Broadband prices to halve by 1 April

After weeks of rumour, BT this morning confirms it will slash the price of wholesale broadband by the end of March, and sets itself a target of one million broadband customers by 2003

Broadband prices will fall to £30 per month or lower after BT announced on Tuesday that it will slash the cost of its wholesale consumer product by 50 percent.

The cost of BT's wholesale home user broadband package, which is offered by around 200 Internet Service Providers (ISPs) in the UK, will drop to £14.75 +VAT per month on 1 April. Self-installed broadband currently costs £25 +VAT and the engineer-installed version costs £30 +VAT. The new prices will apply to both versions, and both new and existing customers will benefit.

BT claims that the move will provide a major boost to Britain's broadband market. It hopes that these price cuts will mean it can attract one million broadband customers by 2003. BT also said it has made "significant" price cuts on its business ADSL products, but didn't give details right away.

Significant price cuts have been expected ever since BT's new chief executive, Ben Verwaayen, promised radical changes in the company's approach to broadband.

"Broadband is the future for Britain and we're putting it at the heart of BT's plans for growth in the UK mass market. This will drive the whole market forward by making broadband affordable, attractive and accessible," said Verwaayen, announcing the cuts in a statement.

Broadband is always connected, and allows users to surf the Internet many times faster than is possible using a standard dial-up ISP. BT's ADSL product is supported by 1,010 local exchanges around the country, mostly in urban areas, and is one of the few ways that UK consumers can currently get a broadband connection. ADSL (asynchronous digital subscriber line) turns standard phone lines into high-speed digital connections.

Cable companies such as Ntl and Telewest also offer broadband services in some parts of the country, using a cable-based technology, while Tele2 provides wireless broadband in some areas.

Some of BT's opponents have claimed that the only way the company could achieve significant price cuts would be by selling its products at a loss, something it is forbidden to do.

According to Verwaayen, though, it will still be possible for BT to operate a sustainable business model while charging ISP's £14.75. "Through substantial reductions in the cost of providing service we can set prices that will stimulate the market strongly, and make money on it," he added.

Consumer broadband services typically retail at as low as £40 per month at the moment, and if BT's price cut is passed on to customers, retail prices should drop by around £10 per month.

Industry experts are already predicting that some ISPs may cut retail prices by more than this, though. In what seems likely to become an increasingly competitive market, rival ISPs may decide to charge as little as £20 per month for a 12-month broadband contract.

BT also repeated that it is prepared to roll out ADSL to rural areas, if it can find partners to assist with the infrastructure costs.

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