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Last Updated: Tuesday, 24 August, 2004, 11:22 GMT 12:22 UK
Price cut fuels broadband battle
Woman downloading music to computer
Data limits mean users can only download 20 music tracks per week
Internet service provider Wanadoo has launched the latest salvo in the broadband price wars in the UK.

Wanadoo, formerly known as Freeserve, is launching a one megabit service for 17.99, undercutting its rivals.

A 1Mbps service is twice as fast as the standard 512Kbps broadband offering.

Internet providers in the UK are locked in a fierce battle and this could even lead to broadband being offered with no monthly subscription at all, say analysts.

Limited downloads

Broadband has become an aggressively competitive market and for consumers there is often a bewildering array of choices.

As the market matures, it is a natural progression to move up the broadband ladder, said Wanadoo Chief Executive Eric Abensur.

Eight hours of surfing per day
20 music downloads per week
30 minutes of video watching per week
1.5 hours of online gaming per week
Send and receive 800 e-mails without attachments
"We believe 1Mb is a basic right for all internet users, so everyone can enjoy the benefits of faster browsing and downloading, higher quality sound and video, and the enhanced online experience that 1 Mb broadband provides," he said.

Rival 1Mbps services are priced at around 30 per month.

One smaller net provider, Freedom2Surf, already offers a 1Mb capped connection for around 15.

"It is great to see the likes of Wanadoo finally following the lead of smaller ISPs and introducing packages that lower the cost of broadband under the psychologically important 20 a month barrier," said Chris Panayis, managing director of Freedom2Surf.

Net limits

The Wanadoo offer, which is available as from Wednesday 25 August, comes with strings attached. Users will be limited to the amount of data they can download.

We are going to see further pricing announcements in the autumn
Ian Fogg, Jupiter Research
The monthly allowance for the cheap service will be two gigabytes, which equates to eight hours of surfing per day.

Users exceeding this limit will be warned with two e-mails and asked to chose either to upgrade to a 22.99 monthly package which allows 6GB of downloads or face having their service restricted to e-mail-only for the rest of the month.

However, a Wanadoo spokesperson told BBC News Online that these caps would not be enforced until early next year.

The announcement of cheap fast broadband could lead to a service which scraps the monthly subscription fee altogether in favour of a usage-based pricing scheme, suggested Ian Fogg, an analyst with Jupiter Research.

"Historically Wanadoo was chosen by consumers because it was a cheap way to get online and it is now driving cheaply priced broadband to the mass market," he said.

In its Freeserve days, Wanadoo offered one of the first free dial-up services, which encouraged millions of people to go online.

Getting closer

Its recent announcement has been timed to coincide with BT's decision to extend the reach of broadband.

Last week, the telco announced that it was scrapping the distance rule for broadband, whereby people had to live within a certain distance of their local telephone exchange in order to qualify for broadband.

For people wanting a 1Mbps service, there is still a restriction but the distance has been stretched from four to six kilometres.

The cost of broadband has steadily been coming down. A renewed war to tempt surfers to switch to the higher speed products looks likely, especially as BT has recently made changes to its wholesale pricing.

"We are going to see further pricing announcements in the autumn," said Mr Fogg.

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