 per line per month to £7.63. This price is expected to be reduced further in the second round of changes planned for January 2008.
There will also be further savings for service providers at high density exchanges. The current rebate scheme that applies at 561 of these exchanges is set to be revised to cover 1,016 exchanges. The level of this rebate is also set to increase from £1.10 to £1.24 from May 2007. The rebate reflects the lower cost of providing broadband in these areas.
The increase in the rebate – combined with the lower rental price - will reduce the net monthly rental price (i.e. rental less rebate) in these exchanges from £7.30 to £6.39. This is a reduction of 12.5 per cent. Further increases to the rebate are also planned from January 2008.
Cameron Rejali, BT Wholesale managing director for products and strategy, said: “These pricing proposals will help our ISP customers develop their business plans and compete effectively in the broadband market. The proposed prices better reflect the economies of scale and input costs we face, meaning we can deliver lower average costs to ISPs. The industry has been waiting to hear how we will enable them to compete with the local loop unbundlers and so these proposals should allow them to plan ahead.”
Service providers choosing the BT Datastream product - a simpler service than that provided by the BT IPstream product - are also set to benefit from the revised rebate scheme. The existing rebate of £1.15 for connections to the current 561 exchanges will be extended to the 1,016 designated exchanges. This will effectively reduce the rental charge per end user from £7.05 to £5.90 in those areas from May 2007.
BT Wholesale has started to purchase the LLU product and will consequently be charged for the provision and cessation of a line from Openreach. From May 2007, BT Wholesale intends to reflect these charges through connection and cessation charges for its service provider customers. As a result, the connection charge for BT IPstream and BT Datastream products will come down from £40 (ex VAT) to £34.86 (ex VAT) reflecting the charges from Openreach.
A cessation charge is also set to be introduced where service providers order the termination of service on an end user’s line. This charge of £33.75 (ex VAT) reflects the input costs from Openreach. The cessation charge will not apply when a consumer wants to move from one service provider to another and both service providers use the MAC process. BT’s aim is to encourage more service providers to participate in the MAC process, which is designed to make it simpler for consumers to move from one service provider to another. The cessation charge will also not apply where there are bulk migrations to LLU.