British broadband brouhaha British Telecom is being criticized for lowering its wholesale broadband pricing to a point that leaves a £1 ($1.57) a month difference between its ISP fees and what it sells bandwith to rivals carriers. Talk about a thin margin. It only goes to show that the bits are the commodity and content is the value creator. Here's why AOL and MSN, as they face the transition from dial-up customers to broadband, are in such a fix -- they've been selling bits, that's what the marketing has been all about: "Get connected."

Well, now folks are connected and the reason they'll pay for faster connections is more/different content and services. But, because of actions like British Telecom's, connectivity is too cheap to earn a significant margin and they are being forced back on content. The message in the BT move is that the content challenge is sweeping the globe. Yahoo can (and has) taken advantage of this by working with BT to sell broadband services directly to consumers in the United Kingdom and collecting a bounty for new customers, as it has with SBC in the United States. It's already built its business around aggregating content and as long as it doesn't charge for content will be able to take providers' money for bringing an audience, as well as collecting broadband bounties. [RatcliffeBlog: Business, Technology & Investing]

Mitch hits it on the head.  As bandwidth becomes increasingly a commodity, it's gonna be more and more important for ISPs and service providers to provide value added differentiation.  I was just telling some VCs that yesterday.

This is why we told AOL as well.......... well whatever, they have every right to tube.  It's a free country - right?  Stupidity is one of the rights Bush is fighting for.