Zen and the art of broadband pricing

Zen Internet has joined the broadband price war by announcing plans to cut the cost of its services, letting customers get a 2Mbps service for the price they currently pay for a 1Mbps connection.

The company said on Wednesday it would reduce the cost of its 1Mbps ZenADSL Home 1000 service from £34.99 to £29.99 per month, with its 2Mbps ZenADSL Home 2000 package dropping from £44.99 to £34.99 per month.

"We constantly review our pricing structure to ensure we are providing value for money in tune with market conditions," said Stephen Warburton, commercial manager, Zen Internet, who denied that increased competition between BT and other network operators had led to the cuts.

"Our price cuts haven't come about because of the infrastructure price war. The changes have come about because when we reviewed our pricing recently we were not as competitive as we liked for the 1Mbps and 2Mbps services, and many users are looking for faster services," Warburton added.

The cuts, which come into effect on 1 June, are one of many recent changes in the broadband market as companies fight to offer the cheapest services.

Last week, PlusNet increased the speed of its standard broadband service, which costs £14.99 a month, to 2Mb, and UK Online recently dropped 512K broadband prices to £9.99 a month.

Thanks to local-loop unbundling, Bulldog and Easynet — which owns UK Online — have built their own broadband infrastructure and started to offer ISPs alternatives to BT's network. Industry experts believe this is causing the price war between providers.

"That's triggered competition in the market," said Ian Fogg, a senior analyst at Jupiter. "What we're seeing now is just the start of greater competition and that means we'll see more speed and more choice. On the other hand that's forcing BT Wholesale to increase speeds."

Fogg said that the UK broadband market was struggling to keep up with France, Sweden and the Netherlands. France is now looking to deploy ADSL2+ and move customers from today's 4Mbps and 8Mbps speeds to 20Mbps, he added.