Freeserve hikes broadband prices, blames BT and Oftel

ISP suggests a vote of no confidence in BT and Oftel
Written by Jane Wakefield, Contributor

In another setback for broadband, Freeserve has hiked the price of its high-speed service from £39.99 a month to £49.99, blaming BT and Oftel for the rise, and launching a bitter attack on how the pair have handled ADSL roll out.

In a provocative and angry statement, the ISP suggested a vote of no confidence in telecoms watchdog Oftel and its old adversary, BT. Mass market broadband services, via ADSL, are a long way off in the current climate it claims.

"This [price rise] has been forced upon Freeserve because we have no confidence in BT, or the regulator, in driving down the wholesale price to a level which will facilitate large-scale take-up of broadband in the UK," reads a statement.

ISPs like Freeserve and AOL are currently reliant on wholesale services, via BT, to roll out ADSL and both have complained vociferously about the allocation process and the lack of service guarantees. AOL has accused BT of holding back broadband Britain, and Freeserve is also convinced the current climate makes a wholesale ADSL product unworkable. "Freeserve does not have any confidence in BT's allocation process for ADSL capacity, which has made it virtually impossible to plan an effective marketing strategy to create consumer demand," the statement reads.

The UK already has some of the highest ADSL prices in the world, and in a series of surveys has come near bottom of the broadband roll-out league table. While Germany has connected around 500,000 customers to ADSL, in the UK there are 50,000 users. Until the wholesale price is lowered, Freeserve will not consider a mass market product. "Freeserve is not prepared to rescue BT from its ADSL debacle and can have no confidence in the process until the wholesale price is reduced to levels seen in France and elsewhere in Europe," the statement concludes.

ADSL providers in the UK are struggling to keep up with their European counterparts. Their reliance on BT (quote: BT) was due to be ended this summer as local loop unbundling offered an alternative. This process -- which allows operators to install their own equipment in BT exchanges and therefore make their own way to consumers' houses -- has long been regarded as the end of the tunnel for operators seeking to offer cheaper broadband. But so far, with just four exchanges unbundled and only a handful of operators intending to offer services, there is a huge question mark over the future of the process.

BT has recently changed its allocation process, claiming there is no longer a waiting list and that it could install as many ADSL lines as ISPs wanted. It says there just isn't much demand for broadband, a situation which forced it to cut back its consumer ADSL offering to focus instead on the business market.

AOL has argued vehemently that consumers want broadband but need the price to be right, a situation that can only be rectified by a more competitive landscape.

While ADSL prices remain high, the cable firms -- which account for about 15 percent of the broadband market in the UK -- are busy cutting prices. Last week Telewest cut its high-speed cable modem service from £33 a month to £25. Ntl also offers a cable modem service for £24.99.

Freeserve's decision to go the other way and increase prices will offer no comfort to government, determined to see the UK as the best broadband nation by 2005.

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