Join Date: May 2001
Location: Pont Aven, France
Cost of broadband internet set to plummet
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.