BT slashes prices to rivals

TELECOMS group BT today announced a huge cut in the prices it charges its rivals for using its network, paving the way for much cheaper broadband and telephone services across Britain.

From the start of next month, prices will be cut by 35% and probably 70% by the end of the year, bringing them down to the lowest levels in Europe.

The move will encourage rival telephone and internet companies to move into BT exchanges and compete alongside the former State monopoly. The extent to which price cuts will be passed on to the consumer is not yet clear.

The move - which is bound to hit BT's revenues in the short term but could boost them in the long run - is seen as an invitation to industry watchdog Ofcom to slash the amount of regulation surrounding BT. Its shares slipped 1 3/4p to 171p.

Stephen Carter, chief executive of Ofcom, warned BT last month that its charges for local loop unbundling, which gives rivals access to its exchanges and the 'last mile' of copper wire from there to homes and businesses, were 'significantly adrift of European best practice'.

Today he said: 'I welcome BT's commitment to both price and process improvements in these key wholesale products.'

Wanadoo, the former Freeserve now owned by France Telecom, said it welcomed the cuts which would 'trigger a real broadband revolution'. Tiscali said it should produce 'a better deal for consumers with continued downward pressure on price to make broadband more affordable to the mass market'.

BT chief executive Ben Verwaayen said: 'Our announcement marks a major move towards the telecommunications market of the future. BT has always argued that a market needs to develop in which those who are willing to invest and innovate can reap the rewards. This is a significant step in that direction.'

He added: 'We now have a far clearer idea of how Ofcom sees the market developing, and we share their view that competition based at the infrastructure level will be good for everyone and for the UK in general.

'Their statements about regulatory certainty are crucial as we have enormously ambitious plans for the networks of the future, and require that certainty for shareholders if we are to invest the huge sums required.'

BT currently dominates the domestic market for broadband with more than two million customers and a target of five million by the end of 2006. Ofcom's Carter has made it clear that he wants to see its rivals able to carry much more traffic over their own networks.

OFCOM also announced today that it had cleared BT's controversial cuts to home phone charges, which should result in a reduction of £15 in the average household bill. Thirteen rivals had complained, saying it made it harder for them to compete.