UK Internet tariffs to be set below local call rate

The telecoms watchdog Oftel has paved the way for cheaper Internet usage in proposals published today.

As predicted by ZDNet News, Oftel has proposed a new pricing structure for Internet calls below the local call rate. Director General of Telecommunications, David Edmonds, explained how this will give ISPs greater flexibility. "A service that is supported through advertising and sales on the Internet Web site could be priced below the current local call rate. Alternatively, specialist information services could be at a higher charge to customers who are willing to pay," he said.

In what many will see as a blow to BT, Oftel will not be altering the shared revenue from Internet calls. BT had argued for a greater share of the revenue, claiming the use of 0845 numbers by free ISPs was clogging up the network that it had to maintain. The revenue split, currently 70 percent of which goes to the ISP and 30 percent to BT will stay the same, ensuring the survival of the free ISP business model which some claimed would be endangered if a greater share of the Internet pie went to BT.

While the proposal is good news for free ISPs, the Campaign for Unmetered Telecommunications (CUT) is less impressed. "Although we welcome anything which allows for pricing flexibility, the set up does nothing to address the problems of metered calls," said Errol Ziya, spokesman for CUT. He thinks the fact ISPs were using 0845 numbers in the first place reflects lack of insight on Oftel's behalf. "Oftel set up the 0845 system and did not foresee it being used for the Internet," Ziya said. According to Ziya, Oftel was never designed to monitor Internet usage and he believes it is time the Internet had its own watchdog.

According to Oftel's David Edmonds the watchdog is well aware of the importance of the Internet. "I believe our proposals strike the right balance between supporting the growth of Internet use, and meeting the needs of the telephone operators and Internet service providers to generate the funds necessary to allow additional investment in their respective networks to cope with this growth," he said.

For CUT the fact that ISPs are funding themselves from call revenue is a "worrying trend" but Ziya remains confident flat-rate access will win through eventually. "Telco's are now in the business of data networks and data should not be charged by the minute," Ziya said.