BT will today outline the final reductions on its wholesale broadband prices, which will enhance the ability of broadband providers to compete against companies such as Carphone Warehouse and British Sky Broadcasting in the market for cheap high-speed internet packages.
BT was forced by regulators to open its network to rivals in 2005. This process, known as local loop unbundling (LLU), enables competitors to offer phone and broadband deals that generate higher profit margins than if they simply resold BT's wholesale products.
The fall in cost differentials between LLU broadband operators and the 700 service providers who rent their lines from BT could prompt providers considering LLU to continue to rent their lines and could slow the demand for LLU.
Internet service providers using BT Wholesale's IP Stream will see a 9 per cent reduction in monthly rental charges, with the price falling from £8.40 per line per month to £7.63 from May.
The announcement rubber stamps price reductions proposed by BT in November last year. Rebates for service providers at BT's high-density exchanges, are also set to increase from £1.10 to £1.24, reflecting the lower cost of providing broadband in these areas. The current rebate scheme that covers 561 of these exchanges will apply to 1,016 exchanges.
BT said it wanted to "level the playing field" between service providers who rented BT lines and those who had larger margins thanks to LLU. It said that the price cuts would help smaller service providers compete more effectively against the larger LLU providers.
LLU has enabled companies including Carphone and BSkyB to bundle broadband with other services and use it as an incentive to attract new customers. Many are offering "free broadband" which has led to a sharp fall in broadband prices leading to a price war which has given consumers myriad package choices.
BT Wholesale is also introducing higher broadband speeds early next year, offering speeds of up to 24 megabits per second as part of its next generation network roll out. The move is expected to increase the importance of broadband speeds as a promotional tool for providers.
