Carphone mum on 'free broadband' speculation

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From The Register

Carphone mum on 'free broadband' speculation
Big song and dance planned
By Tim Richardson
Published Monday 27th March 2006 11:20 GMT

Execs at the Carphone Warehouse are said to be mulling the idea of offering broadband for free as part of a bundled phone package.
The retailer-cum-telco is expected to release details of its broadband strategy shortly following confirmation earlier this year that it plans to press ahead with plans to invest £45m in local loop unbundling. Following its acquisition of OneTel and the UK and Ireland business on Tele2, Carphone has some 2.4m punters and is keen to make an impact in the phone and broadband market.

An announcement about its broadband strategy was due to be made in March although there is speculation now that this will slip to April. According to trade mag Mobile, Carphone is due to unveil details of its broadband service on April 11 ahead of a summer launch backed by a massive ad campaign.

As part of its bod to shake-up the market, the firm is mulling the idea of giving broadband away for free to its TalkTalk punters, reports the paper citing sources close to Carphone, or making free calls available to broadband subscribers.

Either way, the report claims that Carphone's announcement is "expected to send shockwaves through the broadband market".
A spokeswoman for Carphone declined to comment on what she described as "speculation" and wouldn't even be drawn on when an announcement would be made.

However, industry insiders have told El Reg that they remain sceptical about any "free broadband" give-away because the numbers just don't add up. If Carphone did launch a free broadband service then it would most likely be a short-term gimmick, they said. ®

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From The Times

Carphone's broadband launch set to shake BT
By Elizabeth Judge

CARPHONE Warehouse is preparing a fierce attack on BT with the expected launch next month of Britain’s first “free” high-speed internet service.

The high street phone retailer, which wants to become the main domestic rival to BT, is hoping to woo customers with a combined package of free calls, line rental and broadband, which analysts believe will be priced at less than £25.

BT’s current cheapest offer for line rental and all-inclusive calls, its BT Together Option 3 package, is £25.50 a month - without broadband. That will allow Carphone to promote its offer as one in which broadband is thrown in free.

The plans, which are expected to be laid out at an analysts’ day next month, will come as a blow to BT, which is already under pressure in both its traditional calls and broadband markets.

BT is also facing the threat of local loop unbundling (LLU) - the process by which rivals move into its exchanges and offer their own services rather than reselling BT’s.

There is also a number of other powerful broadband competitors. BSkyB, the satellite broadcaster in which News Corporation, parent company of The Times, owns a 37.9 per cent stake, recently acquired Easynet, the internet business, in an attempt to mount an assault on the broadband market.

Charles Dunstone, chief executive of Carphone, has already said that he plans to invest millions of pounds in installing his own broadband internet equipment in BT’s exchanges under the LLU process. This will give Carphone more control over the services and prices it offers to customers, and allow it to pass on any savings. Mr Dunstone has said that only those players that move into LLU will be able to compete in the future.

Yesterday Mr Dunstone said he could not comment on the details of the new broadband package because they were commercially sensitive.

Since it was launched in 2003, Carphone’s TalkTalk domestic phone brand - which offers customers free calls to other Carphone users - has built up more than one million customers.

Its broadband service, TalkTalk Broadband, launched in 2004, has so far signed up just 75,000 customers but analysts say that the company, with its strong brand and its network of high street stores, has huge potential to build its customer base.

It is understood that Mr Dunstone, who will start to unbundle exchanges in July, is still weighing up the details of the new combined service. He is thought to concede that the economics of significantly undercutting BT are difficult.

However, the group has emphasised that it is taking a “retailer’s attitude”, which analysts believe indicates that it will target volume of customers more than margin. Because of strict price controls BT is currently unable to offer some of the packages of services that its rivals can. These controls are being removed but not until August.

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From The Sunday Times

Carphone faces uphill battle on free broadband
Paul Durman

RIVAL broadband companies are deeply sceptical that Carphone Warehouse will be able to meet the huge demand from customers for “free” high-speed internet access.

Some have warned that the mobile-phone retailer’s inexperience in delivering broadband risks alienating thousands of its customers — a problem encountered by Bulldog Communications, part of Cable & Wireless.
NI_MPU('middle');Carphone’s Talk Talk subsidiary last week launched “free broadband forever” — bundling 8 megabit per second internet access with a package of unlimited voice calls for a price of £20.99 a month.

To deliver the service, Talk Talk plans to install its own broadband equipment in 1,000 BT exchanges, and to have 200 operational by July.

However, the process of switching customers away from BT is complex, involves many different parts of BT and is prone to break down — leaving customers without their broadband service. BT is supposed to be introducing a new automated system by the end of June, but some broadband firms suspect it will not be ready in time.

Boris Ivanovic, the founder of Be, one of the firm’s furthest ahead with “unbundling” local exchanges, said: “I think (Carphone) is over-optimistic in terms of how it’s going to go. A lot of people are talking about unbundling but very few have done anything. Carphone are talking about what they wish to do. They don’t have any particular experience to say whether it’s possible.”

Talk Talk’s existing broadband customers are supplied by reselling BT’s wholesale product. Ivanovic said: “The knowledge you need for unbundling is orders of magnitude more complex than just reselling. Running a network with 1,000 nodes in exchanges when their ambition is to add millions of customers, the complexity is very different.”

Ivanovic built a successful broadband company in Sweden before setting up Be 18 months ago. He said this experience gave his team knowledge of the myriad ways in which things can go wrong, and to plan accordingly.

Be is now unbundling one or two exchanges a day. It is operational in 113, and will go live in Manchester on Tuesday. Ivanovic said the only firms with more exchanges unbundled were Bulldog with 430 and Easynet with 230.

AOL, Wanadoo and Tiscali are all seeking to install their own broadband equipment to allow them to compete more effectively. But their desire for a rapid roll-out is restricted by the complexity of the process and the need for manual intervention by BT’s engineers.

Unless Talk Talk’s unbundled exchanges are in place by July, it will cost the firm more money to supply its customers, because it will have to buy BT’s more expensive wholesale broadband product. Charles Dunstone, Carphone’s chief executive, said last week that he “will chase BT to the end of the world” to recover any additional money he has to spend.

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From The Sunday Times

Cost of broadband internet set to plummet

Price cuts are on the way as a ‘free’ offer by Carphone Warehouse shakes up the market, says Clare Francis

THE cost of broadband is expected to tumble after Talk Talk, Carphone Warehouse’s home-phone service, last week announced it would offer free internet access — at a price.

People who sign up to Talk Talk’s Talk 3 International Call tariff will get broadband with a speed of up to 8 megabits (Mb) a second included for no extra cost in the package. Customers can also make unlimited free calls to any landline in Britain, Europe, Australia, New Zealand, Canada and America.

The cost for the deal is £20.99 a month — including line rental of £11 a month — plus an initial £29.99 set-up fee for new customers. Existing Talk Talk customers who already pay the company for their line rental will not have to pay this fee if they switch over to Talk 3 International Call. This makes it the most competitive home phone and broadband bundle available.

About 10m households have broadband access and the number is growing by 80,000 a week, according to Ofcom, the telephone regulator.
Carphone Warehouse has only 75,000 broadband customers, against 2.3m for BT Retail and 2.8m with NTL. The decision to launch this package is therefore a clear signal it wants to be a bigger player in the market. But industry analysts are advising people to think carefully before signing up.

Karen Darby at Simplyswitch.com, a comparison service, said: “Broadband prices have already fallen over the past 12 months, but this latest offering will not only help Carphone Warehouse attract the customers it is looking for; it will also force other providers to lower their prices even further. I would therefore advise people to wait a few weeks just to see what happens.”

Free broadband is not yet available to all households. BT has the monopoly on the country’s telephone exchanges, but has been told to “unbundle” them so other firms can set up their own networks. Carphone Warehouse is doing this, but so far only 70% of BT’s exchanges have been unbundled.

So people in some areas who want to switch to the new Talk Talk package may have to pay an extra £10 a month for their broadband because it will come through a BT line. You can find out whether you are eligible for the free broadband by inputting your postcode on Talk Talk’s website, talktalk.co.uk.

There are other catches with the new Talk Talk package. The main one is that customers are locked in to an 18-month contract and if they want to get out within that time will be charged a £70 disconnection fee.

At the beginning of last year the average price of 1Mb broadband access was £30 a month. It is now about £19, but this will fall further as providers respond to Talk Talk’s aggressive pricing. Eighteen months is therefore likely to be a long time in the world of broadband — so while Talk 3 International Call is a great deal now, it may not look so wonderful by the end of the year.

Sarah and Graham Howe already have their broadband and phone with Talk Talk. They pay £14.99 for their broadband each month, £11 a month line rental and £14.99 for their Talk 2 phone package. Even though the Howes could save by switching to the new deal, they are wary about doing so.

Sarah, a 31-year-old oncology registrar from Fulbrook in the Cotswolds, said: “We have just come to the end of our 12-month contract so are looking to see if it is worth switching to a different provider. The new Talk Talk deal sounds good, but the 18-month contract puts me off because the cost of broadband seems to be falling so quickly that I don’t want to be stuck paying a higher premium for an extra six months.”
And it definitely seems to be a question of when, not if, other providers will slash their costs.

Blair Wadman at Uswitch.com, another price-comparison service, said: “With this aggressive strategy to increase market share, Talk Talk has set a benchmark for the industry and other providers will have little choice but to follow suit to be able to compete effectively. The battle for market share is likely to heat up further towards the end of the summer, when Sky (37.7% owned by News Corporation, parent company of The Sunday Times) launches its broadband service. We think you will be able to get broadband for less than £5 a month by the end of the year.”

As providers slash their margins they will look to make up costs elsewhere. Industry analysts therefore expect more packaged deals, like the new Talk Talk offering, where customers have to sign up to more than one service.

There are already a number of packaged products available. Toucan offers 1Mb and 2Mb broadband deals which include landline telephone calls. Its 1Mb deal costs £14.99 a month and customers get free weekend calls to other UK landlines. Its 2Mb package offering the same phone deal costs £15.99.

Unlike Talk Talk, customers do not have to switch their line rental — they could pay BT for that — although it would be cheaper if they did. Toucan charges £8.99 a month for line rental compared with BT’s £11.

Homechoice also offers a broadband package. For £29.99 a month customers get up to 8Mb broadband, plus digital TV and free weekend and evening calls to UK landlines. Customers get the package for £19.99 a month for the first two months. Faster broadband access is also likely.

Some firms, including Homechoice, have been offering 8Mb broadband for a while, although only in certain areas. Carphone Warehouse is now offering the same speed and BT has just started upgrading 5,300 local telephone exchanges. This will enable it, and other providers that use its lines, to offer speeds up to 8Mb, making it possible to watch TV via your broadband line.