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Last Updated: Friday, 27 August, 2004, 17:11 GMT 18:11 UK
Price hike for business broadband
Ethernet cable, Eyewire
Linking to the net could cost some firms more
Small net firms are warning that they will be hit hard by BT's decision to increase prices for some of its fast internet services.

The telecoms giant bumped up prices for some of its business broadband services following a ruling by regulator Ofcom.

It wanted to encouraged competition by emphasising differences between BT services and those of its rivals.

But the price rise has been met with dismay by small net firms which said it could put some of them out of business.

Price hikes

"It makes life very difficult for smaller net service firms," said Steve Dyer, chairman of Mailbox Internet and spokesman for the UK Internet Federation that represents about 70 small and medium sized net firms.

"It seems odd that we have a situation where the regulator is instructing the telecom monopoly to increase prices," he told BBC News Online.

The target for Ofcom has been a competitive market which gives smaller net firms a choice
Ofcom spokesman
The move by BT to raise prices was also criticised by the UK's Internet Service Provider's Association.

In a statement Ispa said it had "significant fears" for its smaller members following the price rise.

BT's decision could mean that the prices for some of its net services rise by up to 32%.

The decision to raise the prices followed an Ofcom investigation into the state of the wholesale broadband access market.

Broadly any firm wanting to set itself up as a net service firm can get broadband lines either direct from BT or from another firm that resells BT's lines.

A spokesman for Ofcom said the investigation showed that there needed to be a greater difference between the services BT offered and those offered by its rivals.

"The target for Ofcom has been a competitive market which gives smaller net firms a choice," he said.

To make the market differences between ways of renting fast net links more stark, Ofcom told BT to alter the margins between the costs of its own services and those reselling its lines.

The Ofcom spokesman said it could not dictate to BT how to comply with its ruling.

BT chose to comply by raising prices of the broadband links that it sells direct to net service firms and which many of them resell on to businesses.

"We did not take a decision like this lightly," said a BT spokesman.

But, he said, the decision was taken to ensure that the pricing structure of its entire portfolio of net services made sense.

"There are other products that the service providers could potentially use," he said.

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