Benefits of Unmetered Telecommunications UK Education and the Internet E-commerce and the UK Economy COLT Telecoms MD speaks out! BT's Justification for Metered Local Charges

DTI Defends Minimum Call Charge What if the US Paid BT Local Call Rates? Universities Metered New Technology Lowers Telecoms Costs Archive

BT Respond! One of our contributors asked BT: Have you any comment to make on the topics raised in http://www.unmetered.org.uk/mythbusters/index.htm? They replied, and we comment on the reply. Note that, in the reply, the issues raised by our Mythbusters have not been addressed ... Thank you for your mail about our local call charges. It is important to understand that in this context free, or unmetered, is a misnomer. Telephone companies that do not charge directly for local calls have to recover their costs in other ways. One method is to recoup the cost from long distance call charges. However, with domestic competition on long distance and international routes, BT is not in a position to do this. Also, BT believes that it is fairer to charge individual customers according to the actual use they make of the telephone network customers who habitually make long distance calls should not subsidise those who want free local calls. Unfortunately for BT, this is the opposite of our explicit differentiation between 'free' and 'unmetered' - they seem to think that 'free' and 'unmetered' are the same thing! As for 'recover their costs', nobody knows what those costs are. The crucial point about local calls, as stated in the Matson interview, is that there are negligible costs in initiating or propagating a call inside a telecommunications operator's network. (Regional, national and international calls are different, and have real costs to the operator because of per-minute interconnect charges between the operators; those costs are up to the regulator, not the operator, and are determined by some alchemical process). BT appear to be implying that they are forced to keep down prices on regional, national and international calls because of competition (other people try to undercut them) yet can maintain high prices on local calls because there is no competition in the local loop (although that is changing) ... ! In any case the concept of 'actual use' is irrelevant. When mechanical switches were in place a long-distance call did result in more wear and tear on the network; now, with an all-digital trunk network in place and information traversing the length of the British Isles in a tiny fraction of a second, there is no longer a reason for physical call distance determining tariffs. Even BT themselves know that the current three-tier (local,regional,national) structure is unsustainable in the medium and long term - they said it themselves in Scottish Business: Customer A subsidising customer B is amortisation. I 'subsidise' people who use schools (I have no children), roads and car owners (I don't drive), farm animals (I am a vegetarian), use international calls (I don't know anyone in foreign countries apart from Scotland ;) and, no doubt, in hundreds of other ways. Why? For the general good, and because I may want to use these services in the future. Certainly true with the Internet; if the cost were to come down more people would use Internet services and any notions of a small number of users being 'subsidised' would vanish. Another method is to recoup the cost from line rentals. In the USA, household customers can pay over twice the monthly rental to obtain unmeasured local calls compared to those with measured service. For example in Providence, Rhode Island, in October 1995, a residential customer opting for free local calls could pay some £82 a year more than one choosing a measured service. That £82 could have bought around 162 hours of BT weekend calls, excluding VAT. 'Recoup the cost from line rental' is precisely what we're saying - give the customer a choice between flat-rate or metered, or flavours in between. Many people, from my Inbox, would be perfectly happy to pay an increased monthly fee to have metering removed. As for the Rhode Island example, see the next paragraph. (And why use figures 'excluding VAT'? Not many residential users can claim back VAT!). Similarly, a Buffalo, New York customer opting for free local calls, as at October 1995, paid about $25.88 a month or £192.31 a year: a BT residential customer currently pays £90.60 a year - over £100 less per annum. This, unfortunately, falls into a trap which we've narrowly avoided ourselves on several occasions; you can't make direct comparisons between tariffs in different countries because the 'economic parameters' of different countries (Gross National Product, productivity, average earnings) differ enormously. For example, US GNP is 40% greater than the UK, and US labour productivity about 50% greater, both being to the benefit of the US. In 'real terms' the difference would certainly be less than the factor of two quoted here. Another important factor is that the definition of a local call in the US can be very much more restricted than in the UK. This means that some local calls in the UK would be charged at long distance rates in the US. Yes - but so what? Suppose a change to the scope of billing was required to sustain unmetered local calls (again, nobody knows the internal economics of telecommunications operators). There would be no reason to keep the current billing system by area code. There's another method of defining 'local' which is much more precise and which is already there in the billing system for every customer of every telecommunications operator; postcodes. Looking through the other end of BT's telescope, the current 'area code' system is grossly unfair in any case. A Londoner has about ten million local call subscribers to choose from; someone in mid-Wales or northern Scotland a few thousand! Hence the rise of the 'non-geographical' number, which is starting to break down the three-tier structure as mentioned earlier. Increasingly, local companies in the US are moving away from offering free or unmeasured local calls. In a number of US states, including New York and California, business customers are not even given the option of unmeasured calls. I'm sorry, but this has to be made up. I have never come across the slightest evidence of 'moving away' and, given that unmetered local calls might as well be written into the US Consitution so jealously guarded they are, if 'moving away' was happening I would have heard about it loud and clear. I don't know the details of US business charging, but a business of any size would have a (flat-rate) leased line of some sort rather than dial-up access. Some telephone companies are finding that Internet users are using free or untimed local calls to remain logged onto service providers for prolonged periods. As a result Internet providers experienced on-line related congestion, adversely affecting the quality of service offered to all its customers including those making standard voice calls. This is something BT would obviously wish to avoid. 'A small percentage of Internet users', not 'Internet users'. The magic number in the US, quoted over and over again, is about 3% of all users spending over 100 hours per month online. And this with 1 in 4 of the population (60 million) having Internet access from home and unmetered access at any time; you can't drink all the free beer you're offered. And comparing the integrated BT trunk network (which is often described as one of the best in the world) and the fragmented US network (where some parts still have mechanical switches) is comparing apples and oranges ... yet the US operators offer unmetered calls! In any case, I've had a permanent connection for 3½ years and know all about 'congestion'. Initially there was indeed trouble 'on-line' (with routers), but these problems seem to have been cracked and it's now individual servers that are slow; there are some that are very obviously not up to scratch. This is the service provider's problem and nothing to do with the telecommunications operator. The last sentence is wonderful; do BT want people to access the Internet or do they not? I have never seen any argument, other than asseveration, that problems would arise if, to pluck numbers out of the air, Internet use went up by a factor of five (ten million home users in the UK) in a few months. If everything was arranged to avoid risk or problems we might as well all lie in bed all day .. You can also see a 'cultural difference' between here and the US. There a service is given to as many people as possible as cheaply as possible, then the inevitable problems are ironed out, then the economy of scale from mass usage benefits all parties; here a service is restricted to those who can pay, which avoids technical problems by managing demand but means that economies of scale don't occur and many uses of the technology aren't economic because too few people use it ... BT currently offer many discount packages which can save up to 35% on designated local numbers and are continually reducing call charges, making BT very competitive in driving down costs for customers. 'Continually reducing' by 5% or 10% per year (the last BT reduction was in April 1998) and following pressure from OFTEL without which, I am sure, these reductions would have come a lot more slowly. As for 'driv[ing] down costs' the 'many discount packages', all metered, require reams and reams of paper to itemise the calls, which is surely a huge waste of storage, paper, ink and effort. Wouldn't a flat-rate package (with no billing save a monthly subscription, thus no need to store call information, print out call details or stuff envelopes) 'drive down costs'? Whew! I'm sorry about the extreme length of this page, but a problem we have is that nobody else is making detailed arguments - indeed, any arguments at all - against what look like plausible reasons from BT for maintaining the status quo. 'From BT' indeed; at least they have stuck their neck out and tried to justify their tariffs whereas, despite much prompting, none of the cable operators ever have.