London's not just in the zone, but a whole new one

London's not just in the zone, but a whole new one

Lance Spencer, Director of Data Networking & Next Generation Services

Lance Spencer, Director of Data Networking & Next Generation Services

When TalkTalk Business launched its first Ethernet services, the objective was to create a market disruptive proposition with a uniquely simple pricing mechanism that would give Partners of all sizes a clear understanding what price they would be paying.

So how did we do that?

We were first to market with free installs for a three year contractual commitment = TalkTalk Business at its disruptive best.

Secondly, we leveraged the scale of our network.

We had, and still have, the largest number of Ethernet-enabled exchanges – 3,036 – so over 97% of Ethernet circuits are connected directly to our local exchanges.

To keep the pricing as simple as possible, we created two pricing zones. Zone 1 was for connections to the Local Exchange infrastructure, and then Zone 2 was for any circuits that used the adjacent exchanges, i.e. the last 3%.

However, life and the market turned out to be a bit more complicated. Averaging the price over all 3,036 exchanges meant we were sometimes more expensive than the competition  in some exchanges, especially in metropolitan areas where our costs were low – although we were then incredibly competitive in remote and rural exchanges, where we were often the only provider of Ethernet services from the local exchange.

To address this, we started to create new zones. For example, Zone 0 was introduced in areas where TalkTalk Business’ costs were low and where we needed to be more competitive. The number of Zone 0 exchanges has subsequently increased from 300 in 2010 to nearly 1,760 exchanges today. Zone 0 covers the exchanges where there is the most competitive pressure and we offer our most competitive pricing: it contains over 70% of all Ethernet connections.

Then we created Zone 3, for a very small number of exchanges where our costs and the industry costs are much higher and so we need to charge a small premium to cover our costs. However, we are still the most cost effective provider.

Over the five years we have led the Ethernet market, we have constantly finessed our pricing, as our input costs have reduced, to enable our Partners to gain competitive advantage and grow their businesses. With this in mind and to ensure that we are able to maintain our leadership in the market, we are introducing a new 'City Zone’, to 58 London exchanges that will now enjoy significantly lower prices than non-London exchanges.

Although this does make the pricing more complex, we do have easy to use availability checkers, both through GUI interfaces and APIs, to allow our Partners to automate the quoting process. This means that the new Zone should have little impact on your operational activities, but allow you to be much more competitive in the London market.

London is a unique market for high speed, high availability business connectivity, and has been since the days of Mercury and COLT digging fibre into business premises. This also means that our costs for delivering capacity in the capital are also uniquely low.

Overall our objective has not changed: we still want to ensure we offer our Partners the most competitive Ethernet Services whether that is at the Wholesale Layer 2 level, or a Wires-Only or Managed Services at Layer 3.

Our “City Zone” pricing will launch next month, allowing our partners to enhance their competitive advantage. Moving forward, we will continue to work with our Partners to find new opportunities to leverage our unique network footprint.

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