Internet service providers (ISPs) have hailed the significant price cuts that BT will make to its range of wholesale broadband products, and many have already guaranteed to pass the savings on to their customers. BT's move also won praise from e-commerce minister Douglas Alexander, and Oftel has indicated it is unlikely to block the cuts.
The cuts, which see the monthly wholesale cost of BT's consumer ADSL product plummet to £14.75 per month, have also tempted Freeserve to enter the broadband arena in a big way. The company will offer a £30 per month broadband package from 1 April.
BT's chief executive, Ben Verwaayen, announced the details of the company's new approach to broadband on Tuesday morning. The £14.75 per month wholesale price, which covers both the self-installation product and the earlier "engineer-installed" product, is low enough to let ISPs sell consumer broadband services for £30 or less -- widely seen as a price that could give broadband a mass-market appeal.
Freeserve is the first of the major ISPs to announce its intentions in the light of BT's price cuts. It will offer broadband Internet for £29.99 a month to its existing customer base from 1 April.
The ISP hopes to sign up new customers to its broadband service shortly after, if BT ensures that its local exchanges can cope with the increased demand. "Between now and April, there is still a lot of work for BT to do to upgrade both network capacity and their back office provisioning before the product can be offered to a mass market, and this is why our existing customers will be offered the £29.99 product first," explained chief executive John Pluthero in a statement.
Freeserve's product will use BT's self-installation ADSL. Launched in January 2002, this product does not involve an engineer visiting a customer's home to install equipment. Instead, users install the ADSL modem themselves. This only involves an "activation fee" of around £50 + VAT, sparing customers a costly installation fee.
Several other ISPs are planning to break the £30 barrier with their self-installation broadband product.
The cheapest price announced so far comes from Freedom2Surf, which will charge £22.50 including VAT for its broadband package from 1 April. It has also cut the cost of its business ADSL services -- passing on BT's £20 cut in the monthly wholesale cost of its business products.
Fellow ISP Pipex is planning to charge £23.44 including VAT for its consumer broadband package from 1 April. Pipex won praise earlier this month when it announced it was cutting the cost of this package to £30 including VAT, and BT said it was delighted to see that Pipex has still managed to pass on these latest saving to customers.
"Pipex has been getting lots of new customers since they dropped their prices recently," said a BT spokesman. "It has been one of the best ISPs in terms of using their own money to attract new customers, and its great to see that they've managed to drop their prices so low," he added.
In January, Pipex created a fund to pay the activation fee of its first 40,000 ADSL customers.
PlusNet is one of many ISPs who will offer lower monthly costs if customers sign up for a 12-month contract. From 1 April, its self-install home user broadband package will cost just £22.99 inc. VAT for those who sign up for a 12-month contract. With a month by month contract, Plusnet's consumer broadband will cost £25.99 inc. VAT.
"The price cuts are designed to stimulate mass-market take-up of broadband in Britain, so it's terrific that ISPs are already passing on savings to customers," said a BT spokesman.
E-commerce minister Douglas Alexander has also hailed Tuesday's news as great news for Broadband Britain, and congratulated Ben Verwaayen, BT's chief executive, for taking up the challenge of lower broadband prices.
"This will be of great benefit to BT's 200 wholesale customers. What is more, it will enable resellers of BT's wholesale broadband service to pass the savings on to customers and be the catalyst for a major step change towards higher broadband use in the UK," said Alexander in a statement.
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