BT Openworld follows Freeserve in price rise
BBC News reports today that BT Openworld is rethinking its pricing strategies only less than a year from launching the most popular consumer broadband service. Their plan was to sell the ADSL connection service at below cost (~£40/month incl. vat) and subsidise the losses made through advertising and other revenue sources on their 'portal'.
Freeserve has already announced its forthcoming price rise a couple of weeks ago when it admitted it could not sustain the current price war with BT and had to face economic realities. BT's undercutting of competition has fuelled other service providers into complaining to Oftel, without much success. Andy Green from BT Openworld admits that legal constraints on selling at a loss is a factor, leading some to speculate that this early move to raise prices may be to avoid intervention by Oftel.
By Monday, Freeserve's price increases will have taken effect and BT will be the lowest cost provider until it too, deserts the subsidisation model that causes so much financial uncertainty. These increases in the average cost of ADSL will be a boost to providers of alternative Internet connectivity technology--Cable modems in particular. NTL and Blueyonder offer their basic service at £25 per month at less than half the cost of the basic ADSL service. Whilst specifications vary, many consumers in this country are not yet prepared to spend £50 per month on broadband in the home.