Opening up the broadband market

Will the price cuts make Broadband Britain a reality?

For the past couple of years, UK consumers have got used to hearing government ministers extol the virtues of "Broadband Britain".

But as yet, only a tiny minority of UK internet users have taken them at their world.

Of the two "flavours" of broadband generally available, cable companies such as NTL and Telewest have each signed up about 100,000 users, while the few dozen companies offering retail packages based on BT's wholesale ADSL service have about 140,000 between them.

Not a huge number by any standards after a year of availability.

Especially when compared with the 2.1 million subscribers now using ADSL services in Germany.

Postcode lottery

The problem has been twofold: price and availability.

Cable-bsed internet connections are only available to about 25% of the population at best, and with both main cable companies bowed under huge debt burdens the odds of that ratio growing any time soon is slim.

ADSL is only available on BT phone lines, and will theoretically work for about 70% of the country's subscribers.

But if the wires are of poor quality, or you live too far from an exchange, you're out of luck.

And in any case, BT has only enabled ADSL at only 1,010 of the 6,000-odd exchanges up and down the country.

BT points out that about 60% of subscribers are connected to one of the enabled exchanges, but if you live deep in the countryside or even in a small town, you could well be out of luck for some time to come.

Pile 'em high

As for price, that has been the cable companies' main selling point. At about £25, compared with £10-15 for an "all-you-can-eat" dialup account which runs at a tenth of the connection speed, they have got a much higher proportion of their user base to sign up than has BT.

BTopenworld, BT's internet service provider, has till now charged a minimum of £39.99 a month on top of a £150 connection fee.

Most other ISPs buying the wholesale service from BT have set prices even higher.

In comparison, German customers pay less than £20 a month. Belgium's Belgacom charges just over £15, while France Telecom's Wanadoo costs no more than £10.50 - although it is under investigation for illicitly cross-subsidising and driving its competitors out of the game.

All change?

But now that BT has taken the axe to wholesale rates in the UK, what does that mean for the user?

For the next few weeks, not much. The new charges do not take effect till April.

But when they do, prices will plummet. BTopenworld has yet to reveal its own pricing, but its competitors have already taken the initiative.

Griffin's prices are falling to £26.43 from £38.19. And Pipex, one of the biggest ISPs in the country, is now charging just £23.44 including VAT.

The conventional wisdom in the business is that broadband is doomed in a mass market sense until the price comes down below £30 a month - and preferably to £25.

Now, it seems, we will see if the predictions are right.