BT Openworld has introduced a cut-rate broadband package costing less than £20, a price aimed at bringing high-speed Internet access to a much broader market.
The telco contrasted its BT Broadband Basic, which will cost £19.99 a month, to packages from cable broadband providers such as NTL and Tiscali, which cost less than typical ADSL subscriptions, but offer lower speeds. BT Broadband Basic will offer a 512Kbps connection, the same as the more costly BT Broadband and BT Yahoo Broadband, but will introduce a usage limit of 1GB per month. All technical support must be conducted online, with a 60p/minute charge for telephone support.
"We are the first with a full half-megabit service at under £20," said Duncan Ingram, managing director of BT Openworld. "We don't want to restrict customers in their speed for downloading or surfing. We think the 1GB-per-month usage quota is pretty generous. It is plenty for around half the broadband users out there."
He said the ability to offer exclusively online sales and support was a recent development made possible by improvements to BT's online systems. The majority of BT Openworld's orders and contacts for assistance are now made online, Ingram said.
The new package will cost £19.99 for Direct Debit customers, or £20.99 for others, for a 12-month minimum contract of service. Besides the 1GB limit, the service has a number of limitations that could make it unattractive for users of more pricey services: it can be used only with one PC, and does not support home networking, for example. The service can only be used with the Voyager 105 DSL modem. Other services can typically be used with any modem, and allow multiple PCs in the home to connect to the Internet at the same time -- considered to be one of the main benefits of a broadband connection.
Existing users of other BT broadband packages wishing to downgrade to the cheaper service must pay the same £30 connection fee as new users, as well as paying for the £50 Voyager 105 modem. "Users can downgrade if they wish, but we don't envisage it to be a significant issue," Ingram said.
BT will initially not enforce the 1GB limit, allowing customers to get settled into the service. During the spring, tools for customers to monitor their own usage will be introduced, and the limit will be start to be enforced in the summer. Ingram said BT wants to avoid the customer-service issues that have plagued some other providers of capped broadband. "We are putting customers first in this, initially ensuring that it's a good customer experience," Ingram said.
BT's price cuts in recent months, bringing full-featured broadband packages to under £30 per month, have resulted in a sales boom that recently took BT's own ADSL customer base over the two-million mark. However, industry analysts have said that price-cutting in the UK and elsewhere has levelled off recently, as telcos attempt to increase their margins based on existing prices.
BT said its margins for BT Broadband Basic are similar to those on other broadband products.
Ingram said the Basic service uses the same ADSL wholesale components as the higher-end services, and that there is nothing stopping other ISPs from following BT's lead. "Anybody can do this, but so far we are the only ones that have thought of it and implemented it," he said. "It depends on a company's ability to serve customers well online. We now have that confidence."
Most ISPs competing with BT Openworld rely on BT's wholesale products for their own ADSL services.
On 11 March, BT will announce more of its strategy for consumer broadband, including applications and content, Ingram said.