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Britain gets a new broadband divide

UK Online's move to offer entry-level broadband for just £9.99 could lead to cheap, fast access for all - unless you happen to live in the countryside
Written by Graeme Wearden, Contributor

Talk of a broadband divide used to be centred on the haves and the have-nots of high-speed access as a result of BT's feet dragging over rolling out ADSL to rural areas. But now that the majority of those who want it — around 96 percent of the country according to BT — have access to a broadband-enabled exchange, the protesters appeared to have been appeased.

However, the increasing perceived need for faster access through fatter pipes is threatening to change the rules of the game once again and create a new broadband divide — now based around costs and speed rather simple access.

The roots of this new broadband status quo can be traced back to a recent decision by UK Online to slash the cost of its high-speed Internet access products in certain areas. This move, announced in mid-April means that a 512Kbps connection from UK Online will cost just £9.99 a month, with a 2Mbps connection costing £19.99 a month.

The problem is that UK Online — the retail ISP of Easynet — is only offering these prices to customers who are connected to one of the 240 BT local exchanges where Easynet has installed its own equipment, a process known as local-loop unbundling (LLU). The rest of the population will have to pay £19.99 for a 512Kbps link and £29.99 for the 2Mbps option.

UK Online says that these lower prices illustrate the benefits of LLU versus reselling one of BT's wholesale broadband packages. But with LLU operators focusing on urban areas, where there are typically more customers per local exchange, some in the industry fear that rural areas will miss out.

"More competition is better for consumers, but there are concerns about the availability of low-cost services across the UK. It's a big issue, I think," says Malcolm Corbett, director of the Community Broadband Network which represents many local broadband initiatives. Corbett claims that the UK government's recently published digital strategy includes concerns about the equality of access to broadband.

LLU had largely been a failure in the UK, with just Easynet and Bulldog — now owned by Cable & Wireless — unbundling many exchanges. But last year Ofcom forced BT to cut the cost of unbundling a local exchange, which has encouraged many telcos to consider it again. Tiscali, for example, announced this month that it will spend £90m over the next three years on unbundling in the UK.

UK Online insists that its offerings in non-unbundled areas are still competitive, and hints that its new lower prices could spark a price war. Chris Stening, general manager of UK Online, points out that his firm had launched an 8Mbps consumer service last year, after which BT began trialling its own 8Mbps product.

"Would that have happened if we hadn't done what we did? We're driving the market," claims Stening.

Easynet's 240 unbundled exchanges allow it to reach around 4.4 million homes and offices, but to offer an unbundled service to everyone in the UK it would have to unbundle all of BT's 6,000-plus local exchanges, a bill that could run into the billions of pounds.

According to Ian Fogg, senior analyst at Jupiter, LLU gives operators more choice in what they offer to users. "It's up to the ISPs whether they decide to offer the same speeds for less money, faster speeds, or services such as voice-over-IP," says Fogg, who pointed out that in France unbundling has led to the rollout of innovative broadband services such as VoIP and IP television.

Fogg believes that urban areas will continue to benefit from better broadband services in "at least the short and medium term", but insists that this wasn't as negative a situation as a few years ago when high-speed services weren't widely available.

"Rural areas can get broadband, but if you live in urban areas you get more choice," says Fogg. There are many other factors that are considered when a business picks a location, including availability of land and transport links, where some rural areas could have an advantage, he explains.

Lindsey Annison, broadband activist and founder of the Access to Broadband Campaign, believes that public funding is needed to address the broadband divide.

"This Labour government encouraged a competitive broadband marketplace. Whoever is in government next needs a strategy that takes account of what's happened abroad," says Annison, pointing to South Korea where government intervention played a key role in boosting broadband availability and take-up.

Annison adds that local communities are still playing a vital role in providing broadband in areas where it isn't otherwise available, despite BT being on track to offer its ADSL service to 99.6 percent of homes and businesses by this summer.

"Community networks were expected to fall by the wayside, but that's not happened at all," says Annison.

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