BT will deliver on its promise to slash Internet access rates for UK consumers, the company claims. But, critics say the company hasn't gone far enough.
BT has been criticized in recent months for its metered phone charges, which force Internet users to pay local rates for each minute they spend online. e-commerce advocates say BT is hindering the development of Internet use at a time when the country is struggling to compete both in Europe and the US.
On Tuesday, BT said it would offer Internet service providers a flat charge of £140 per month for one port. Each port serves an average of 20 customers, says BT's Simon Craven, although ISPs that want to compete on better service may limit the number of users to 14 per port. The rate will allow ISPs to pass along the flat-rate access to their customers, giving UK consumers the same terms as those enjoyed by Internet users in the US.
If BT expected unanimous applause for the gesture, its expectation was not met. ISPs’, who have been urging the company to adopt a true flat-rate access model, responses ranged from cautious optimism to frustration.
"BT has recognized that the cost of Internet calls is too high," said Maggie Gallant, spokeswoman for AOL UK. "It's a step forward, but we're disappointed that BT hasn't really responded to consumer demand by offering a true flat-rate tariff."
The catch is that the fee covers only 56 hours of usage per week, or eight hours per day. After that, BT reverts to its metered pricing scheme, albeit at a lower rate of 1p per minute, considerably less than its current rate of 4 pence per minute. A more significant catch, say some ISPs, is that in order to take advantage of the deal, they have to rent a minimum of 10,000 ports from BT. In other words, an ISP must ante up £1.4 million a month to receive the "flat" rate.
"At these rates, no one in his right mind would go for it," said Chris Matthews, CEO of Telinco, an infrastructure provider for ISPs. "10,000 is completely ridiculous. A small ISP wouldn't even look at this."
AOL's Gallant says the move could lead to a shakeout in the British ISP market, which overflows with free service providers. "The 10,000 figure will exclude a number of ISPs in the market," she said. "This puts a lot of the financial risk onto the ISPs."
AOL and Freeserve, the top two ISPs in Britain, issued public statements about BT's move; neither offered strong approval. AOL Europe has been one of the loudest advocates of flat-rate access. In a recent address at an industry conference in London, AOL Europe President and CEO Andreas Schmidt said that anything short of abandoning metered pricing would put: "the entire European revolution ... under threat." He added: "I'm calling on you, my fellow colleagues and CEOs, especially in Europe, to come out and stop the clock."
Freeserve, which launched the free Internet service revolution here, went public with its view of BT's move on Wednesday. "We hope that it represents a further step away from the old subscription-based, high-access-fee models," Freeserve's chief exec John Pluthero said in a statement. Freeserve, like many ISPs, gets a cut of the toll charge from BT, and that cut amounts to a large part of the company's revenue.
Noticeably silent in the debate was Lineone, a large British ISP that is partly owned by BT. Ajay Chowdhury, Lineone's managing director, declined to discuss BT's new offer.
Some ISPs are waiting until full details of the offering are made public. BT's Simon Craven says his company will make a presentation on Thursday to Oftel, the government agency that regulates telecoms in Britain. The presentation will point out that the plan must be presented to the regulatory body before going into effect, hopefully by the middle of December. Craven says he does not expect Oftel to be troubled by the high cost of signing up with the offering.
"Oftel understands there are economies of scale," Craven said. "It's not unusual for us to have deals that only become available at certain volumes of business."