This post was originally written to coincide with the launch of our new Broadband Your Way products. Unfortunately other events took over at the time and it never quite made it out back then. The background remains useful however, and for those interested in our Broadband product strategy and the design of BBYW this will be worth reading. This blog article is the first in a series which will discuss what is changing about broadband supply over the coming years and how those changes at wholesale level will impact our customers and consumers generally.
- BT made the first wholesale price reductions in over two years on 1st May 2007 and further IPStream reductions are planned by BT for next year. Coupled with the introduction of the new WBC (Wholesale Broadband Connect) product and the roll-out of BTs 21st Century Network, we expect that by next year our wholesale capacity costs will be significantly reduced from what they were before May 07.
- Our BBYW products were built around these future cost assumptions and were ‘forward priced' to that effect.
- Due to this forward pricing assumption, the designed ‘average' usage for Broadband Your Way is nearly twice that of the equivalent Plus and Premier products. Doing this was possible as a result of our new ownership and the resulting longer term perspective we can now take in terms of our growth and business performance.
- We are planning for continued rapid growth in customer usage, driven by more Real-Time (or ‘Interactive') traffic such as media streaming and content rich web 2.0 sites. To support these demands and prevent network saturation, restrictions on file sharing and other non-interactive traffic at peak periods is required (Edit: BBYW Pro (£19.99 for 10GB) is our only product where this is not the case, which is why it's more expensive for the same overall bandwidth allocation as BBYW Option 2 (£14.99 for 10GB).
- We will add future wholesale Broadband capacity in line with our projected customer growth, not in reaction to it. Further capacity for our network was supplied to support the BBYW product launch and predicted growth means additional capacity is currently on order.
Article ContentsSummary PlusNet's Broadband Product Design IPStream Broadband Pricing Introducing Broadband Your Way BBYW Product Design Traffic Control Questions and Answers Broadband Blueprint. This explained the rationale behind our product designs and has proved to be one of the most popular documents on our website. The assumption behind our product blueprints is that demand for capacity will continue to outstrip economic Broadband supply for the foreseeable future (Even with the planned new and upgraded broadband infrastructure). We'll be explaining more about why we believe this is the case in future postings. About the Blueprint Our Broadband Blueprint describes how we design our products. Simply put we take the amount a customer pays us each month, remove our fixed costs, and spend what is left on network capacity. These fixed costs include Broadband line rental, our staff, buildings, and network infrastructure, as well as a profit margin for each account. The Blueprint document demonstrated the amount spent on capacity for our older accounts, and I've updated this format to provide similar information for BBYW below. here). An online calculator to convert Kbps (speed) to file size (usage) can be found here. Simply put, 5Kbps equated to a design of 1.5GB a month, 20Kbps is 6GB a month and so on. These were the levels described as "designed usage" in the Blueprint, and this worked OK when the average demand for usage from all customers on the product was less than the allocated amount. In reality, a calculation which presumes customers will use a trickle of data over a 24 hour period isn't particularly useful in the real world, even if it does help in explaining the theory. People's real habits are of course to use their allowance when it suits them. For most, that's not the same time or amount everyday, but usage is heavily weighted towards the evenings - particularly Sunday, Monday and Tuesday. It's at these times that reductions in the available download speeds are inevitable to prevent complete network saturation and the associated poor performance of the whole connection that would result. 1 & 2 below). We are fortunate to be able to ‘forward price' BBYW on this basis (See note 3 below). - We've changed from an 8 hour to 16 hour usage monitoring period (We no longer describe this as 'peak' time) for BBYW. This ensures our network is protected from disproportionate heavy usage for a longer period of the day and allows us to offer higher overall usage allowances as a result. Since the takeover by BT, our focus is now firmly on sustainable growth and leading service delivery. That means we can take these longer term views of profitability for our new products. This explains why for many people BBYW will provide better value for money now, and why we wanted to make sure people could move to the new products without penalty. Our older Premier and Plus products will of course continue to track the current wholesale costs as laid out in the original Blueprint document.
|BBYW Option + Price||VAT + Line rental + Overheads + Margin||Network Capacity Allowance per month||Average Daily Kbps (16 hours)||Average Designed Monthly Usage|
|1 - £9.99||£9.64||35p||3.2 Kbps||0.7GB|
|2 - £14.99||£12.19||£2.80||26 Kbps||5.6GB|
|3 - £19.99||£12.84||£7.15||65 Kbps||14GB|
|4 - £29.99||£19.32||£10.67||97 Kbps||21GB|
Why launch BBYW rather than upgrading your current products?The first thing the PlusNet User group said when we explained our approach with the BBYW launch was "How come you are not passing on the BT cost savings to customers on existing products?". It's an understandable question, but doesn't consider the three 155Mb/s segments which were lit in February and March as a result of the expected May 07 price decrease. We then provided a fourth segment shortly after the BBYW launch to cope with the additional customers signing up for the new product. I don't think there is a right answer here though. It's true that we have focussed on making our new products as attractive as possible, but it's not fair to suggest we are neglecting existing customers as a result. We spent a long time debating this, and ultimately a few factors swung it in favour of launching a brand new product set rather than changing the existing ones:
- We had a lot of feedback from customers who disliked speed restrictions that applied before account allowances were reached, and the often requested ‘pay for more' ability would have been harder to implement for customers without asking them to make a choice. We wanted to address both of these requests.
- Plus, Premier and PAYG made no sense positioned where they were. We wanted to design a clear, single product with options that could be tailored to what people needed. PAYG will see a return soon as a new specialist "PlusNet Pro" product which has a design that means much less traffic management, for an appropriately higher price.
- The 4pm-midnight ‘peak' time was beginning to cause us issues as average usage increased - we were projecting that the heaviest users would cause problems during the 9am-4pm period, and this had become especially apparent at times during the school holidays. Especially given our plans to increase our attractiveness to business customers this year, ensuring the responsiveness of our network during the working day is an important consideration.
- Our existing products were out of date and many people told us they were too complicated and not competitive enough.
- We wanted to tie in new products with our new ownership, new management, new leaf turned (proper customer support, enough bandwidth, no hidden changing policies etc).
- We've made it completely free for all customers to move to BBYW if they feel it will suit them better. Most people will benefit by moving unless they make heavy use of the daytime unmonitored period on Plus and Premier.
What about Premier, Plus and PAYG?It's important for people to see that Plus & Premier have not been made worse as a result of the BBYW product launch, and the May 2007 pricing had already been reflected when we lit the additional segments in March. The benefits of 2008 pricing and any new features will however in the majority go to BBYW and not Plus, Premier or PAYG customers. We chose to launch BBYW as a separate product partly because we didn't want to make arbitrary changes that would impact some people who are happy using our current products - Especially those who make use of the shorter monitored usage period. We have been keen to ensure that at any time customers will be able to make an informed choice about whether to stay where they are (we won't be withdrawing Plus, Premier or PAYG in the next year and have no plans to do so at any time) or they can move without penalty to BBYW. We've emailed all customers about the new products to avoid some of the accusations we've had in the past about failing to keep our customers up-to-date, and will send occasional reminders in newsletters and other communications. Customers who would like to compare network performance between Premier, Plus, PAYG and the BBYW Options can do so using the PlusNet Usergroup's comparison tool.
What about capacity for the future?We have new central 622 pipes on order and have now moved to a strategy of ordering capacity ahead of demand (whilst still planning a managed capacity based on customer numbers) rather than the "Just in Time" approach operated in the past. We activated the 1st segment of our sixth 622Mbps Central Pipe on the 19th June and the next 155Mbps segment is due to be lit soon, in line with predictions for growth in our BBYW product set. We will continue to add network capacity in line with customer number projections and the products they are using. To illustrate the point, because of the higher usage design, even if all existing customers moved to BBYW and customer numbers didn't increase we would still add more capacity to our platform.
What will happen to BBYW expected speeds in the future?Each BBYW product is designed based on what we predict will happen as average Broadband usage increases, and how we expect the use of certain protocols at certain times of day of the day will impact load on our network. We believe that the conservative predictions we have made about the percentage of customers who will reach their usage allowance means that BBYW products will maintain the expected speed levels even with the predicted growth in average usage. This will come about as a result of new services like the BBC iPlayer, 4 on demand, and a multitude of feature rich and bandwidth demanding applications which we imagine will enter into mainstream usage in the coming months. It's of course possible that we might not see the explosion in average usage we predict, and in that case we'll be able to provide faster speeds on some of the protocols that are currently speed restricted on our network at busy times. On the other hand, we can't predict the future, and if more killer apps are developed that really drive up average usage for ‘interactive' protocols, there is a chance we'd have to reduce the expected speeds for some non-interactive protocols to accommodate this. As an example, no one predicted the growth in usage that youtube.com would generate when we were launching our last generation of broadband products.
In the next part...Look out for my next blog posts, in which I intend to cover:
- More details about 21CN (BT's £10 Billion infrastructure upgrade), WBC (Wholesale Broadband Connect) and our take on the future of Broadband products and wholesale pricing in the UK.
- Ongoing intelligence about growing usage habits, and analysis of historical data which highlights the speed at much usage demands are now growing, along with how we plan to cope when it comes to ensuring we can preserve people's ‘Interactive' experience.
1. This includes further IPStream price reductions due in 2008, as well as indicative pricing for the new Wholesale Broadband Connect products (which are based on the rollout of BTs new 21st Century Network). I intend to discuss 21CN and IpStream Connect pricing in more detail in a future post, but in short, WBC will be more suited to today's type of Broadband usage (i.e. Video streaming, as supposed to the current IPStream product which was designed primarily for simple web surfing and email use). 2. The decrease in cost also needs to be balanced with the increases in speed that many people will see as a result of 21CN and ADSL2+, as well as the increase in Internet usage that is occurring across the board as discussed elsewhere (Youtube for example is now using 11% of our network at peak - It wasn't even a factor a year ago). For these reasons, some type of traffic control and management will probably always remain necessary, even when more capacity is cheaper. BT has already built optional traffic prioritisation into the design of the WBC products on this basis. 3. We are also in a position now where we can be clear that should the wholesale pricing reductions we expect not materialise in the predicted timeframe, customers won't end up suffering as a result.
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Ian Wild is Product Development Manager at PlusNet plc