Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Supplementary memorandum submitted by BT


  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 licensed operators.

  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 increases.

  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,, 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.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 1 May 2002