BT cuts broadband pricing

By Matt Whipp

Posted on 3 Apr 2003 at 13:52

BT has cut its wholesale prices for ADSL IPStream products by up to £2 on consumer products and by 55 per cent for business, but the ISPs aren't altogether happy.

'We have a major price cut in wholesale DSL,' said Ben Verwaayen, CEO of BT.

The price cuts come into effect from the 1 May, and are applicable to the IPStream offerings. The Home 500 product will drop from £14.75 a month to £13. This can be increased to the claimed £2 per customer where ISPs are taking large numbers of subscriptions.

Business products have been cut by 55 per cent: Office 500 drops to £18, Office 1000 to £28 and Office 2000 to £38.

Verwaayen said: 'Broadband for businesses is now a volume product and is benefiting from economies of scale.'

'These price cuts will benefit everyone from service providers to consumers and businesses and will ensure that the UK continues to have some of the lowest prices in Europe,' he added. 'We now have the opportunity to go big time with broadband.'

Even so, the price reductions are unlikely to be passed on to consumers. Freeserve told us that increases in other aspects of BT's Wholesale products 'negates a small part of the IPStream price reduction'. We were told: 'We don't plan to reduce our prices and we will keep this under review.'

The DataStream Debate

ISPs are outraged that BT's cuts only apply to BT's IPStream products, and not across the board.

Tiscali UK's CEO, Sergio Cellini, said: 'This is Broadband BT not Broadband Britain.'

Freeserve has said it is 'surprised that BT has not also reduced the price of their DataStream offering given the similarity of efficiencies and equipment costs to IPStream.'

The accusations levelled at BT centre on an Oftel ATM interconnection ruling that forced the company to come up with its DataStream product in order to promote competition.

IPStream customers essentially pay BT to manage their traffic and services, but are tied to the same products offered by BT.

DataStream allows ISPs that have their own networks to take their traffic straight off BT's core network. This gives ISPs taking Datastream greater freedom in both end-user pricing and products.

For example, as a DataStream customer, Tiscali will offer a 1Mbit consumer service this summer, ahead of BT. IPStream customers will have to wait until the winter when they can offer BT's 1Mbit service to their subscribers.

Cellini went on: 'This is clear discrimination against DataStream, which is not in the consumer's interest, and is an effort to squeeze competitors' margins.'

An Oftel spokesperson said that: 'On the information we have so far, we don't think that BT is behaving in an anti-competitive manner.' She said that Oftel has no control over how ISPs structure pricing.

Cellini added: 'Most of BT's actions in the last 12 months have been designed to kill the development of DataStream and to prevent competition.'

To wit, BT's 50 per cent discount on the activation fee was only applied to the IPStream products.

A spokesperson for BT Wholesale obliquely told us that the activation fee discount was a special offer that had now ended. All businesses offer special promotions, she said.

As for the IPStream cuts over DataStream, the spokesperson told us, 'There are changes to help DataStream customers in terms of new contractual arrangement and equipment. As of 1 May, DataStream customers will be able to offer their subscribers three-month minimum contracts [rather than 12] and we are introducing fatter pipes with four times the capacity to help them reduce unit costs.'