BT Group waited until all its competitors were in hospital before slashing the wholesale cost of digital subscriber lines.
BT Group
Published: February 26 2002 20:55 | Last Updated: February 26 2002 20:57
A cynic might observe that BT Group waited until all its competitors were in hospital before slashing the wholesale cost of digital subscriber lines. That is a bit unfair on Ben Verwaayen, who only recently took over as chief executive. But after years of obstruction, now is a good moment for BT to push DSL as a mass-market product. The UK's alternative carriers and cable companies are strapped for cash. BT has the chance to overhaul NTL/Tele-west, establish its wholesale DSL as the dominant form of broadband access and put paid to local loop unbundling once and for all. By BT standards, this is a bold initiative. The service will be lossmaking at first but economies of scale should kick in as the number of subscribers rises from today's pitiful 145,000 towards a target of 1m by mid-2003. Compared with other incumbent operators, however, it is not that radical. BT's new wholesale price of £14.75 a month puts it broadly in line with the European average. Deutsche Telekom, prepared to take bigger upfront losses, has already achieved DSL penetration rates higher than those BT hopes to hit more than a year from now. But BT's shareholders demand that it lives more modestly.
It is impossible really to understand the impact wholesale price cuts will have on BT without knowing what its DSL retail strategy will be. That Mr Verwaayen promises to explain in April, when presumably he will also address old Concert and Ignite, which matter much more in the short term. Until then, investors should reserve judgment. |
