Contents

Summary
Chapter 1 Introduction
Chapter 2 Internet access - basic
Chapter 3 Internet access - broadband
Chapter 4 Broadband take-up and availability
Chapter 5 Wholesale inputs in the broadband market
Chapter 6 Alternative broadband access technologies

Annexes: Available to download as a pdf document only - please click here

Annex A: Exchange rates and VAT rates
Annex B: Detailed results for Internet access baskets (basic)
Annex C: Detailed results for DSL and cable modem services
Annex D: Changes to wholesale DSL offers in France, Germany and the UK since the June 2002 report
Annex E: Glossary

  Summary

Scope

S.1 This report is an international benchmarking study of Internet access covering both basic dial-up access and broadband services (DSL and cable modem). The report covers Internet services in France, Germany, Sweden, United Kingdom and the US (the States of Ohio and California are used for dial-up services; the study covers a number of the largest providers of broadband who offer services across a range of States).

S.2 This study is a follow up to the study published by Oftel in June 2002 on dial-up and broadband Internet access, based on February 2002 prices. Oftel has carried out the analysis and drafting of this report. The tariff data used in this report have been collected by consultants HI Europe, formerly Total Romtec (with the exception of the tariff data in Chapter 6, which was collected by Oftel).

S.3 For broadband Internet access, the report considers not only comparisons of retail prices but also comparisons of:

• take-up and availability;
• availability and price of wholesale DSL products; and
• (for the first time) price and availability of services provided using "alternative" broadband technologies such as Broadband Fixed Wireless Access and satellite.

S.4 Comparisons of local loop unbundling (as a means of providing DSL services) are also included for the first time in this report.

S.5 Points that should be borne in mind in interpreting the results are detailed in paragraphs 1.8 - 1.11 of this report. This report is not intended in any way to be a buyer's guide to services in the UK.

S.6 The results presented are based on a snapshot of prices as at 20th August 2002.

Results for "basic" Internet Access

S.7 Tables 1, 2 and 3 show the results for the price index for basic Internet access (ie Internet access for consumers who have no particular requirement for access speed), for residential off-peak usage, residential peak usage and for business users respectively. This is expressed relative to the UK price index.

S.8 These results show that, based on the sample of service providers selected:

• for residential consumers, UK prices are cheaper than all countries for peak and off-peak unmetered services and peak limited usage. For off-peak limited usage the UK compares favourably with the US and France but prices are above those in Germany and Sweden; and
• for business consumers, UK prices for unmetered services are well below those in France and Sweden, but above those in Germany and the US (California). UK prices for limited usage are cheaper than Sweden and the US, but slightly more expensive than France and Germany.

S.9 In the UK and US, unmetered dial-up services are widely available. In the other European countries this is not the case, and broadband services are more cost effective than dial-up for consumers with high usage. The results are based on the average of the two cheapest available options, and hence include some broadband packages.

Table 1: Comparison of residential off peak Internet access prices

Table 2: Comparison of residential peak Internet access prices

Table 3: Comparison of business Internet access prices

S.10 Compared to the results in the June 2002 report:

• for residential services, the UK’s position compared to other countries remains the same and the UK is still the cheapest for limited use residential peak services and all unmetered services; and

• for business services, the UK’s position has improved for limited usage and is now the third cheapest compared to the most expensive in the last benchmark. For unmetered services the UK’s position has also improved.

Results for broadband Internet access

S.11 Table 4 and Table 5 show the results for the price level, price index (relative to the UK) and bandwidth provided for broadband residential and business services. The results are based on the average of the two cheapest deals available from the service providers covered in this research (it is not possible to include all service providers and this study may not represent the cheapest deals available in every case). Prices shown include the monthly subscription, as well as set up costs spread over three years. Results are presented both with and without cable modem offers included.

S.12 The last report benchmarked data at February 2002, however, a partial update was carried out to take into account BT’s DSL wholesale price cuts at April 2002. This partial update has been considered in these results and price changes for the UK are also expressed in terms of April 2002 – August 2002.

Residential broadband services

S.13 Table 4 shows the results for the price level, price index (relative to the UK) and (downstream) bandwidth provided for broadband residential services. The results are based on the average of the two cheapest deals available from the service providers covered in this study as at August 2002. From Table 4 it is seen that as at August 2002:

• when cable modem services are included, prices in the UK are similar to the US and Germany, cheaper than in France and only in Sweden are prices lower than in the UK. However, the average speed is higher in the US than in the European countries; and
• when cable modem services are excluded (ie a comparison of DSL services only) UK prices are cheaper than France, similar to Germany and slightly more expensive than Sweden and the US (this is only by £2-£4 per month).

Table 4: Results for price level, price index and (downstream) bandwidth for residential broadband services

S.14 When cable modems are included, UK prices have not changed since April 2002, however, prices in Germany decreased leading to a deterioration in the UK’s relative position. When results for DSL services only are considered, the UK's overall position has not changed, however, there is an improvement in its position relative to Sweden and the US with these countries now 6-11% cheaper compared to 13-24% in April 2002 (due to price increases in these countries).

S.15 The two cheapest DSL services in the US provide a downstream speed of 256kbit/s and 200kbit/s, whereas the UK services have downstream speeds of 512kbit/s. Comparing UK and US DSL services that both have a minimum downstream speed of 512kbit/s, the UK is cheaper than the US as at August 2002. The US does not offer services at 512kbit/s, and, setting the minimum speed at 512kbit/s, the average speed of the cheapest two US DSL services is 725 kbit/s.

Business broadband services

S.16 Table 5 shows the results for the price level, price index (relative to the UK) and bandwidth provided for broadband business services, for a variety of consumer types. The results are based on the average of the two cheapest deals available as at August 2002.

S.17 From Table 5 it is seen that as at August 2002:

• for the most basic services available to business (ie where the business has a minimum bandwidth requirement of 129kbit/s):

• the UK is cheaper than all other countries;
• prices in the US and Germany are 19% and 38% more expensive than the UK; and
• prices in France and Sweden are significantly more expensive than all other countries.

• for business services where a minimum geometric mean (ie square root downstream bandwidth x upstream bandwidth) bandwidth of 500kbit/s is required:

• prices in the US are very much lower than elsewhere; and
• prices in France, Germany and Sweden are 20-44% more expensive than in the UK.

• for business services where a minimum geometric mean bandwidth of 1000kbit/s is required:

• services are only available in Germany, Sweden and the US; and
• prices in Germany are much more expensive than Sweden or the US.

Table 5: Results for price level, price index and bandwidth for business broadband services (cable modem services included)

S.18 The UK is still the cheapest country for a basic service at August 2002, although prices in the UK have increased slightly since April 2002.

S.19 When there is a minimum bandwidth of 500 kbit/s the UK’s relative position has improved since April 2002 and the UK is now the second cheapest country after the US. The position of Sweden has deteriorated since April 2002 (due to the inclusion of a wider range of service providers).

Take-up of broadband services

S.20 Data on take up is presented as a percentage of population (using OECD population figures for 1999) in Figure 1. Broadband take-up rates in each country are shown as at end 1999, end 2000, end 2001 and June 2002.

S.21 While current levels of broadband take-up are low (below 7% of the population) in all of the countries benchmarked, take-up in the US and Sweden is markedly higher than in the other European countries. It is noted that all countries tend to show a period of relatively slow take-up initially, followed by acceleration in the take-up rate. It is noted that broadband services were launched later in the UK than in other countries and this later start should be borne in mind when viewing this chart.

Figure 1: Broadband take-up per 100 population by country for end 1999, end 2000, end 2001 and June 2002.

Source: OECD, companies

Wholesale DSL products and local loop unbundling

S.22 The comparisons of wholesale DSL products presented in the June 2002 report have been updated and show:

• end-to-end wholesale products continue to be unavailable in Germany; and
• following price cuts in France, prices for end-to-end wholesale DSL services for residential services are above those in the UK, while those for business products are below.

S.23 LLU has been compared on the basis of a number of measures across the benchmarked countries. In all countries, DSL services over unbundled local loops are starting to be provided to end users, particularly business users, increasing the range of broadband services available (eg increasing the range of speeds and contention ratios available). Take-up is currently low in France, Sweden and the UK, but is growing. In Germany and the US, take-up is higher, accounting for around 8 per 100 incumbent DSL lines. In the UK, the infrastructure is now in place to allow services to be provided to much larger numbers of end-users. Further infrastructure is also expected to be rolled out. Given this, it is expected that take-up figures will increase over time. Prices in the UK for LLU (both fully and shared access) are somewhat higher than the other countries in this study.

Alternative Broadband Technologies

S.24 The report has considered the availability, price and take-up of alternative broadband technologies such as Broadband Fixed Wireless Access (BFWA) and broadband satellite access. The market for such alternative broadband technologies is still very new. While BFWA and/or satellite services are offered in all of the benchmarked countries, subscriber numbers are still small. Prices for BFWA and two-way satellite services generally appear to be above prices for DSL and cable modem services. One-way satellite combined with unlimited dial-up access for the return path is likely to be more expensive than DSL or cable modem, though a user who is able to severely restrict the time spent dialled-up may be able to keep their costs close to, or even below, the cost of DSL or cable modem.

Chapter 1

Introduction

1.1 Oftel’s aim is to provide the best possible deal for telecommunications customers in terms of quality, choice and value for money through effective competition. International comparisons of telecom services are one way of assessing the achievement of this aim.

1.2 Oftel carries out regular reviews of the major telecom markets to determine the appropriate level of regulation for the future. Regular benchmarking exercises allow a time trend to be developed, which provides greater information than a single snap shot. The results in this report will form part of the data input for future reviews.

1.3 This study focuses on comparing the cost for representative users for Internet access in each country using a "basket" methodology. Oftel has carried out its own benchmarking work (as opposed to using alternative published sources) to ensure that the methodology is rigorous and robust and that it addresses the following issues:

• usage baskets need to reflect a range of patterns of use representative of different groups of consumers; and
• consumers have a potentially wide range of choices for their telecom services:

• consumers have a choice of competing service providers all of whom will offer different packages; and
• each service provider may offer a variety of different packages and discount schemes targeted at different segments of the market.

Price comparisons need to take into account the range of products available to the consumer.

1.4 The following countries are included in the analysis:

• France;
• Germany;
• Sweden;
• UK; and
• US (the States of Ohio and California are considered for dial-up Internet access; the study covers a number of the largest providers of broadband who offer services across a range of States).

1.5 This study is a follow up to the study, International benchmarking study of Internet access (dial-up and broadband), published by Oftel in June 2002, which was based on tariff data valid as at February 2002. A list of the "tariffs valid at" date and date of publication of previous studies is given in Table 1.1;

Table 1.1: List of previous studies

Reports can be found at: www.Oftel.gov.uk/publications/research/index.htm

1.6 Oftel has carried out the analysis and drafting of this report. The models developed by Oftel used to generate the results contained in the report have previously been audited by an independent consultant, Analysys Ltd. Analysys have also provided advice and information in respect of chapters 5 and 6.

1.7 Data has been collected from the vast range of tariff packages available to residential and small/medium sized businesses, for major service providers and service providers in each country as at August 2002. The tariff data used in this report have been collected by consultants HI Europe, formerly Total Romtec (with the exception of the tariff data in Chapter 6, which was collected by Oftel).

Points to bear in mind

1.8 There are a huge range of operators and service providers offering services to consumers and it is not possible to cover all packages on offer. In addition, it is not possible to fully capture all aspects of innovative tariff products. While it is believed that the sample chosen is fully representative and covers the range of offers available by country, the possibility that consumers have access to additional offers outside the range calculated for the sample used in this report cannot be excluded. Not all tariffs included will be available to all consumers in a particular country.

1.9 The objective of this report is to provide a comparison between countries for a range of consumer usage profiles. A range of profiles is chosen to be illustrative of the most frequent types of customer calling patterns, but is not comprehensive. Prices are based on a snap shot as at 20^th August 2002. Although providing a sound overall picture, the comparison of companies within a country should not be taken as necessarily being representative for an individual consumer.

1.10 The analysis is based on a basket methodology, which allows prices to be compared across different service providers in different countries. It is not, however, intended to be a buyer’s guide to services as:

• it provides only a snapshot of the price levels for a continually changing set of price packages; and
• the residential or business consumer will have to use more specific usage information in order to determine the best option for that person or business.

The objective is to illustrate the scale and level of prices available to consumers in different countries.

1.11 There are separate industry funded initiatives and reports which seek to help UK consumers be better informed purchasers of telecommunications services (examples are: fixed and mobile quality of service indicators –www.cpi.org.uk and www.oftel.gov.uk; and information for small businesses about using telecoms and the internet –www.telecomsadvice.org.uk). Oftel has also recently produced a range of consumer guides and has introduced a seal of approval, called the Oftel PASS, for websites that compare the prices of different suppliers and provide impartial and accurate information - http://www.oftel.co.uk/publications/consumer/2002/pass0902.htm. This report is not part of that body of work as it seeks to compare positions between, not within, countries and it is not, therefore, intended in any way to be a buyer’s guide to services in the UK.

Outline of the report

1.12 There are five subsequent chapters which present the results for:

• Internet access – basic (Chapter 2);
• Internet access – broadband (Chapter 3);
• broadband availability and take-up (Chapter 4);
• wholesale inputs to the broadband market (Chapter 5); and
• alternative broadband access technologies(Chapter 6).

1.13 In general, the methodology used is very similar to that used in previous reports. The methodology is designed to allow a comparison to be made of dial-up services and broadband services as well as allowing a comparison to be made of the gap between unmetered dial-up and broadband products in each country.

Please click here to continue