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Last Updated: Thursday, 13 May, 2004, 14:23 GMT 15:23 UK
BT set to reduce broadband charge
Internet surfer
BT is slashing charges for its rivals
Telecoms giant BT has unveiled a 70% reduction in the price of broadband access for its rival providers.

The firm said it was reducing wholesale prices in a bid to boost competition and encourage lighter regulation of the growing market.

But experts say the changes may make little difference consumers as only wholesale prices have been reduced.

Regulator Ofcom welcomed BT's plans, before saying it would be widening its probe into internet service providers.

Lower charges will allow internet service providers (ISPs) to carry more broadband traffic and enable them to offer a wider array of services and download speeds as well as lower charges for high-speed internet access.

Rival ISP Wanadoo welcomed the gesture, saying: "Cutting LLU costs will trigger a real broadband revolution in the UK."

Fellow ISP and communications firm Thus also backed the move, adding: "Ultimately this should lead to increased innovation, choice and value for consumers."

'Positive steps'

But whether BT's rivals decide to pass on the cuts to their users remains to be seen.

A BT spokesman explained that as the reductions are for wholesale prices the move "won't immediately affect broadband customers".

Wholesale prices cut for access to last mile of copper wire to user's door
Comes after criticism from the regulator about BT overcharging rivals
Unclear whether broadband operators will pass on savings to consumers
ADSL Guide analyst Andrew Ferguson also warned consumers "not to expect widespread price cuts".

He added that while the average home user may see the "odd 1 or 2 a month knocked off the price" the main difference will be to providers as lower costs will lift profit margins.

One competitor did respond with swift price cuts, though.

Bulldog Communications chief executive Richard Greco said the group would be reducing the cost of its one and two megabyte Time-Of-Day services.

Mr Greco said of the decision: "Finally BT threw us a bone. We think that these are really positive steps - but just first steps."

He added that he was "grateful" to Ofcom for their swift moves since taking office to shake-up the ISP market.

But he warned that although BT is set to reduce its charges there was "still a way to go" to bring UK prices into line with those in countries, such as France where ISP access costs are five times cheaper.

Cuts pre-empted?

Last month Ofcom chief executive Stephen Carter attacked BT for overcharging rival telecoms operators to access the local loop.

According to one European Union report, the price of internet access in the UK is up to 60 more expensive than the European average.

BT's announcement is thought to be a means to pre-empt forced price cuts, which many had expected Ofcom to unveil in its statement.

BT has always argued that a market needs to develop in which those who are willing to invest and innovate can reap the rewards. This is a significant step in that direction.
Ben Verwaayen, BT
Mr Carter added that the probe into the broadband market would "mark an opportunity to accelerate the prospects for sustainably competitive investment in Broadband Britain".

The price reductions centre around the group's Local Loop Unbundling (LLU) products.

The local loop is the last mile of copper wire connections linking households to telephone exchanges - and the phone lines are used to supply the high-speed broadband net service.

BT had been forced to open up these lines to rival companies to increase competition.

Competition boost

BT also announced it would be simplifying and redesigning its current LLU products in the "strong belief that such a move will benefit those companies who are willing to invest and innovate".

Chief executive Ben Verwaayen said: "Our announcement marks a major move towards the telecommunications market of the future.

"BT has always argued that a market needs to develop in which those who are willing to invest and innovate can reap the rewards. This is a significant step in that direction.

"We now have a far clearer idea of how Ofcom sees the market developing and we share their view that competition based at the infrastructure level will be good for everyone and for the UK in general."

BT said the cuts would take effect on 1 June when it would reduce the monthly rental price for the existing shared LLU product from 4.42 to 2.26 per line. Connection fees will also drop from 117 to 83.33.

It said the initial cuts represent an overall saving of 35% on current prices. Further cuts, taking the total reduction to 70%, are set to take place once volumes pick up.

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