The BT Offering - IPstream & Next Generation Services - Footprint v Usage
BT provides great coverage with IPstream having the largest footprint of any broadband operator. The tail prices are competitive, at least in the Ofcom market 3 areas, which cover around 70% of the country. The bandwidth price doesn’t benefit from any market 3 discount though, which means that for heavy users these products can seem very expensive. BT have also started to make significant strides forward with their 21CN based ‘Next Generation’ broadband services, now available to 40% of the population. Thanks to the underlying all-Ethernet backhaul network, the cost base for the bandwidth is much lower, which means that this product provides both a competitive tail and bandwidth price, albeit with a limited footprint.
The LLU Offering – Competitive with Additional Features
The LLU operators are ahead of BT with their Next Generation Networks and so have been offering competitive tail prices and bandwidth for some time and have a larger footprint than Wholesale Broadband Connect with similar pricing – although still not as wide reaching as IPstream. They are also offering some products that provide additional features such as guaranteed bandwidth, QoS and higher upstream which attract a premium in terms of price and serve as the key differentiator.
Fibre Optic Provider – Potential Leased Line/Ethernet Replacements
There is only one wholesale fibre optic broadband offering and that is from BT. This product which is priced at a similar level to the copper broadband is available in variants that offer up to 40Mb/s downstream and 10Mb/s upstream. With capabilities like this, the product is knocking on the door of low speed Ethernet services or leased lines. This is a truly disruptive technology that requires a huge capital investment because it relies on fibre optic capacity from the exchange to every street cabinet and then broadband MSANs being installed in every street cabinet. There is a lot of speculation that BT might actually slow down the rollout of copper broadband services (where there is lots of competition and little opportunity to differentiate) and accelerate the rollout of fibre optic broadband (where there is little competition). Of course, large scale, capital intensive infrastructure projects are what BT is good at.
How will the LLU Operators Compete?
Well, their existing investments in copper loop equipment will limit them to a maximum of around 20Mbit/s downstream and 2.5Mbit/s upstream over a single copper loop. Achieving performance like this is limited to those customers located relatively close to the telephone exchange; the average downstream rate is more like 5Mbit/s across the UK. It seems to me that if they want to continue to meet the ever increasing bandwidth demands of business customers that they have three choices.
1: Innovate
All the LLU operators have invested in space in the exchanges, backhaul capacity and copper termination equipment. The thing that limits the bandwidth that can be delivered over a copper cable is the length and thickness of the cable. One way for LLU operators to deliver higher bandwidth services would be to use more than one cable. They could then deliver bonded ADSL services or bonded EFM (Ethernet First Mile) services. EFM would provide a service that would compete directly with low speed Ethernet leased lines and FTTC.
2: Invest
There is nothing to stop the LLU operators investing in their own fibre optic local loop network and going head-to-head with BT Group. However, I’m not sure that the capital markets would be particularly supportive of any of the competitive operators spending the money that would be required to make this a reality.
3: If you can't beat 'em
Of course, the LLU operators could simply use BT’s wholesale fibre optic broadband services, but it is hard to see how they could differentiate themselves sufficiently, except perhaps through price. It would certainly be difficult to differentiate on quality or features.
How can Resellers benefit?
Partner with an aggregator who has relationships in place with all of the key players to ensure that as products develop you can package them up and sell them under your own brand. When SMEs start to move their desktop applications into the cloud en masse it will be even more critical for you to own the access into your customer base. Recurring revenues billed in your own name are vastly more valuable when you come to sell your business and by choosing a channel-only Partner now that has a practical vision and a roadmap to hosted applications you can focus on selling and leave the investment and innovation to them. One last thing, unless your ISP can extend MPLS functionality right out to your customers you will not be able to manage applications using QoS (Quality of Service). Most tenders for IPVPNs these days specify MPLS for this reason. Ask the question of whoever’s IPVPN you are thinking of selling as getting this wrong will limit your ability to supply applications to the cloud when your customers need them.
Source: Comms Business February 2010.
Adrian Sunderland
