The UK Broadband War - Series 2, Episode 2
With the UK tuning into Free Broadband (but now we can’t say Forever), I would have placed a large bet that penetration of Broadband Britain would pick-up – not so.
According to BT’s 1Q results to June 2006 released today: net broadband adds for BT Wholesale were 311k and LLU full or partial lines were 222k giving a total of 533k “BT Copper DSL adds for the quarter. However, in the Quarter to Mar 2006, BT Wholesale added 682k and there was 164k full or partial LLU giving a total of 846k.
In other words the rate of growth of penetration is actually slowing!!
However, full and partial LLU is increasing with the run rate now at about 2.5k/day up from 1.8k/day. Again, this is surprising as Bulldog has withdrew from the market and TalkTalk hasn’t actually LLUed anyone yet. The only explanation, I can think of is that the big broadband ISPs (AOL, Tiscali and Wanadoo) are actually pressing ahead with partial unbundling of customer lines as they build out their LLU infrastructure. This is great for their profitability, unless the customer flips to “free” brigade before they have recouped the Openreach charges.
The TalkTalk Almost Free Broadband Offer now has 476k signed up (as at 26th July) from the launch date on 11th Apr. The previous statistics release on the 5th June was 340k which implies the sales rates has slowed from 6.18k/day to 2.67k/day. This is still pretty good if you consider BT Retail is adding 1.72k/day (though this is net and BT suffer from churn). Carphone Warehouse (CPW) are also reporting that 40% of people taking up the offer come are existing broandband customers, in other words 190k are churners. This is incredible, especially when you consider that quite a lot of people will be within contract terms and therefore cannot currently churn. Also surprising is that 81k (17%) are actually outside the unbundled areas and paying £10/month extra for the really-not-free product. It is hardly surprising that Dunstone is relatively comfortable that CPW will end up unbundling more exchanges than forecast. Currently, I envision CPW as a hive of activity will the engineers busy unbundling and adding capacity to the Opal network, the call centre people dealing with queries and it is obvious that this is creating Dunstone more than a few headaches which he is admirably quite happy to admit to. However, I suspect the cause of his nightmares is whether he has got the maths correct on the economics of broadband – the telecom history books are littered with examples of new entrants who underestimated support and capex costs, saw pricing decline much faster than expected and had investors turn off the funding tap.
BT Retail have maintained their market share of net adds at around 30% (absolute 158k) which implies to me that that the big ISPs are losing market share rapidly and this is before the Sky "upload/download/save loads" effect kicks in. I think people are underestimating the Sky machine – Dunstone was quite derogatory saying “Sky is only for 8% of the population” when an analyst asked a question. He also was quite rude to his mobile customers saying he is surprised by their level of subsidy for small spending prepaid customers. He should know – his MVNO business in the UK is going nowhere fast: only adding 19k subscribers in the quarter to June and is probably still burning cash at the same rate as before.
One thing is for sure – the Orange Free* Broadband offer (*only for people who spend more than £35/month) hasn’t improved the position of Wanadoo who, according to the France Telecom 2Q results, now have 1,004k customers - a meagre net add figures of 18k or 3.4% of the market. Whether the reason for this is that people haven’t taken up the free broadband offer or that the existing Wanadoo base are churning to the TalkTalk offer (eg me) or the almost free Sky offer. The evolution of this are going to be fascinating because Murdoch Junior and Dunstone are adamant that the bundle of mobile and home broadband will not work. Meanwhile, France Telecom is setting the target of “adjusting the cost structure” as the main priority with profitability of the mobile operation dropping to 26.2% - will this result in commission drops for the Carphone Warehouse.
I’ll be looking out for the Tiscali, AOL and the smaller ISP results (Pipex + PlusNet) as I feel a radical reshaping of the market is starting to happen. I feel there still have a few mysteries yet to be solved.
• Will the C&W Wholesale LLU package be renamed the C&W Nosale LLU package?
• Who will buy Tiscali and AOL?
• Will they have any customers left at sale time?
• How much value is declining in the AOL UK property per day?
• When will O2 launch?
• What cards (if any) do T-Mobile & Vodafone have up their sleeves?
• Will ntl go bust trying to fight off BT/Freeview and Sky?
These questions - and many others - will be answered in the next episode of UK Broadband Wars.
According to BT’s 1Q results to June 2006 released today: net broadband adds for BT Wholesale were 311k and LLU full or partial lines were 222k giving a total of 533k “BT Copper DSL adds for the quarter. However, in the Quarter to Mar 2006, BT Wholesale added 682k and there was 164k full or partial LLU giving a total of 846k.
In other words the rate of growth of penetration is actually slowing!!
However, full and partial LLU is increasing with the run rate now at about 2.5k/day up from 1.8k/day. Again, this is surprising as Bulldog has withdrew from the market and TalkTalk hasn’t actually LLUed anyone yet. The only explanation, I can think of is that the big broadband ISPs (AOL, Tiscali and Wanadoo) are actually pressing ahead with partial unbundling of customer lines as they build out their LLU infrastructure. This is great for their profitability, unless the customer flips to “free” brigade before they have recouped the Openreach charges.
The TalkTalk Almost Free Broadband Offer now has 476k signed up (as at 26th July) from the launch date on 11th Apr. The previous statistics release on the 5th June was 340k which implies the sales rates has slowed from 6.18k/day to 2.67k/day. This is still pretty good if you consider BT Retail is adding 1.72k/day (though this is net and BT suffer from churn). Carphone Warehouse (CPW) are also reporting that 40% of people taking up the offer come are existing broandband customers, in other words 190k are churners. This is incredible, especially when you consider that quite a lot of people will be within contract terms and therefore cannot currently churn. Also surprising is that 81k (17%) are actually outside the unbundled areas and paying £10/month extra for the really-not-free product. It is hardly surprising that Dunstone is relatively comfortable that CPW will end up unbundling more exchanges than forecast. Currently, I envision CPW as a hive of activity will the engineers busy unbundling and adding capacity to the Opal network, the call centre people dealing with queries and it is obvious that this is creating Dunstone more than a few headaches which he is admirably quite happy to admit to. However, I suspect the cause of his nightmares is whether he has got the maths correct on the economics of broadband – the telecom history books are littered with examples of new entrants who underestimated support and capex costs, saw pricing decline much faster than expected and had investors turn off the funding tap.
BT Retail have maintained their market share of net adds at around 30% (absolute 158k) which implies to me that that the big ISPs are losing market share rapidly and this is before the Sky "upload/download/save loads" effect kicks in. I think people are underestimating the Sky machine – Dunstone was quite derogatory saying “Sky is only for 8% of the population” when an analyst asked a question. He also was quite rude to his mobile customers saying he is surprised by their level of subsidy for small spending prepaid customers. He should know – his MVNO business in the UK is going nowhere fast: only adding 19k subscribers in the quarter to June and is probably still burning cash at the same rate as before.
One thing is for sure – the Orange Free* Broadband offer (*only for people who spend more than £35/month) hasn’t improved the position of Wanadoo who, according to the France Telecom 2Q results, now have 1,004k customers - a meagre net add figures of 18k or 3.4% of the market. Whether the reason for this is that people haven’t taken up the free broadband offer or that the existing Wanadoo base are churning to the TalkTalk offer (eg me) or the almost free Sky offer. The evolution of this are going to be fascinating because Murdoch Junior and Dunstone are adamant that the bundle of mobile and home broadband will not work. Meanwhile, France Telecom is setting the target of “adjusting the cost structure” as the main priority with profitability of the mobile operation dropping to 26.2% - will this result in commission drops for the Carphone Warehouse.
I’ll be looking out for the Tiscali, AOL and the smaller ISP results (Pipex + PlusNet) as I feel a radical reshaping of the market is starting to happen. I feel there still have a few mysteries yet to be solved.
• Will the C&W Wholesale LLU package be renamed the C&W Nosale LLU package?
• Who will buy Tiscali and AOL?
• Will they have any customers left at sale time?
• How much value is declining in the AOL UK property per day?
• When will O2 launch?
• What cards (if any) do T-Mobile & Vodafone have up their sleeves?
• Will ntl go bust trying to fight off BT/Freeview and Sky?
These questions - and many others - will be answered in the next episode of UK Broadband Wars.
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