BT claims Friaco price cuts are too steep

BT has hit back at Oftel's proposal to force it to reduce the price of its flat rate internet access service Friaco, saying that the suggested cuts would be too steep.

Oftel has launched an investigation into BT's pricing, and has suggested a seven per cent cut in its wholesale flat rate offering.

But a spokesman for BT Wholesale said: "Some of the figures Oftel mentioned in its justification for the price cut are out of date. We will be going back to Oftel and discussing this with them in due course."

The telco refused to comment on how much it expects the figure to be reduced by.

Friaco was developed in 2000 by AOL and MCI WorldCom alongside Oftel to force BT to provide flat-rate internet access to operators at wholesale prices.

BT had been monopolising the narrowband market with BT SurfTime which was sold straight to the consumer and made direct competition with the incumbent difficult.

However, a leading analyst claims the proposed seven per cent price cuts are insignificant and will not make narrowband access more affordable for ISPs or end users.

Forrester Research telecoms analyst Rebecca Ulph told silicon.com: "This cut isn't going to make a significant difference to the price of flat-rate narrow band. On a £15 monthly bill it'll be around 50p."

Ulph added: "Most ISPs still don't think BT is playing fairly, despite Friaco. BT is making ISPs pay up front for Friaco based on an estimate, so only big ISPs like AOL and Freeserve can afford to provide it."

BT's spokesman also said that Friaco's low price may inhibit the UK uptake of broadband.

He said: "We think Friaco's a terrific thing but it will be interesting to see what impact it has on broadband if unmetered narrow band access cost comes down at wholesale."

Ulph disagreed: "A small cut in unlimited narrow band won't make much difference to broadband interest, as it is far more expensive. Oftel needs to spend more time on reducing this wholesale price."

The seven per cent price cut proposal is currently in the consultation period that closes on 19 March. Final details will be announced this spring.