Supplementary memorandum submitted by
1. In our oral evidence session before the
Committee on 5 February 2002, we explained that we expected to
announce some new initiatives within a matter of weeks. Those
initiatives were revealed on 26 February, with more details being
announced subsequently, and this memorandum updates our earlier
statements accordingly. The main elements of our announcements
were as follows:
2. Target: we are targeting one million
connections on BT's own network for flat rate, always-on, ADSL
broadband products by the summer of 2003: to date over 150,000
users have been signed up by BT's 200 wholesale customers, up
from 40,000 a year ago, and there are encouraging signs that demand
has increased significantly.
3. Wholesale Prices: The price of BT Wholesale's
main consumer product to service providers (BT IPStream 500) will
drop from £30 a month, or £25 a month for the recently
introduced self-install version, (BT IPStream Home) to £14.75
for both. Rental for existing ADSL wholesale customers of these
services will also drop to £14.75.
4. A review of BT Wholesale's entire price
list for ADSL broadband products has been completed and changes
have been notified to Oftel to come into effect on 1 April. This
also reduces significantly the prices of ethernet business products
for service providers and BT Datastream products aimed at other
5. These price changes will provide all
service providers with an opportunity to lower charges substantially
to their residential and business customers.
6. As we explained at the oral evidence
session, we have achieved the price cuts by a combination of lower
input costs and higher volume projections. Technology procurement
costs have dropped with volume demand for ADSL technology from
around the world; core IP costs have fallen, and sustained customer
service improvements have significantly reduced engineering costs.
7. Retail Prices: Following the Wholesale
announcement, service providers such as Freeserve and Pipex quickly
announced their own price reductions. BT's own internet service
provider, BTopenworld, launched its new Plug and Go self-install
broadband product on 5 March with a low monthly rental of £29.99
and free line activation as a special offer for orders placed
before 31 May and delivered before 30 June. Customers also require
ADSL equipment at a one-off cost of £85. BTopenworld also
announced that prices for existing customers would fall from £39.99
a month to £29.99 a month from 1 April. Prices for business
products also fell significantly.
8. Market stimulation: A new BT Wholesale
marketing campaign was launched on the day of the announcements,
to stimulate end-user demand through generic promotion of broadband.
BT Wholesale is also giving financial support to assist the marketing
campaigns of more than 40 service providers who sell broadband
services using BT's wholesale ADSL products. This consists of
support for advertising and direct mail as well as consultancy,
data analysis and call centre support. Extensive marketing by
service providers to end-users is expected.
9. BTopenworld, which is only one of the
many service providers which use BT Wholesale's products, announced
on 7 March its own, separate multi-million pound integrated marketing
programme to drive broadband take-up in both business and consumer
markets. The campaign will include TV advertising, national and
special interest press adverts, an online campaign and the distribution
of broadband discs to give consumers everything they need to register
for broadband quickly and easily.
10. Customer experience: BT Wholesale will
continue to develop innovative systems that will enable service
providers to improve service to all broadband users. Service level
agreements ensure provision commitments to service providers are
met and sophisticated systems are being piloted with more than
20 service providers to provide a better flow of orders and lower
provisioning costs as well as benefits such as on-line order tracking.
Network resilience is being built-in to handle the anticipated
11. Expansion: BT intends to expand its
existing broadband availability beyond the 1010 largely urban
exchanges already enabled, where clear demand indicates commercial
viability or where there is the opportunity for a partnership
with others. Partnerships are being sought with Regional Development
Agencies, local authorities and other business and public sector
alliances to stimulate and meet demand.
12. Satellite: BTopenworld has extended
its high-speed two-way satellite service to the whole of the UK
from 25 March, following successful trials in Northern Ireland
and the Highlands and Islands of Scotland, allowing companies
in areas without ADSL coverage to benefit from fast internet access.
At the same time, prices have been reduced with, for example,
single-user monthly rental coming down from £69.99 to £59.99.
13. Content: Customers need compelling content
to encourage them to move up to broadband and the content industry
needs to be stimulated to produce this new material. As one of
the leading service providers, BTopenworld continues to explore
options in this area. For example, it announced on 6 March that
it had agreed to purchase Europe's most popular music site, dotmusic.com,
following on from the January launch of the BTopenworld Classical
service. These deals, in combination with the earlier acquisition
of the games site Games Domain, demonstrate BTopenworld's commitment
to providing attractive content for its customers.