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BT's U-turn could drive competitors off the road

New packages do away with interconnect fees, cut off air supply to free ISPs

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BT's seemingly groundbreaking decision to "slash the cost of dial-up Internet access" is not all it seems. Aimed at ISPs rather than end users, it will only be available for service providers who manage at least 140,000 Net users. Take into account all the complex maths tied up in the offer, users could expect to pay at least £16 for around 30 hours call time a month. Add on VAT and the ISP's cut, and the figure could be nearer £20 a month, if not higher. BT's carrot yesterday was to announce that its new deal "will make it possible for ISPs to launch radically new subscription tariffs which might include unlimited dial-up calls to the Internet for a single monthly fee". The stick, is that BT's move is a competitive backlash at those ISPs and telcos that have been able to offer subscription-free services by taking their cut of the interconnect charges. BT's offer means that the interconnect charges would simply not exist in this new arrangement. And the result is that if Freeserve, say, wanted to take advantage of BT's offer, it would probably have to ditch its own telco, Energis. If that happened, Freeserve -- or any other subscription-free ISP that generated its revenue from the interconnect charge -- would have to make up a substantial shortfall in revenue either by charging a subscription, or by generating more revenue from ecommerce or ads. Not surprisingly, no one at Energis was willing to be interviewed today, although it is expected to issue a formal response later this afternoon. Freeserve was equally tight-lipped. ®

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