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Thursday, March 22, 2007

Brightview - A quality ISP

Brightview are currently bathing in the glory of being consistently named as one of the UK’s top isps. The placing of their three main brands: Global, Madasafish and the vISP, Waitrose, in huge surveys from both Which? And Watchdog prove that they have a huge proportion of satisfied customers, more than any other ISP in the country, although Zen Internet are giving their agents a run for their money.

This seems to be feeding through into repeat business with John Lewis launching another virtual ISP (they also own Waitrose) and Madasafish reporting a 30% increase in switchers since the new MAC scheme was introduced on Valentine’s Day. Most of this business seems to be generated by word of mouth and therefore are probably keeping Brightview marketing costs extremely low.

Brightview is just emerging after a corporate restructuring as probably the only pure-play broadband stock on the AIM market and released results on the 27th Feb announcing 54k subscribers. One quick glance at their figures shows that excellence in customer service does not translate to financial excellence.

On a turnover of £6.4m for the six months to 31dec'06, the internet division seem to have generated a net loss of £8k. The internet division also includes significant dial-up and other revenue, broadband turnover being £4.4m. BT Central Costs of £220k and investment in Broadband acquisition in the period was £676k of which the majority of goes straight to BT. These figures highlight how difficult it is for a small ISP to generate a return even for a well run one.

In my heart, I really want small providers like Brightview who deliver excellent customer service to succeed; however the economics of the reseller market and more especially BT wholesale pricing work against them. This I believe is the great shame of the current wholesale broadband pricing scheme – it only works in favour of those providers who want to bulk up quickly and invest capital in unbundling. These are the exact same providers who are bottom in terms of customer satisfaction.

The future is even more uncertain for the small providers with the development of the BT Next Generation Network. What is even more scandalous is that the pseudo-quango looking at the impact of the NGN and lobbying for a level playing field, the NGNuk, charge £40k pa for full membership. This is an old trick by telco industry bodies, especially on the equipment provider side, used to keep small innovative players out of the decision making process.

It is patently obvious that the industry is heading rapidly towards an oligopoly, especially in the consumer sector and the OFCOM is actually encouraging this with its Wholesale Broadband Consultation. To quote:
1.1 The importance of broadband continues to grow. It plays a central role in communications used by many consumers and businesses to keep in touch, access information and conduct business. Over the last few years the market has seen rapid improvements in availability, take-up, speeds and prices and this has put the UK near the top of international best practice. In line with its legal duties, Ofcom aims to ensure that we build on this significant progress.

1.2 Competition has an important role to play in delivering what consumers and businesses need. Increased competition in certain parts of the retail market for broadband has led to a fall in prices and internet service providers (ISPs) have looked to offer different speeds and product bundles to attract customers. As a result take-up has grown, reaching more than 12 million broadband connections.

1.3 Competition at the retail level depends on ISPs having access to wholesale broadband services or local loop unbundling (LLU) to build their services. Ofcom has identified that competition between networks based on LLU, rather than just at the retail level based on wholesale broadband products, is crucial to maintaining the UK's broadband progress. Promoting competition based on LLU continues to be central to Ofcom’s approach in making sure that consumers can access the services they demand. There are now more than 850,000 unbundled lines in the UK and there is the prospect of further competition.
Note, no mention on quality – just take-up, speeds and pricies – and also the emphasis on future policy being directed to LLU not resellers. OFCOM should take notice that customers are overwhelming asking for QUALITY SERVICE and this is being delivered by small players in the reseller market. OFCOM should act NOW before if is to late to allow the resellers to generate a fair and reasonable economic return and allow them a voice in the future of the industry.