Modelo de la jerarquía de las necesidades de Abraham maslow

3.134 Substitution on the demand side would suggest that a hypothetical monopolist in the supply of residential broadband internet access would not find it profitable to sustain prices above competitive levels because sufficient numbers of residential customers would switch to the competitively priced “lower-end” business products. Similarly, a hypothetical monopolist of the supply of business broadband would find its customers switching to the competitively priced higher-end residential products.

3.135 Whilst business services are generally priced higher than residential services, there is an increasing overlap between the price range of business and residential

services. This is due to the features associated with business services being made available to residential customers either as part of a higher level service or as a pay- for option. In addition, residential users are also moving towards better quality

broadband internet access product, i.e. high upload and download speeds, to access increasing online content (such as catch-up TV, user-generated content, real-time voice and video communications) using computers as well as game consoles and radios with built-in WiFi chipsets.

3.136 Based on our residential consumer survey, of the 67% of the people who knew how much their broadband package cost per month, the average was around £19 a month, with a cluster of consumers at the 8Mbit/s to 10Mbit/s service speeds. Around 9% of people surveyed stated that they spent over £30 a month on their broadband service.

3.137 At the lower end, basic broadband-only business packages start from as little as £10 a month excluding VAT. If a hypothetical monopolist increased its residential

packages significantly, there are few barriers such as switching costs or contractual obligations which would introduce a break in the substitutability between residential and basic business broadband packages.

3.138 Given that both services are based on ADSL technology, the routers and software requirement remains the same regardless of whether a residential customer is viewing catch-up TV or a business using the internet to conduct its activities. In addition, our regulations relating to the Migration Authorisation Code (MAC) are aimed at ensuring that customers are able to switch their service providers smoothly and with minimal disruption. In response to a 10% increase in the price of broadband packages, 13% of residential customers stated that they would switch to an

alternative quality broadband product.

3.139 Our consumer survey shows that the majority (46%) of SMEs spend less than £50 a month on broadband internet access. Of these 12% are on a residential ADSL package. Large businesses with more than 250 employees, on the other hand, tend to spend more with 52% reporting that they spent more than £200 a month on their fixed internet access services.

3.140 Over the last two years in the residential broadband market we have observed a move by providers to focus on increasingly higher bandwidth products, e.g. reduction of “up to 2Mbit/s” products and an increase in “up to 20Mbit/s” offers. At the top end Virgin Media has its 50Mbit/s service, whilst BT has a 40Mbit/s service.

3.141 With improvements to residential products some business customers such as small- office home-office (SOHO) and small and medium enterprises (SMEs) users may increasingly find that services targeted primarily at residential customers are

12% of business customers stated that they would switch to a higher quality

broadband product in response to a 10% price increase and 10% opting for a lower quality product. This suggests that a 10% SSNIP on the low end business package is not likely to be profitable, with some business customers switching down to the residential package.

3.142 Similarly residential customers are free to choose a business broadband for their home and opt for the additional business services such as engineer installation, assured bandwidth, static IP address, service level agreement etc. As with residential customers, the requirements for switching to business ADSL services are typically a BT phone line and a Migration Authorisation Code (MAC) from current ISP.

3.143 Since the market definition is required to be forward-looking, it is necessary to consider how the distinction between residential and business services will develop within the period covered by this review. As the asymmetric broadband internet access market develops further, it may be increasingly challenging for suppliers to be able to differentiate and segment the market profitably between business and

residential customers. Furthermore, differences between the demand profiles of these types of customers may diminish.

3.144 The impact of switching to and from basic business ADSL broadband services may feed through to the higher specification business services. The switching behaviour of both business and residential customers in response to a SSNIP therefore shows that it is not clear that there is a clear break between residential broadband access products compared to the typical ‘standard package’ business offers available.

Supply-side substitution

3.145 In the absence of a regulated wholesale broadband access product, supply-side substitution between retail business and residential broadband internet access could occur where an LLU operator, or an operator with its own access networks, which provide services solely to residential customers begin to supply business customers in response to a SSNIP by a hypothetical monopolist in the provision of services to business consumers (and vice versa).

3.146 It may be the case that LLU operators currently focus primarily on the residential market and do not offer business services. However, product market definition does not necessarily hinge on what providers are currently doing, but rather on whether they provide a constraint (i.e. are they able to readily enter the market in response to a SSNIP). In fact, most of the Principal LLU Operators already offer some business services, and others have separate divisions dedicated to this activity. For example, TalkTalk offers communications solutions to businesses through its Opal brand, Cable & Wireless provide business services, Orange has a dedicated business division, and Sky offers communications solutions to businesses through its Easynet brand.

3.147 Our view at the last review was that wholesale inputs used to support residential and business users are basically the same because of the way in which these wholesale services are provided. That is, the ADSL line cards, the DSLAM that the ADSL line card is plugged into and the backhaul connection from the DSLAM can all be used by an ADSL service provider to support a range of residential and business asymmetric broadband services (including business services of the highest available quality). Therefore it is reasonable to assume that a wholesale provider who is only supplying (say) residential services could readily (i.e. within 12 months) start offering business services in response to a SSNIP, and vice versa.

3.148 At the wholesale level we believe that suppliers have control of the service

characteristics and are able to configure services to suit different customers’ needs. At the last review we requested information from the Principal LLU Operators45 about the type of services they provide over their LLU-based network and whether they currently deploy different networks (e.g. DSLAM, backhaul connection) to guarantee distinctive quality of service levels.

3.149 We requested the same information from the Principal LLU Operators for this review. This continues to support the view that these suppliers tend to have a single platform which is capable of supporting a wide range of services to meet the requirements of residential and business customers (e.g. high contention to very low or no

contention).

3.150 In moving from offering residential grade wholesale services to business grade services there may be a need to develop new processes and systems to support higher quality services. However, a provider who already has a network that can be configured to offer higher quality services should be able to obtain the necessary processes and systems within 12 months, either by developing them in-house, buying them in or contracting support out to a third party. In any case, most of the POs already have, at least some, of the necessary processes and systems.46 3.151 Based on the evidence available, it looks as if a wholesale provider who is only

supplying (say) residential services could readily (i.e. within 12 months) start offering business services in response to a SSNIP, and vice versa. Therefore a hypothetical monopolist would be prevented from imposing price increases above the competitive level by the threat of supply-side substitution. In practice most operators already appear to supply both.