Tiscali launches price war in broadband market

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The Italian internet service provider Tiscali will launch an attack on the UK's broadband market today by unveiling a cheaper high speed internet package in a move designed to help it grab one-fifth of the growth in the market this year.

Mary Turner, the chief executive of Tiscali UK, said: "Our target is to capture a minimum of 20 per cent of the growth in the market... [which] is projected to be one million over the next 12 months."

Tiscali UK is launching a broadband package priced at £15.99 a month plus a £25 set-up fee - although the speed of the service is about three times faster than a standard dial-up connection.

Current broadband services offered by BT, Freeserve and AOL are all priced at about £28 a month, although they are about ten times faster than a standard dial-up connection.

The Tiscali product is aimed at customers who connect to the internet on narrowband packages and who want to upgrade to a faster service at a similar price point. "There are people who are frustrated with narrowband but who do not use the internet sufficiently to warrant paying £27 or £29 a month to get broadband," Ms Turner said. "There's a selection of narrowband products and that's what the market is now demanding in broadband. We can take advantage by bringing out different flavours of broadband."

She believes there is a market for an "entry-level" product and said the £15.99-a-month service would be "more than sufficient" for average internet use. "If you're a heavy user of all the multimedia stuff, then perhaps you'd opt for a 512kb or 1MB product, but for a significant proportion of the UK market, the use of the internet is for e-mails, downloading bits of music and you don't need a 512kb or 1MB product."

There are currently just over 2 million broadband internet customers in the UK, including about one million cable customers using NTL and Telewest. BT has about 1.25 million users and over 50 per cent use either its BT Retail or BT Openworld products. The balance are connected on BT lines through about 130 other internet service providers like AOL and Freeserve.

The company also includes the broadband customers of companies with their own networks, such as Tiscali, Energis and Thus, within its total count since they have to pay BT a fee for using parts of its network.

Ms Turner said Tiscali has about 750,000 broadband customers in Europe.