ISPA asks BT to think again about proposed Usage Based Charging prices
Wednesday, 15 September 2004
Current price suggestions not a viable alternative for Small ISPs
ISPA representatives and members attended a meeting on Friday, 10th September 2004 at which BT Wholesale offered its ISP customers the first information on pricing of BT’s proposed Usage Based Charging (UBC) scheme for IPStream.
The UBC scheme is due to complement the recently introduced Capacity Based Charging (CBC) scheme. Many ISPs hope that UBC will offer an affordable alternative CBC given that IPStream services were recently subject to significant price increases.
At the meeting, BT provided calculations on three possible price points – £0.33, £0.45 and £0.58 per kilobit per second per month. At present BT cannot give a commitment that the final price will be within this range. BT also stated that any final price they propose will be subject to scrutiny and possible change by Ofcom. ISPA is concerned that BT will not be able to make the final price available for some time.
ISPA is calling on BT to revisit the proposed UBC pricing model that at present places UBC at 65 per cent more expensive than CBC and puts the existence of small ISPs (SME ISPs) in jeopardy.
ISPA is also concerned that whilst end users expect retail prices for Internet services to remain the same for anything up to a year, BT can change any of its wholesale prices by giving only 28 days notice.
ISPA would like BT to answer the following questions on the indicative prices the carrier outlined.
1) At present the suggested price range is quite broad, and the upper end of the price range is nearly double the lower end. Why is BT unable to provide a narrower range of prices that will effectively indicate where the final UBC price will lie?
Peter Milford, Corporate Manager of ISPA Member NewNet said, “It’s good to see that BT have come forward with a suggestion on UBC, but the actual price must offer a credible alternative to CBC if UBC is going to be successful. At present, the current system doesn’t make sense. The whole process with standard and capacity based charging acts against SME ISPs. For UBC to offer a credible alternative it must be pitched at the lower end of the levels suggested by BT. We recognise that any figures are going to be subject to Ofcom’s margin squeeze test, but it worries us that this may delay the implementation of UBC.”
2) Why are the indicative prices so high when international transit prices imply they should be a lot lower?
James Blessing, Technical Director of Zen Internet and member of the ISPA Council said, “33p per kbps per month equates to £330 per megabit per second per month. If you've ever bought global transit from a tier one provider you'll pay around $100 - yes US dollars – per megabit per second per month to transfer data around the world if you commit to using 50Mbps minimum. I don’t understand how BT can even think of charging over five times the price of international data transfer for just moving IP traffic round the UK.”
3) BT seemingly wants to charge a premium because it believes it is bearing a risk in providing the bandwidth, but at the same time BT is proposing to charge on peak usage. How can BT justify this and why can't charging be based on average usage rather than peak usage?
Matthew Hare, Chair of the ISPA Broadband Sub-Group and Managing Director of Community Internet said, “At present BT are contradicting themselves. If BT is taking the risk, it would be proposing a scheme that is based on charging for the average amount of data transferred. Under this proposal ISPs are actually taking the risk because they are paying for any peaks in bandwidth needs of their end users. Such peaks can occur when there are significant security downloads needed for end user’s PCs, when there is a new virus or even when there is a popular online event, such as a download promotion or a popular streamed event like an online concert.”
At the meeting, BT announced that they would be doubling the number of session limits on 155MB pipes and above. At present all ISPs have a limit to the number of businesses or homes that can go online.
Mr Hare continued, “By doubling the limit on the big pipes, BT are proposing yet another advantage to their biggest customers, yet they are still proposing the same session limits for SME ISPs who often only use 34MB pipes. SME ISPs are likely to be severely hit by this. Not only do they not get the breaks of the larger ISPs, but as the majority of SME ISPs primarily serve business customers that often use routers, their customers’ connections will always be active. This will leave the ISP with a large bill or unused capacity. BT should create a level playing field for all ISPs to ensure effective competition in the UK Internet industry.”
BT has agreed to meet with ISPA at the end of this month to answer these questions and to offer some concrete measures to alleviate the IPStream price increase for ISPA's SME ISP membership.
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The views expressed in this release are those of the Internet Services Providers' Association (ISPA UK) and do not necessarily reflect the corporate policies of the individual companies that are members of the Association or other organizations that may be mentioned in the release.
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About the Internet Services Providers’ Association
The Internet Services Providers’ Association (ISPA) was established in 1995 as a trade association to represent providers of Internet services in the UK. ISPA promotes competition, self-regulation and the development of the Internet industry. For a list of members or other information about ISPA, please consult the website: www.ispa.org.uk