Tech sector reacts to BT broadband price cut

27 February 2002 The technology sector has reacted with cautious optimism following yesterday’s decision by UK telecoms giant BT to slash broadband Internet prices.

The incumbent carrier announced that it would cut the rate it charges companies using BT’s infrastructure to provide a high-speed digital subscriber line (DSL) service from £25 (€41.03) a month to £14.75 (€24.21) from 1 April 2002.

Alternative carriers, Internet service providers (ISPs) and BT’s own BT Openworld service should be able to cut the price of their DSL tariffs to as low as £20 (€32.75) or £25 (€40.94) a month. That would bring the UK into line with prices on the continent.

Some companies applauded BT for the decision, suggesting that it could prove one of the most significant developments for the British technology sector in 2002. But others berated BT for acting only after many of its competitors had already gone bust.

The most significant reactions came from BT’s domestic rivals in the cable television sector. Debt-laden operators NTL and Telewest both indicated that they would roll out Internet access services offering speeds of up to one megabit per second (Mbit/s) – twice the speed of BT’s present DSL technology – by the end of 2002.

America Online (AOL) said that the price cuts were “very positive” for its claimed 1.7 million subscribers. “We are currently examining the details, but it is already clear that this takes us much closer to the dawn of ‘broadband Britain’,” said Karen Thomson, AOL UK CEO.

But Emma Gilthorpe, vice president for public policy in Europe for Cable &Wireless, the UK-based telecoms carrier, said the move would weaken the business case of wholesale competitors to BT. “This does not really solve the problems we have in the UK in broadband after the failure of unbundling,” she said. “It entrenches BT’s dominant position.”

At the moment, there are only an estimated 140,000 phone lines in the entire UK that have been upgraded to DSL. In comparison, Germany has more than 2.1 million DSL connections and even France has more with about 400,000.

The motivation for BT’s decision has also vexed many observers.

On the surface, the decision seems to have been linked to the appointment of new CEO Ben Verwaayen. But there will be speculation that the carrier moved only after much pressure was exerted by the British government and the UK telecoms regulator Oftel.

In recent months, Brussels has also taken a much tougher line on member states considered to be dragging their feet on broadband and local loop unbundling. It has started prosecutions against the governments of Germany, Portugal and Greece and threatened legal action against many others for the slow process of liberalising their local phone networks.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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