UK telco BT proves the need for net neutrality legislation

UK telco BT is pushing to charge content providers a carriage fee for content offered on its internet network.

BT claims that video sites including YouTube and the BBC iPlayer are getting a free ride on its network, because they use more bandwidth than other sites. The company claims that someone has to pay for it.

“We can’t give the content providers a completely free ride and continue to give customers the [service] they want at the price they expect,” John Petter, managing director of BT Retail’s consumer business told the Financial Times.

BT has already started throttling video content in the UK, cutting user access speeds for video sites from 8mbps to 896 kbps during peak periods.

The startling thing with the proposal is the sheer greed of BT to begin with. Even if video sites do take up more bandwidth, customers paying for internet access expect access to those sites; if BT can’t profit from its existing network, it needs to charge customers more for access, make changes to the network to cut costs, or get out of the game altogether.

But is BT currently losing money on its broadband network? It’s not. Their last profit figure did drop 81% in February, but not due to UK broadband, but problems in its Global Services division. Digging through the paper work though, I found this statement in their annual report

Broadband and convergence revenue increased by 9% to £1,298m in 2009 (2008: £1,189m, 2007:£985m), re?ecting the successful retention of customers in the maturing broadband market, together with revenue from services such as BT Vision and mobility. The broadband installed base increased by 355,000,to 4.8m customers at 31 March 2009.

They don’t break out the broadband costs, so there’s no straight comparison on profit margin. The broadband results though are lumped in with BT Retail, which includes a rapidly shrinking land line business. Despite company profit dropping 81%, guess which way BT Retail went? (and lets not forget the recession):

Gross pro?t increased by 2% in 2009 to £3,186m (2008: £3,114m, 2007: £2,938m), compared with an increase of 6% in 2008. Gross pro?t margin increased by 0.9% to 38% in 2009.

Sound like a company that can’t make a profit from broadband, or just sheer greed?

I’ve always been able to see both sides of the network neutrality debate, but this is as good an example as any as to why such network neutrality are needed.