BT's Bonfield rejects calls for lower ADSL prices
Published: 03 Oct 2001 13:06 BST
Sir Peter Bonfield, chief executive of BT, has warned that ADSL pricing is unlikely to fall in the foreseeable future, and called upon the government to implement the advice of its own broadband taskforce.
Giving the 2001 Hinton Lecture at the Royal Academy of Engineering, Bonfield denied that BT was to blame for the low take-up of broadband packages in the UK. Bonfield claimed that -- with 13 million homes now connected to an ADSL-enabled exchange -- it was time for the Government to help boost awareness of the benefits of a fast, always-on Internet connection, and to push broadband rollout within the public sector.
In a move that will disappoint those hoping for cheaper high-speed access -- including e-commerce minister Douglas Alexander -- Bonfield claimed that it didn't make sense for a commercial organisation such as BT to lower the cost of ADSL, at least not until there are many more customers for the service. "When we've got a return on our capital expenditure then we can go back and lower the price, because we'll have shown that broadband works as a business proposition," he said.
Last week Alexander said that BT should exploit its investment in ADSL "more aggressively", and set prices low enough to "bring broadband to the masses." Bonfield claims that the current regulatory structure -- where Oftel attempts to maintain a level playing field so all companies can compete fairly to offer broadband -- makes this difficult.
"We reduced the price of our wholesale ADSL offering from £35 to £30 per month recently," Bonfield said. "Some people in government welcomed this, but then Oftel started saying 'hang on, this could be unfair pricing'. So, BT is accused of setting its prices too low, and also criticised for charging too much for ADSL," Bonfield said.
An Oftel spokeswoman, however, denied that it was investigating this price cut. "We welcome lower pricing for consumers and service providers, unless it conflicts with BT's obligations under its licence or under competition law," she said.
A BT spokesman later explained that the company often had to go through lengthy procedures before it could launch a product or announce a price cut, because under the regulatory framework it must make a profit on everything it sells. "This can be a bit cumbersome when we're trying to compete, as our rivals aren't constrained by this," the BT spokesman said.
BT's chief executive believes that Alexander, who was only made a minister back in June, should concentrate on the recommendations made last week by the Broadband Stakeholder Group. "The government should read the report of the Broadband Stakeholder Group, and act upon it," he said.
This report is packed with recommendations to the government as to how it can increase broadband rollout. These include providing credits to schools to allow them to buy online broadband teaching resources, setting up a fund to subsidise the creation of innovative broadband content and reducing the cost of building broadband infrastructure.
However, in his response to the report, Alexander's comments concentrated on what he thought BT should be doing, even though BT was only mentioned once in the Broadband Stakeholder Group's report. The telco is understood to be less than happy about Alexander's comments, with a spokesman pointing out that BT had already announced several price cuts recently, and that regulation prevented it offering ADSL at the same price that ntl and Telewest sold its cable broadband product.
Earlier this week, NetValue released Europe-wide figures showing the percentage of home Internet users that had a broadband connections. With just 2.3 percent, the UK was behind Sweden, Denmark, Germany, France, Spain and Norway.
According to Bonfield, it will take between three and four years before 25 percent of the UK's home Internet users are signed up to a broadband offering. A BT spokesman later told ZDNet News that this prediction didn't mean that the government's aim of making the UK the leading broadband nation within the G7 would fail. However, in his speech, Bonfield described this as "a stretching target".
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