Ntl is to trial cheaper broadband services it says Tuesday, sparking speculation that a price war is about to begin.
Currently the cable company offers broadband via cable modem for £39.99 a month, but is about to begin a trial of the service in Cambridge for £15 less. According to a spokeswoman the trial will last around three months at which time the cable company will decide whether to roll it out nationwide.
Rival cable firm Telewest -- which on Tuesday ruled out a merger with ntl -- has already dropped the price of its broadband service Blueyonder from £50 a month to £33. On Monday BT said it too would consider price cuts on its ADSL service in the future.
The price reductions are important: the government's commitment to making broadband available to everyone in the UK is dependent on cheaper broadband. Analysts claim that prices need to fall to around £25 before broadband can be described as a mass market product.
Ovum analyst Tim Johnson likens the current broadband market to that of unmetered access. "Like unmetered all the companies are currently subsidising broadband services and losing money by a pretty big margin," he says. Despite this he is not surprised broadband operators are considering price cuts. "I guess they are taking the attitude that it doesn't matter if they lose a bit more and gain more customers."
Johnson is concerned that now might not be the best time to consider cutting margins largely because of the slump in the dot-com goldrush. "It is not the dot-com boom we had six months ago. The telcos' share prices are dropping and they are less able to flash money around," he says. Despite this he does not predict the broadband market will suffer the same collapses experienced in the unmetered market.
"It is a different class of company investing in broadband. There are multi-million pound players and have got the money to fund it."
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