New Media: BT's reduction of Internet tariffs just doesn't add up for many ISPs

What else would you expect from a former state monopoly that has just raked in a pounds 3.3bn profit?
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The Independent Culture
BEHIND EVERY seemingly positive announcement lies a mile of complex red tape and small print. The good news is that it doesn't take a genius to see through the PR hype and expose the labyrinth of catches.

BT's so-called concession last week - reducing tariffs for ISPs (Internet service providers) - riled up the industry, after BT pitched that it would actually hasten unmetered Internet access. Many people were left disappointed, but er, what else should we expect from a former state monopoly that has just raked in pounds 10.3bn, of which pounds 3.3bn was profit, in the first six months of this year?

ISPs were the most vociferous about BT's new tariff, suggesting the offer was a rip-off. The offer, in case you missed it, was that BT is planning to introduce a new tariff structure for ISPs next month, but the catch is it only bundles eight hours of call-free Internet access a day per port. Each port connection, which serves an average of 20 customers, costs pounds 140 a month, but the more significant catch is that, to take advantage of the deal, ISPs have to rent a minimum of 10,000 ports from BT, which could put the monthly bill up by pounds 1.4m.

While widespread rejection of the offer by ISPs seems likely, it's inevitable that some (but only those that have more than 200,000 subscribers) will incorporate the offer into their business model. A further catch is that, under the new tariff, ISPs have to use BT ports for the whole Internet call, that would squeeze other operators out of the market and could end up dispensing with the interconnect charge model.

According to BT, service providers could translate this to 18 hours of free Internet access per month and charge customers a flat fee of pounds 10, or supplement the cost completely with advertising and e-commerce commissions.

Most observers are predicting a shake-out of the ISP market, but with the BT offer in the marketplace, the smaller ISPs may find it even more difficult to survive.

My main problem with BT's latest "concession" is that, yet again, it is not giving anything away, instead opting to protect its oh-so-precious profit margins. Perhaps we are all being too hasty, because the last comment from BT was that it hadn't yet finalised its plans or revealed the exact details of the service, but even if it does alter the offer, I doubt whether it would give too much away.

But regardless of the ins-and-outs of the offer, it's slightly reassuring that, if you exert enough pressure on a company like BT for a continued period of time, then eventually it will cave in, albeit reluctantly.


The emerging VC (venture capitalist) and incubator scene in the UK has been one of the most widely reported Internet market developments over the past six months, with journalists seemingly obsessed with the tons of money that's being ploughed into start-ups and the people it's making into millionaires. This, without question, has been great for those entrepreneurs wanting to get their ideas off the ground, or bored new media execs wanting to make a quick buck and "go". While events like First Tuesday have done wonders to put these people together with VCs, getting a business off the ground is often not as simple as it seems, even if you have raised pounds 5m in funding.

That's where comes into play, fronted by Paul Zwillenberg, the Associated New Media ex-MD, is a hybrid incubator/VC/development company which takes a business plan, provides funding, strategy and development, then follows it through with sales, marketing and distribution help. The model is based on charging a fee for different levels of service and taking between 5 and 20 per cent equity in the company.

If it was a new company, I would think "nah, too over-ambitious", but the fact that it's been around in the US since 1996; has a host of successes under its belt; has Zwillenberg running its European operation, and has just raised pounds 22m in a round of funding, makes me think it will do good things for the UK Internet scene.

I'm reassured by the fact it is being very choosy - it won't take any Tom, Dick or Harry on board, already turning down 99 per cent of all business plans in the US - but select only the best, more feasible ideas. While this may be exclusive, it also means that the core business and skills incubator won't be diluted by fly-by-night ideas.

The company likens itself to a "digital [Hollywood] studio" where it takes scripts, if you follow the analogy, vets them and, if they're deemed good enough, a movie (website) is made. I had to mention this because, for some unfathomable reason, since I heard this, I've not been able to get the vision of Tom Cruise screaming "show me the money" out of my head.

QVC's tech savvy

Home shopping channel QVC may not instantly convey images of technical savvy, but look beneath the surface and you may be pleasantly surprised by the scope and breadth of its interactive plans. QVC, long considered a bastion of kitch, naff goods and tanned smarmy presenters, raised a few eyebrows last week when it revealed its plans for interactive TV shopping.

Most press reports claimed it was developing a service to rival Open but didn't really grasp the concept of enhanced TV where the interactivity is built into the broadcast stream. QVC's shop window and transactional facilities will sit behind its TV programming in a way not dissimilar to Teletext. Of course, to put all its 12,000 products on to QVC Directory, as it calls the service, it will need to buy additional bandwidth from Sky and whichever other digital operator it manages to sign up with.

The service, which works in a similar way to Sky Sports Extra, where data is stored in the set-top box and navigation is through the remote control, has great potential. I'm not just talking about QVC's service, I'm talking about the way broadcasters can develop their own interactive response areas behind the programming, not just put something in the standalone interactive area.

Remind me exactly what Open does, that others can't? Perhaps it should lower its tenancy fees and try to lure more competitive retailers to rent space on its service. How else is it going to soon be in a position for a successful floatation on the stock exchange?