The postcode lottery: it’s not when you log on, but where

As another broadband company introduces an extra charge for customers living outside their unbundling domain, uSwitch.com reveals a new broadband class war as customers are increasingly penalised for living in the ‘wrong’ area.

Millions of broadband customers across Britain are facing new penalties just for living in the ‘wrong’ area, reveals uSwitch.com, the independent price comparison and switching service. This week AOL has joined the growing list of companies now operating a ‘two tier’ pricing system, introducing an additional £10 a month charge for broadband customers living outside their LLU network. uSwitch.com calculates that such charges are costing customers up to 240% more if they are not covered by a provider’s LLU network.

AOL’s two new tariffs, effective from 22nd May, offer customers living within their LLU network a 2Mb service for £14.99 a month and an 8Mb service for £29.99. Customers living outside the LLU network will be offered the same services for £24.99 and £39.99 respectively, potentially reducing the attraction of the deal for 40% of the population.

AOL joins TalkTalk, Sky, UK Online and Virgin Media in differentiating both the price and speed of broadband services according to where people live, suggesting that a new broadband ‘class system’ is emerging. uSwitch.com reveals that non-LLU customers of these five companies are paying a minimum of £10 a month more to receive the same speed as an LLU customer, or £120 a year.

Steve Weller, Head of Communication Services at uSwitch.com, comments: “The new tariffs introduced by AOL bring into sharp focus the digital divide that is forming between LLU and non-LLU households. Unfortunately, AOL is not the only company to penalise households not falling within their unbundled network. In the case of UK Online for example, non-LLU customers are charged up to double the price for the same service; alternatively, for the same cost as their unbundled neighbours they will receive only an eighth of the speed.”

Weller continues: “It’s simply not acceptable that one customer may be paying £19.99 a month for a service of up to 1Mb yet their friends down the road could be paying just £14.99 for a 2Mb service – as is the case with UK Online - just because their postcode happens to fall under their provider’s LLU hit list.”

The process of Local Loop Unbundling (LLU) has given broadband companies more flexibility over the costs and speeds they offer their customers, by installing their own equipment into BT exchanges. The result has been a wave of highly competitive deals as companies have aggressively sought to sign up as many new customers as possible in a very short time frame. Broadband prices fell by up to 17% last year and are continuing to fall.

Yet, while the pace of LLU is accelerating, with LLU connections expected to reach 2 million by the end of the year, nearly 8 million households are still receiving broadband over an IPStream network, owned by BT’s wholesale arm. While 45% of households are now able to access the cable network, Virgin Media’s broadband customers currently stand at 3.4 million.

Weller continues: “Rural areas tend to be the ones being neglected by the LLU roll-out. With a lower number of homes to every exchange, broadband providers aren’t able to claw back enough value out of their investment, so instead have concentrated on unbundling areas with a higher population density. People living in the country are effectively second class citizens in the eyes of the broadband operators.

“Fortunately, companies including Orange, Tiscali and Pipex are not succumbing to this regional discrimination policy but who’s to say they won’t jump on the bandwagon soon? We have yet to see what deals Virgin Media will offer following its deal with Cable & Wireless to supply broadband, phone and TV services to parts of the country it can’t currently reach via cable.

“We are calling for this new ‘postcode lottery’ practice to be halted in its tracks before other providers join in, denying more consumers the chance to benefit from the great deals that are currently out there. In the meantime, now is the time for consumers to secure themselves onto a deal that presents good value for both money and service.”