Oftel ruling will not mean cheaper Internet

Oftel has ruled that BT has been overcharging for its wholesale unmetered Internet-access product, but ISPs may find better things to do with their savings than passing them on to customers

The cost of flat-rate Internet access is unlikely to fall in the UK despite Oftel's announcement on Monday that it is forcing BT to cut its wholesale unmetered Internet charges by 17 percent.

The ruling, which will be backdated to take effect from June 2002, will see millions wiped off BT's balance sheet.

Oftel's director general David Edmonds hopes that the price cuts will be passed on to consumers -- but the word from the telecoms industry is that this is improbable.

"It's far more likely that ISPs will invest any saving, to bolster their service and add additional content," Jonathan Lambeth, head of corporate media relations at AOL UK, said.

"I'm confident that AOL UK will pass on any benefits to consumers -- it's much better to do it in terms of better content and better customer service," Lambeth added.

Large telcos such as Cable & Wireless and Energis buy BT's wholesale unmetered Internet access product and resell it to ISPs. Some sources in the industry are already indicating that these operators will absorb the savings rather than lowering their prices.

Even if the entire saving was passed on to end-users in the form of lower prices, it's likely to be a reduction of less than 50p per customer per month.

Both Freeserve and BT Openworld declined to say whether they were planning to cut their prices.

For its part, Energis says it "will be reviewing cost-saving implications with our customers on an individual basis," but declined to speculate further on whether retail prices might fall.

Oftel's investigation stemmed from a complaint by Cable & Wireless, later backed by Energis, after BT continued to charge for call routing and management measures that had been needed when the unmetered access service was set up but had since become obsolete.

For a round-up of the latest on ISPs, broadband and related issues, see the Telecoms News Section.

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