BT price cuts get the go ahead

Regulator Oftel decided not to intervene after it concluded that the substantial reductions were achieved through cost savings. Had Oftel decided that BT would be selling its broadband products at a loss then it could have forced the telecommunications company to raise its prices--a move that would have thrown the United Kingdom's ISP (Internet service provider) sector into massive confusion.

The announcement is a green light for cheaper broadband in the United Kingdom--and means that ISPs can offer broadband to home users for less than $43 (£30) per month. Some ISPs have already said that their consumer broadband will be as low as $33 per month. Such low prices are expected to stimulate heavy demand for high-speed Internet services.

BT's price cuts--which saw the wholesale price of its consumer ADSL (asymmetric digital subscriber line) product fall to $21 per month, were announced late last month--and Oftel Director General David Edmonds said in a statement that his organization has examined the new prices closely.

"Oftel has found that BT's price reductions reflect the significant cut in network and provision costs that BT has managed to achieve in order to bring wholesale broadband Internet prices down. BT can pass these cost savings on to ISPs, who in turn can reduce their own retail prices for broadband Internet access to consumers," Edmonds said.

BT is not permitted to sell its products at a loss--a restriction that is meant to prevent it from competing unfairly with other telecommunications companies.

Graeme Wearden reported from London.