Is free broadband really the future?

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It's around 10 years since BT first opened up trials of IPStream to ISP customers. Since then the broadband landscape has changed beyond recognition. There are now over 16 million broadband lines in the UK and we've climbed the international comparison tables for penetration. Fixed-line broadband is reaching saturation, speeds are increasing and mobile broadband is really taking off. But where do we think broadband is going next? There's no doubt about it, the broadband market is slowing down. Recent figures from broadband analysis company Point-Topic show this as a natural maturing of the market, as broadband adoption reaches saturation. Carphone Warehouse recently pointed to the credit crunch and slowing UK economy as the cause of their slowing sales. It's getting tougher for ISPs, particularly smaller ones, to compete with the heavy price discounting as Sky, TalkTalk and Tiscali race for market share. Some big brands like Orange are even shrinking. It seems that every newspaper is stuffed with broadband ads, comparison sites advertise constantly on the TV and direct mail trying to convince me to buy TalkTalk or Sky keeps flooding through my door (seriously - I don't want it, please stop mailing me!). Of course prices always fall - quality broadband was £50 a month in 2000. We led the way with the first £14.99 permanent price in 2005 and followed that up with BBYW Option 1 for £9.99 in 2007. It seems that prices in the broadband market are eroding faster than ever before. On this trajectory we'll all be getting paid for using our broadband lines in a few years! We believe that as people now use the Internet for voice and video as well as data, broadband has become a must-have service for every home and office. As broadband becomes more important we believe quality of service becomes even more important and we've a full awards cabinet to evidence our credentials. We've already published our plans for 2008/09 and we're on track to make some improvements to our broadband and home phone services later this summer. At the moment we're running a special offer of half-priced broadband for the first three months, provided the customer takes our Home Phone service. Previously we've steered clear of discounting our broadband service and we've had quite a bit of feedback from customers who don't like this sort of promotional tactic. I think it's perfectly possible for us to do special offers while still being absolutely committed to transparency - and we do that by not hiding things in small print with lots of caveats. The reason for looking at price discounts is pretty obvious. On price comparison sites a low price-point is really important for where you are ranked in the value for money tables. If you take Tiscali's entry level broadband product it is £14.99 a month - £5 more per month than PlusNet Broadband Your Way Option 1. However by pricing at £4.49 for the first three months Tiscali 'appear' to be better value on many comparison sites. So for the moment we're testing to see if discounted introductory offers make a difference to sales. If they do, we'll probably do more of this in the future. What we'll always do is offer choice and all round good value for money. As prices keep reducing in the market we'll make sure our products stay competitive so all of our customers, new and existing, get great value and great service from PlusNet. So will broadband end up free for everyone? I doubt it. The only reason anyone can advertise 'free' broadband is because it's being subsidised by higher margin services such as mobile phone calls, international phone calls and of course TV. We think by being a broadband specialist (but also offering an excellent value Home Phone service) we can continue to take on the big guys and beat them, based on the quality of service we offer. This summer we'll be unveiling a new-look PlusNet and we'll continue to prove that we supply broadband worth paying for, while our competitors have to give theirs away for free! Happy surfing. Neil Armstrong Products Director, PlusNet