BT says taxpayers must foot the bill for Labour's broadband pledge

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Tony Blair will have to dip into taxpayers' pockets if he is to meet Labour's pledge of giving everyone access to high-speed internet access, according to BT.

The Prime Minister said last week that Labour's election manifesto would promise to "end the digital divide" by giving every household a broadband connection by 2008.

But Alison Ritchie, BT's chief broadband officer, said: "Covering 99.4 per cent of the population is as far as we can go. For the remainder, we will work with the local authorities and the Regional Development Agencies. EU Objective funding and local government funding may be necessary."

It might not be commercially viable to push broadband through the smallest 500 telephone exchanges in the country, which serve remote rural areas, Ms Ritchie said.

Instead, the company may offer wireless broadband, which is more expensive than copper wire. BT's stance appears to be at odds with that of the Department of Trade and Industry. A DTI spokesman said: "Getting the infrastructure out there is a matter for the companies. There will be no direct funding for companies to lay broadband."

But BT is experiencing record orders for broadband. Unpublished BT figures show that the company's wholesale arm, which provides broadband to internet service providers, added 250,000 connections in September. The latest figures lift BT's broadband customer base to over 3.25 million.

Meanwhile, BT is urging its regulator to lift restrictions on the business telecoms market. Currently, Ofcom dictates BT's business charges. But BT wants to lower its call rates in urban areas to compete with the new telecoms companies and it believes that the regulations are damaging its business.

Ofcom is expected to indicate whether the restrictions will be lifted when it publishes its review of the telecoms market, due in the last week of the month.