Watchdog orders BT to cut charges for internet access

The telecoms watchdog Oftel ordered BT to cut the price it charges rival operators for wholesale unmetered internet access by 17 per cent yesterday.

Analysts said the decision would benefit leading internet service providers, such as AOL, Freeserve and Thus, by lowering their cost base.

Oftel said that the prices for unmetered Internet access charged to consumers should also fall as a result of the move, although City analysts were more sceptical.

Stuart Gordon, at ABN Amro, said that the impact of the decision was unlikely to be huge, since the sector was moving away from dial-up internet services towards the faster broadband access.

The ordered cuts follow an investigation by Oftel prompted by a complaint from BT's rival Cable & Wireless. The measure will be backdated to June 2002. The regulator found that the former monopoly operator BT had been charging internet service providers for call routing and call management measures that were not necessary after BT upgraded its network towards the end of 2001.

David Edmonds, the director-general of Oftel, said: "BT has made significant improvements to its network since wholesale unmetered internet access was first introduced over three years ago.

"At that time, BT included several mechanisms to route internet calls through to the appropriate service provider and call management measures to protect its network from being overloaded. BT's network can now process Internet call traffic without these additional measures."

The decision is expected to reduce BT's revenues by up to £17m a year, slightly higher than earlier estimates of £10m-£15m made when Oftel first mooted the price cut four months ago. BT declined to comment on the financial impact of the decision yesterday.

However, analysts said that Oftel's announcement needed to be put into context, noting that revenue from unmetered dial-up internet access genergated about £100m a year for BT out of total revenues of nearly £19bn. This is not a growing revenue stream, as existing unlimited internet customers are migrating to broadband.

Other analysts also noted that making broadband services accessible to more users throughout the UK was a key policy of the UK government.

BT's shares closed down 2.5p at 200p, with analysts noting that the decision had been largely factored in by the City.