BT caves in over broadband price cut row

BT cuts the cost of its Datastream range, and lower business broadband prices could follow. But an Oftel investigation will continue

BT has decided to lower the cost of its Datastream products following claims that it has broken the terms of its licence by only cutting the prices of some of its wholesale broadband services.

The telco announced on Wednesday a cut of nearly 8 percent from the monthly £9.25 cost of its Datastream products, which telecoms operators can use to connect their network into BT's. Datastream also allows them to offer different broadband services to those available from BT Wholesale.

The move could mean lower prices for businesses who buy broadband from BT's rival network operators.

Oftel has already welcomed the cut, with director general David Edmonds saying that he would probably have imposed a cut of a similar level, if an on-going investigation into BT's pricing had come down against the telco. Oftel has also said that this investigation will continue regardless of the latest cuts.

The Datastream row began last month when BT announced it was cutting the wholesale prices of its business and consumer ADSL products by up to 50 percent. These products -- the IPStream range -- operate only across BT Wholesale's network and are bought by Internet service providers and resold to end users.

Although these cuts were welcomed by ISPs, several operators -- including Thus, Energis, and Tiscali, protested to Oftel that BT was operating a "margin squeeze".

These operators claimed that BT was breaking the terms of its license by not making similar cuts to its Datastream products.

Oftel launched its investigation, which could have led to BT's earlier price cuts being blocked. Although the investigation had not been resolved, it appears that BT may have effectively pre-empted it by making this 70p per month cut.

"Oftel wanted us to cut Datastream prices by a certain amount, and we're actually cutting them by more," a BT insider told ZDNet UK.

This claim, though, has been contradicted by Oftel.

"I welcome the fact that BT has announced today that it will cut its Datastream prices by £0.70p, with additional discounts for high volume connections," said Edmonds in a statement.

"This price cut should place other operators back on a more level playing field with BT. It is of the same level as I would have imposed using my statutory enforcement powers at this stage of the investigation," he added.

An Oftel source confirmed that the regulator was reluctant to force BT to cancel the IPStream price cuts, and favoured a cut for the Datastream range.

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