Telecom industry cheers cheaper broadband

The next challenge will be filling the screen with content

Internet service providers (ISP), content providers, regulators and politicians have all welcomed BT's decision to cut wholesale broadband access charges from £25 to £14.75 a month.

The ISP Pipex responded quickly by cutting its broadband cost to £23.44, that is £19.95 plus VAT.

"We expect to see mass take up of broadband in the UK over the coming months," said managing director David Rickards.

"This is a very positive announcement which we welcome," said Karen Thomson, chief executive of internet service provider AOL UK.

"We are presently examining the details," she added.

"But it is already clear that this takes us much closer to the dawn of broadband Britain."

Content is key

Gary Baker, marketing director of Alcatel UK, which offers broadband hardware, said lower wholesale prices from BT "gives room for ISPs to compete with the propositions from Telewest and NTL."

"Beyond that, we expect new application and content to be the main drivers for high level penetration."

Broadband retail prices, European comparisons:

BT Openworld: 55.11 euros

Telecom Italia:
42.87 euros

Telefonica (Spain):
42.04 euros

Telia (Sweden): 28.08 euros

Belgacom (Belgium):
25.10 euros

France Telecom:
17.15 euros

Source: Point Topic

Simon Hockhauser, whose company Videonetworks offers music videos, movies and TV programmes via the web, agreed.

"We need broadband to [do our business] and the prices of broadband have held us back over the last four to five years," he told BBC News Online.

Industry officials predict that along with rising broadband penetration there will be a sharp rise in content supply.

Last Friday, Ireland Live Television News launched what it claims to be the worlds first 24-hour broadband news channel.

BBC News Online is also developing a wide range of multimedia services for broadband.

Price competition

"The cost of broadband is clearly an important factor in take-up and [BT's] price reductions proposed are very significant," said the industry regulator Oftel's director general of telecommunications, David Edmonds.

Ian Buckley, marketing manager of ISP Zen Internet, said lower prices were key to attract new customers.

He referred to market research that indicates that consumers in the UK are willing to pay between £25 and £30 a month.

"We can now offer broadband to consumers at a price that will drive high levels of take-up," said Freeserve chief executive John Pluthero.

Freeserve said it would offer broadband internet access for £29.99 a month to its existing customers from 1 April.

The smaller ISP Nildram, meanwhile, cut the prices for its relatively slow broadband connection to £29 a month two week ago, taking a lead.

The company says it will make an announcement shortly how to react to BT's price cuts.

The ISP Affinity also welcomed BT's move, though its chief executive Wayne Lochner said BT should have reduced wholesale prices even more to below £10.

BT's retail price

BT's own broadband service did not immediately cut its monthly retail charge of about £40.

But the price is widely predicted to come down.

This is expected to make BT Openworld's broadband service cheaper than those offered by some of its European counterparts.

The UK's e-commerce and competitiveness minister Douglas Alexander welcomed BT's lower wholesale broadband prices, describing the move as "excellent news for consumers and business".

Broadband cable

The UK cable companies NTL and Telewest Communications have grabbed large chunks of the broadband market by offering high-speed internet access for £25 a month.

"We're pleased that BT finally decided to push [its broadband service] aggressively. Competition will be good for us as it will help drive [demand for broadband] forward," said Telewest chief executive Adam Singer.

At the end of September, the two had 170,000 customers, more than BT at the time.

Industry officials have estimated that the figure is believed to have risen to about 250,000 since.