BT's broadband numbers called into question

BT Wholesale has been criticised for saying 500 users in an area must show interest in broadband before a rural exchange can be upgraded.

A spokesman for Broadband4Britain (BB4B) said the number is well in excess of the number needed to ensure profitability.

Andy Williams, campaign manager for BB4B, said studies carried out by analyst house Ovum pointed to a far lower figure than BT Wholesale's 'trigger point' of between 200 and 500 users.

Williams said: "Our research shows an exchange could break even or be profitable with between 12 and 75 users over two to three years, although this number does differ depending on the mix of business and residential users.

"If BT Wholesale isn't careful it will dampen demand for broadband rather than create it. We know the actual flash point is much lower than 200 users."

Jan Dawson, analyst at Ovum who compiled a global study on creating a business case for upgrading DSL exchanges to broadband, agreed with Williams.

He said: "We spoke to various global service providers who gave us access to detailed financials and we have come up with a profitable figure for global incumbent operators of 40 residential users per exchange spending £30 each month or 10 business users spending £75.

"However, these figures need to be higher in the UK as we have the highest global charges on unbundling the local loop therefore the overall cost for applying ADSL is higher."

Dawson said the experience of UK local loop unbundler Easynet tells a different story.

"Easynet reckons you need 20 high value business customers, generating about £3,000 each per year to make local loop unbundling worthwhile.

"Based on that presumption, a UK incumbent would need about 100 residential users paying £30 per month giving a yearly total of £36,000 which is about right, or 40 business users."

However, BT Wholesale's figure of between 200 and 500 users is based on voicing an interest, Dawson said and not all of those are likely to actually sign up to the service when it is available.

"BT is probably working off the same figures as we are," Dawson said.

A spokesman for BT Wholesale said: "We do our sums as well and clearly we have access to detailed financials on these matters. If required user numbers were as low as BB4B say, local loop unbundlers would be taking over our exchanges and upgrading them. Our figures make economic sense."

BT Wholesale figures are based on making a return on their investment of upgrading an exchange to ADSL over two to three years.