Archive for February 2002

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[eccr] NYT: BT to cut prices for broadband

Wed Feb 27 17:16:06 GMT 2002

Title: NYT: BT to cut prices for broadband

February 27, 2002

Big British Phone Company to Cut Prices for Broadband


LONDON, Feb. 26 ‹ The BT Group said today that it would reduce the price of high-speed connections to the Internet, a move seen by some analysts as a signal that the new management team is ready to attack some problems that have long plagued the company.

BT said that starting on April 1 it would lower the price it charged other phone companies for the use of its network to £14.75 (about $21) a month, from £25 to £30. These phone companies then resell the service, called broadband, to individual customers. Consumer prices are most likely to drop below £30 a month from the current £40 as a result, analysts predicted. (BT also offers its own broadband service directly to consumers through its BTopenworld subsidiary, which also must pay to use the BT network.)

So-called alternative carriers like Energis and the Colt Telecom Group have long complained that the fees they must pay to BT to use its network are prohibitively high.

BT has said that upgrading its network to offer these services has been costlier and more difficult than forecast.

But analysts have long suspected the company of dragging its feet in an attempt to protect its monopolistic position.

Within the last year, BT has replaced its chairman and chief executive. And some analysts said today that the announcement of lower prices indicated an important change of attitude.

"The company has gone through a significant restructuring over the last year, and it is starting to address customer needs and shareholder value," said Mark Davis, an analyst with WestLB Panmure.

The price cuts will initially have little impact on BT's bottom line. But the effects are expected to ripple through the industry, providing a boon to alternative carriers that must buy network capacity from the company and to consumers, who are expected to benefit from the lower prices.

High costs have so far been an impediment to the swift rollout of fast Internet access in Britain. To date, only 400,000 people in Britain have high-speed Internet access, less than 1 percent of the population. That compares with more than 2 million people in Germany, or 2.5 percent of the population there. Deutsche Telekom  has moved more quickly to upgrade its network and pave the way for the introduction of these new services, analysts said.

BT has slowly worked to reduce costs, finally enabling it to lower prices to a level alternative carriers deem fair. In December, for example, it introduced a version of broadband that customers can install themselves, by buying a modem and plugging it in, reducing the number of service calls BT engineers must make.

"Through substantial reductions in the cost of providing service we can set prices that will stimulate the market strongly," said Ben Verwaayen, chief executive of BT since December.


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