Ok, brief explanation.
The market in the UK is structured so that the national infrastructure is available to competition at several levels. BT, though privately owned, has an obligation to provide services to whole country.
The physical level is operated by BT OpenReach - this permits other providers to complete by using the last mile copper; other 'LLU unbundlers' can place equipment in the exchanges. This competition is not just for data but for telephony as well. BT OpenReach own the majority of the physical assets, the copper, the telephone exchanges etc.
BT Wholesale, the bit that Sally Davis is CEO of, provides national connectivity and other organisations to it at the wholesale level, ignoring the telephony side for the moment, this means that they provide national coverage for broadband over ADSL (99%+ of population) they offer a customer premises to ISP PoP data transport service of IP frames. They use BT OpenReach services to achieve this. Their price list is freely available and their charging is based (to a first approximation) on the number of tails that ISP has (end users) and the number and size of the pipes that connect the ISP to their national interconnect (for those in the know I'm trying to describe IP Stream here). The ISP is basically buying peak capacity.
BT Retail uses BT Wholesale service to provide internet connectivity to customers (though they might become their own LLU supplier sometime - strange, but see below).
Each of these business units operates 'at arms length' (hence why BT Retail may by-pass BT Wholesale to by directly from BT OpenReach) and has to pay, broadly, the same costs for the services between each other as any other player in that market (regulator calls this 'input equivalence' - if I remember correctly).
So there is a market at many levels with the largest player having to play by different rules.
So what is being 'wholesaled' by BT Wholesale is end-user to ISP data transport. One ISP in the UK (PlusNet) reckons that all this comes to about £148 per Mbit (peak) for the bandwidth (National Access and international costs incorporated). [dont forget the per end user tail costs if you are reading this in the UK thinking about costs/profits]
So the only part of BT that is playing the retail ISP fixed-price-for-upper-bound volume game is BT Retail. And it has always had limits and a penalty structure.
Even with new developments the price structure is not going to change too much - and that pricing is based on a mark up on the costs for creating and running the infrastructure and that calculation was, until very recently, carefully scrutinised by the regulator.
Hope this helps. BT Wholesale is not acting fast and loose - its pricing for its services had to be justified with the regulator. Keeping the infrastructure running costs, BT OpenReach is a body-centric buisness, replacing poles, fixing faults powering equipment, BT Wholesale is (at a national level) providing the interconnect which all the other ISPs (to some extent) are consuming.
Neil On 24 Sep 2008, at 19:33, Bob Frankston wrote: What is being “wholesaled”? Why not just charge for the cost of digging trenches and maintaining the fiber? Why charge per bit? I’ll see if my stronger and more detailed note gets forwarded but I find this a land that views Moore’s law as a hostile invader. Bob To be fair to Sally, she heads BT Wholesale, she was saying that the ISPs business model was broken, not BT Wholesale's. BT Wholesale already charge for their services [their price lists are publicly available] to ISPs in a way that scales appropriately with the amount of equipment deployed to support ISPs - so, in that sense, they already have a sane business model. Her comments were more on the ISPs retail model and could be seen as supporting BT wholesale's longer term plans to support more (in terms of equipment/resource use) efficient use of the network through strategically placed content distribution servers Your polemic about the nature and plans of BT are completely unfounded, and well below the standards that I expect for contributions to this list. Statements like this effect perceptions (and market stability) tremendously - you are in danger of being guilty of the irresponsibility that you are complaining about. I feel that you owe this list and Sally Davis and apology. -- no relation (though my wife is called Sally) and, no - I don't work for BT. On 24 Sep 2008, at 17:13, Bob Frankston wrote:
Dave B, thanks for providing these quotes. Davis seems to confuse cost with price. It’s the price that is not sustainable. A wonderful quote “Today there are a number of unsustainable business models out there, and these need to change, Davis insisted.” She 100% right – telecom is not a sustainable business model. Of course she’s not the first – the cellular world is living in fear of abundance too. What should BT do if it’s business model is not sustainable? In this age of bailout should she continue to try to maintain control and expect a bailout while inflicting grave harm on the economy by limiting the ability to create new value or should she take responsibility and negotiate an exit strategy that might leave her shareholders with some money? I consider the continued insistence that BT can maintain control to be a form of kiting – piling up problems in hope that the future will never arrive – just like the mortgage traders did. Alas for now she’s threatening the economy with drastic measures like traffic shaping that will starve the economy just at the time when it can hardly afford it. So the choice is whether her shareholders will lose money or all of our money will (continue to) lose value? Neither outcome is great for them but one does more harm to the public. When Kathryn Morrissey say “There won't be just one model, "there will be room for many models," does this mean that she is willing to sell raw capacity even if it threatens the ability of other parts of ATT to charge a high price for transporting bits? -----Original Message-----
From: David Farber [mailto:dave@farber.net]
Sent: Wednesday, September 24, 2008 03:11
To: ip
Subject: [IP] British Telecom says bandwidth costs unsustainable. True? Date: September 23, 2008 9:33:28 PM EDT Subject: British Telecom says bandwidth costs unsustainable. True? Sally Davis at BT just gave a speech (below) saying BT might have to block the iPlayer and other Internet video because their bandwidth costs are unsustainable. Other carriers, like Verizon, say they have no problem handling the video load, nor expect to have a problem. So I'm sending her comments over to see if anyone can provide evidence on why BT's experience is different or that Davis' comments are unproven hyperbole. It's especially surprising to hear BT's 21st Century Network, (superbly designed by superb engineers) is inadequate. Key competitor Sky just pulled off all limits on their $20 broadband service, saying,"it had invested in creating 'a high-capacity network that is designed to carry huge amounts of traffic without congestion'” without traffic shaping. I've written BT to doublecheck the reporter got it right, but the quotes are pretty clear. So am I missing something unique to the UK, or are Ms. Davis' comments unfounded? Facts welcome. Wholesale giants say Internet will no longer be free ... the answer could be to restrict "free" access to services like the BBC's iPlayer that allows users to stream BBC TV content over the Internet ... "One thing keeps me awake at night. In the immortal words of Jerry McGuire 'show me the money!'," said Sally Davis, CEO of BT Wholesale. ... Today there are a number of unsustainable business models out there, and these need to change, Davis insisted. ... the ISPs are saying "I can't keep increasing the bandwidth for no more money," Davis said, a situation that will ultimately lead to ISPs adopting traffic shaping measures and the like to keep control of bandwidth usage on their networks. ... "We're going to have some very grumpy people," namely the content owners and end-users, said Davis. As such, "we have to find new ways around it… Content distribution models will play a role in that," Davis said. "We will see those business models emerge," but more work needs to be done, she cautioned. ... "In the next three years… we will see some different models emerge," said Davis, a prediction that was greeted with some scepticism from others in the auditorium. There won't be just one model, "there will be room for many models," agreed Kathryn Morrissey, EVP at AT&T Wholesale. "Somebody at some point is going to have to pay for [this network -------------------------------------------
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