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EDITIONS
Thursday, 31 October, 2002, 12:13 GMT
First victim of broadband price war
Hand on keyboard
More companies are offering cheap broadband deals
The broadband price war in the UK has claimed its first casualty with the low-cost start-up ET Global Solutions going bust.

The company, which was one of the first in the UK to offer broadband services for less than 20 a month, has ceased trading and closed down its website.

Its collapse has raised doubts about whether cut-price operators offering low-cost broadband services can survive.

Gio Internet, which offers broadband for 17.99 per month, will take over ET's customer base.

Any customers wishing to cancel services can do so, although they will be tied into their three month contracts. Those that have paid for services that they have not received will be contacted by Gio and offered two months' free service.

Different league

Abdul Khalif, Managing Director of Gio, promised users a more stable service.


It is a promotional offer. We have been subsidising it

Abdul Khalif, Gio
"ET was a start-up company whereas Gio has an established customer base and has been offering unmetered internet services for three years," he said.

"It is not in the same league as companies that are running into difficulties," he added.

However there is a proviso to the cheap offering from Gio.

"It is a promotional offer. We have been subsidising it," Mr Khalif said.

At the end of the year it is likely to go up in cost "to around 20", he told BBC News Online.

Angry consumers

A flurry of internet service providers started offering consumers cheap, subsidised deals, following a broadband price cut by BT earlier in the year.

Screen grab of Gio Internet's front page
Gio's offering is subsidised
Critics have questioned how they could sustain such wafer-thin profit margins, warning that many would go out of business.

A similar situation occurred when flat-rate internet access was introduced by BT in 2000.

Many of the cut-price operators soon went out of business, leaving behind a flood of angry consumers.

Questionable business models

Industry watchers are not surprised to see ET Global Solutions go under, but point out that such failures tarnish the whole image of broadband.

"The demise of ET Global raises fears about the financial stability of similar low cost ISPs operating without the appropriate financial backing, management and technical know-how to provide a good level of service," commented broadband industry watcher ADSL Guide on its website.

"In our conversations with these providers, they insist their model is sustainable but as we have seen, taking the word of the company is questionable, particularly new companies with no track history to back up their plans."

ADSL Guide advised users interested in taking up cheap broadband services to pay by credit card which will offer a better level of protection if the firm runs into difficulties.


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