BT hits ISPs with broadband price hikes

Firms with an ADSL connection could see their monthly costs rise by as much as 30 percent, after BT suddenly increased its wholesale prices to ISPs

BT has sprung a nasty surprise on British business by making dramatic and unexpected increases to the cost of some of its broadband packages to ISPs.

The telco is increasing the cost of its IPStream Office range by up to 32 percent. These products are bought by Internet service providers and sold on to small and medium-sized firms.

A BT spokesman said on Tuesday that the decision was taken "to rebalance BT's consumer and business portfolios".

But in its official announcement to ISPs, BT said that it was raising its prices "in order to meet our regulatory obligations".

Under the terms of its licence, BT is not allowed to behave in an anticompetitive manner. In the past, the telco has been accused of executing "margin squeezes" by charging less for IPStream than for Datastream -- another range of wholesale broadband products used by rival wholesale telecoms operators.

BT recently cut some of its Datastream pricing, but some operators have been demanding deeper cuts, claiming that the IPStream range was too cheap and gives BT an unfair advantage when selling broadband services to ISPs.

BT's broadband prices have been falling steadily over the past few years, helping to fuel the boom in broadband take-up by consumers and businesses, so this change in direction from BT came as a shock to the broadband community.

ISPs were still coming to terms with the change on Tuesday. It is very likely that some or all of the price increases will be passed onto end users.

One told ZDNet UK that BT was "just trying to get as much money off us as possible". Another suggested it was an attempt to drive service providers onto BT's new "capacity charging" scheme, in which ISPs are billed for the bandwidth that their customers use rather than buying a flat-rate connection.

BT has claimed that capacity charging will help ISPs to offer more innovative broadband products, but it will also protect BT from losing money on bandwidth hogs.

BT's price rises in full:
BT IPStream Office 500 will increase from £18 to £20.41 per month (ex VAT).
BT IPStream Office 1000 will increase from £28 to £32.64 per month (ex VAT).
BT IPStream Office 2000 will increase from £43 to £57.00 per month (ex VAT).
BT IPStream S 500 will increase from £23 to £25.41 per month (ex VAT).
BT IPStream S 1000 will increase from £33 to £37.64 per month (ex VAT).
BT IPStream S 2000 will increase from £48 to £62.00 per month (ex VAT).

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