BT slashes cost of Web access

February 26, 2002 Posted: 1240 GMT

LONDON (CNN) -- BT Group, Britain's dominant fixed-line phone company, slashed the price of fast Internet access on Tuesday to boost growth.

Ben Verwaayen, the new chief executive of BT, is hoping the move would attract more than 1 million customers by the middle of 2001. BT currently has 145,000 users signed up to its broadband service, while rivals NTL and Telewest had 175,000 customers between them by the end of September.

BT has been accused by internet service providers (ISPs) of holding back the take up of high-speed Internet access by charging too much.

Britain is at the bottom tier of broadband use among the Group of Seven industrial nations. Germany has 2.2 million homes with high-speed Internet access, which allows faster downloads of Web pages and video.

The move to cut the price to wholesalers, like AOL, Freeserve and Tiscali, is  part of Verwaayen's strategy to boost the profile of the company, which has been battling to bring down its debt mountain through the sale of its mobile phone business and many international operations.

"Four years from now we expect 25 percent of users to be broadband," Verwaayen told CNN. "This is a huge opportunity for ISPs to jump in to create a truly multimedia experience for business and end users."

BT's broadband lines currently cost wholesalers between £25 ($36) and £30 a month. That costs is then passed on to the end user. BT now plans to charge £14.75 per month from April 1, BT said.

Prices for end users should fall to between £25 and £30 from around £40, but that is still higher than the cost faced by customers in Spain, Italy and France, who pay about 40 ($35) a month.

Access to BT lines is sold to wholesalers who then sell it to ISPs, like Freeserve, AOL and Tiscali. NTL and Telewest have won more customers by offering their services for £25 a month.

BT's stock was little changed at 264 pence in midday London trading on Thursday.

According to Reuters, Investment bank JP Morgan noted that BT had raised its installation charge by 40 percent to £210, which it said was "potentially off-putting for consumers."