BT told to cut internet prices

Telecoms regulator Oftel has ordered BT's wholesale division to cut the cost of unmetered internet access by 8.5 per cent.

While the ISP industry is likely to welcome this drop in its cost base, today's announcement won't make a huge amount of difference to consumers for the moment.

Unmetered internet access is provided via quite a complex connection of business relationships, which sees BT providing connections to other licensed telecoms operators (OLOs), who then provide connections to ISPs, who then decide how much to charge the end user.

The cost of that connection supplied by BT, known by the snappy acronym of Friaco, only represents a small part of the cost of a monthly unmetered internet subscription.

By a rough estimate, today's announcement would only result in a cut of around 25p off a £15.99 monthly bill.

A spokesman for ISP BTopenworld said: "We worked out that the saving from this change is so small that it would be wiped out by the cost of changing the pricing. We have no plans to charge our prices as a result of this announcement."

However, Oftel estimates that the ruling, effective today, will cost BT Wholesale between £5-6m per year.

In other words, it represents a small but significant saving for the rest of the telecoms industry - and given how few ISPs and OLOs are making money, any cut in their costs will be most welcome.

An Oftel spokeswoman said: "In the short term this is good news for operators but in the long term it should be good news for consumers as well."

Oftel had initially been proposing a seven per cent cut, but so many people are using unmetered internet products that it decided to increase the cut to 8.5 per cent.

Another cut in Friaco prices should be announced this time next year.