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BT throws down broadband gauntlet

Chief executive Ben Verwaayen is on the verge of revealing significantly lower broadband prices, and effectively daring Oftel to block them
Written by Graeme Wearden, Contributor

BT is only weeks away from unveiling a radical new approach to broadband that will involve significant price cuts and a likely clash with Oftel.

Incoming chief executive Ben Verwaayen won widespread approval for his performance at a press conference on Thursday, in which he promised BT was working on a new broadband pricing structure. More details are expected in two weeks.

BT insiders are insisting that talk of a 50 percent price cut is probably incorrect -- although it is highly likely that a final decision simply hasn't been made yet. Either way, any significant price reduction is certain to put BT on a collision course with the regulator, as its rivals will complain that the telco is acting in an anti-competitive manner.

Although Verwaayen insisted that BT will not start selling wholesale broadband at a loss -- something it is not permitted to do under its licence conditions -- he seems quite prepared to go head-to-head with Oftel.

"I respect the regulator, but he has his job and I have mine. My responsibility is to BT's shareholders, customers and employees," said Verwaayen, adding: "Of course, we would abide by the regulator's decision."

The implication of this remark, some feel, is that BT will cut prices and see if Oftel dares to block it, and face the wrath of consumers desperate for more affordable broadband.

Oftel has already received one complaint about BT's new strategy from Bulldog Communications, who claim that BT is attempting to kill off competition in the wholesale broadband market. Bulldog plans to install its own equipment in BT's local exchanges -- a process known as local-loop unbundling (LLU) -- and sell telecom services to ISPs in competition with BT Wholesale.

Bulldog's complaint is that, in order to cut wholesale prices further, BT is likely to be selling ADSL at a loss.

Cable & Wireless, which dropped out of the LLU process last year, blamed an earlier BT Wholesale price cut for its withdrawal. The company also told a parliamentary select committee this week that BT had failed to supply it with adequate details of local exchanges.

Oftel is unwilling to speculate as to what action it might take against BT, until the telco has revealed its new plans. "Obviously we welcome any price cut, as long as they aren't anti-competitive," a spokesman told ZDNet UK News on Friday, echoing similar comments made by e-commerce minister Douglas Alexander.

Oftel is already investigating some of BT's wholesale ADSL products, amid concerns that the company could already be engaging in predatory pricing. This probe began in August 2001, but further BT price cuts would not render it irrelevant. "A lot of the information already gathered would still be relevant if BT does cut wholesale prices again," insisted the Oftel spokesman.

E-commerce minister Douglas Alexander said on Thursday that he was glad to see signs of positive action on broadband pricing. "The approach announced by BT today is welcome news," he said. "As e-commerce minister I publicly challenged BT five months ago to set fair lower prices for businesses and consumers, so they must work to translate these ambitions into achievements."

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