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Wednesday, November 10, 1999 Published at 13:06 GMT

Business: The Economy

BT cuts internet call costs

BT says it's good to talk: With prices cut, it may also be good to surf

BT has said it will "reduce dramatically" call charges for internet access in the UK from the middle of next month.

The move will see all internet service providers (ISPs) charged just under 1p a minute per call.

The idea is that the ISP - the company through which users gain access to the internet - bulk buys the call minutes from BT.

They would then be free to sell them on to customers, either through low call charges or via unmetered access for a fixed fee of about £10 per month.

Service provider AOL UK said it welcomed the fact that BT had recognised the cost of internet calls was currently too high.

But managing director Karen Thomson said the proposed cut was not a true flat-rate tariff.

"Consumers have been penalised for the time they spend online for long enough. It appears the clock will keep ticking, particularly for heavy users. This will force consumers to restrict their online behaviour, with potentially disastrous effects for the growth of e-commerce," she said.

The ISP market in the UK is dominated by subscription-free internet connections.

Instead of a subscription, users pay BT or another phone service provider for each minute they are online, generally charged as if it were a local phone call.

Huge demand for unmetered access

Because there is a metering of connection time, this has been seen as having a dampening effect on the growth of internet use.

By contrast, in the US most surfers pay a fixed rate per month for their connection and can then stay online for as long as they like at no extra cost.

BT, the former state monopoly, said it would give revised charging details to the industry regulator, Oftel, later this week and claimed it would invest more than £100m during the next two years to "optimise" internet usage.

There has been huge demand for unmetered calls for internet access in the UK from the public, campaign groups and politicians.

The UK government's e-minister, Patricia Hewitt, has recently added her voice to calls for unmetered access.

BT group managing director Bill Cockburn said: "BT is continuing to develop a range of internet access options which cater effectively for both heavy and infrequent users, ranging from individuals at home to major corporations."

Wide variety of charging

The new tariff will have to be approved by Oftel before anything is put in place and used by the ISPs.

The internet service providers have long called for flat-rate internet call charges across Europe, but BT's move appears to have thrown the ball back into the ISP's court.

Users would access services by a toll-free number and then be billed by their ISP.

There is a wide variety of call structures for ISPs in the UK - from those with monthly subscriptions and call charges to those promising no subscription and a toll-free phone number for connections.

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