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BT Heavily Throttling BBC, All Video
Friday, 12 June 2009 07:45
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Significant error in this story: BT's terms of service explicitly say that streaming video will be throttled to 896K on Option 1 (about 1,000 words in) I was therefore wrong to say this was a change that would allow breaking contracts. I relied on another reporters' comments rather than reading the actual BT posting. Thanks to Simon Dux of BT for the facts that showed my error.

London: British Telecom's John Petter tells FT they throttle8 megabits per second customers down to 896 kilobits per second between 5pm and midnight.” That's far below standard TV quality and half the speed of the typical U.S. network's Internet feed. (ABC was 1.9 megabits and AT&T 2.1 megabits last I checked.)

sally_davis_bt

They claim that video traffic growth is driving up BT's costs so much they must charge extra, but Cisco has just done a major report that finds a slight decrease in the rate of Internet traffic growth. France Telecom, Verizon, and AT&T are doing just fine, with very high DSL margins.

While hard to handle video demand is possible in theory, I reported in September from the CEO of BT Wholesale

Davis' network is ready for video

BT does not need to charge extra for access for the iPlayer. Sally Davis, CEO BT Wholesale, confirms she was misquoted in the British papers about the problems. They've solved any congestion problems. ... A respected newspaper had reported Davis saying they had a problem, but the text of the speech confirmed the reporter got it wrong. We all do. http://bit.ly/ssfBi

I was also delighted to report from BT their rates – and actual costs – for bandwidth are dropping.

BT Cutting High Volume Backhaul Rates in Half

The new BT backhaul is "approximately 50 per cent cheaper," Anna Easton of Openreach writes me. http://bit.ly/hXlsN

Increased video use is driving traffic growth, but the cost of the routers, Internet peering/transit etc. is going down about as fast. The cost per customer of bandwidth has been about flat for several years, about $1/month/customer at a carrier like BT. That's 2-5 % of what BT and most others charge consumers for broadband.

Saul Hansell in the NY Times researched these costs extensively, including experts in Britain. In an important set of articles, he made clear this is about higher carrier profits and preventing competitive video, not serious pressure from higher traffic costs.

Ed Richards Thought BT Couldn't Do This – And BT's Contracts Are Void (This is an error. BT in fact does note they throttle to 896K some connections, 1,000 words into a posting on one of their web pages. Andrew Sullivan is one of the best informed observers of the British Internet, but apparently hadn't known this. Crucial information like this needs to be clear, and when this important and unusual should be on any page or ad listing the speed as 8 megabits. 8 megabits doesn't mean much if the most important application that needs that speed - quality video - is excluded.

Two years ago, Ed Richards discussed the issue at a Columbia seminar. Susan Crawford blogged the event “Ofcom sees NN like the Janet Jackson wardrobe malfunction issue — when the issue is understood, “we in Europe wonder what the fuss is about.” ... His major point is that he has there is a different view in the UK.  “If you have network operators who are dominant or have market power, charging for prioritization may be anticompetitive, then the regulator should intervene.  But if a network operator has no market power and is charging for prioritization, then it's a different question; their activities shouldn't be automatically construed as anticompetitive or necessarily regulated.”

Richards continues, saying that the NN debate does give us insight into importance of disclosure to consumers — consumers should be able to switch providers, and they should know which ISPs are making prioritization decisions. ... network operators whose traffic shaping activities change materially should have to tell consumers — and if these changes are significant consumers should be allowed to break their contracts with the provider without penalty.” http://bit.ly/PFkit

That's exactly whats happening here. Andrew Ferguson notes "The BT website still claims that Option 1 is good for 25 hours of iPlayer content, with no direct link to the throttle condition. On the product page description of the 10GB allowance of BT Total Option 1, they claim that Option 1 is best for: Up to 8Mb download speeds Wireless broadband throughout your home”

Courage, Ed.

Can Charlie Dunston Protect the British Internet?

Four carriers – BT, Virgin Cable, Sky, and Carphone Warehouse – control over 90% of the U.K. Internet. They are large enough to have their own fiber backbone and bring costs down. The others are failing or finding a very small niche. 1M customers weren't enough to bring Tiscali to breakeven, and they sold to CW at a massive loss. Companies today don't have to meet in a hotel room to behave like a cartel. The big ones understand how to signal each other and co-operate.

Virgin and Sky make their living from selling TV. They will happily go along with just about anything that BT suggests that limits video over the net if they think they can get away with it. They are very, very scared of OTT. Those three are 2/3rds of the U.K Internet. If Carphone goes along, they have effective control. Everyone else has much higher network costs, mostly paid to BT for backhaul at very high rates. They can't take on many unlimited customers.

Carphone's bandwidth costs have been going done dramatically according to their financial presentations. Once they had the dark fiber/gigE backbone in place, the cost of bandwidth dropped quickly, and adding more bandwidth generally is just a few router upgrades. They've specifically told The City they do not need to throttle.

Charlie's a businessman, and co-operating with the competition to collect more money is a tempting choice. If he goes along, they all make more money. That's what cartels are about. If he refuses, he'll gain many more customers.

He may not be able to handle the volume, especially while absorbing Tiscali. A new DSL customer is expensive to service, including paying BT a charge to connect. It takes a year or more to breakeven in many cases. CW is cash-strapped, so financing customer acquisition could be tough.

The Independent is reporting rumblings that some won't go along with BT's demands. Presumably, they will lay low and let BT take the heat, joining in later.

BT is saying “this isn't BT versus the video folks, it's the whole industry.” That's of course not so – cross either the channel or the Atlantic and the opposite is true.

BT Does Not Have a Traffic Cost or Congestion Problem

Tim Bradshaw in the FT asked the right question. “Mr Petter said he would not comment on 'how many millions' video services were costing the company, but added: 'If it wasn't a significant sum, we wouldn't be focused on it.'”

Which is wonderful, because the entire problem would disappear if Ian Livingston actually asked his network people “how much does all this bandwidth really cost.”

The right answer, based on data from a dozen large carriers, will be “well under a pound/month/subscriber.” One particularly efficient European, not far in size from BT Retail, has told me their figure is 55 cents. The industry standard figure is about a buck a month. It has been flat or even falling at most carriers since about 2002. I've asked BT for their data, either as cost or by amount of bandwidth. I've told them I'd feature prominently any facts they sent over.

They suggested I look at the data from PlusNet, BT owned but operated independently and far too small to run their own network. That's a different situation, because backhaul cost is clobbering rural and small carriers http://bit.ly/9r1zA

Verizon, AT&T, FT, Iliad/Fr, and Cablevision are among those whose top executives have said they don't need to throttle. These are all unlimited. Comcast has a cap of 250 gigabytes, which I've called reasonable. That's seven hours a day of SD video at twice the speed BT is carrying.

The Failures of Structural Separation

Britain was the great success of separation, leading New Zealand, Australia, and the EU's Viviane Reding to recommend it. Britain went from over-priced to average and penetration boomed. Richards could imagine a seat in the House of Lords.

The problem, now becoming obvious: the wholesale monopoly needs strong and effective regulation. With all the noise of retail competition, Richards couldn't do that and even gave them an increase in the copper loop charge. The more the copper earns, the stronger the inclination not to invest in fiber. While France, Holland, Switzerland, and Verizon's quarter of the U.S. are moving rapidly to 100 megabit fiber. 95% of Britain will be stuck with DSL and a press release misleadingly named “fiber to the cabinet,” and even that won't reach most areas for years. Only half the country has a cable choice, and BT's copper has a monopoly elsewhere.

To get Britain fibered, Richards had to set a gap between what BT's charges for fiber and copper. If line charges are similar, BT will try to milk what they have. If Richards wants fiber, he needs to lower the copper loop charge or take direct action. That's politically tough. He was beaten up by BT and their friends for not increasing it more.

BT Openreach, with far less competition than BT Retail, can keep prices high. This will give a distorted picture unless the cash flows are netted out. The money goes from BT Retail to other parts of BT, so the (inflated) markup in the middle needs adjusting for.

 

More to come: Richards' choices, the trade issues when Hollywood realizes they are expected to pay, and details from the engineers.

Last Updated on Wednesday, 17 June 2009 09:50