Iomart, the Scottish-based ISP has sold its Madasafish consumer operation to an undisclosed buyer for £3m in cash.

The company will stick to web hosting for businesses and other Internet operations.

Against a competitive backdrop and reduced marketing spend, the company had managed to increase registrations for Madasfish by 200,000 over the year, a credible performance, the company argues.

But the "whole industry was ambushed by companies with naive and inexperienced management teams clambering over one another to announce ever more 'free' services to the customer," chief executive Angus Macsween said in a statement.

Iomart had neither the resources or the desire to go down the free road. Its decision to avoid this route had been vindicated by the number of ISP failures and collapsing values for the survivors, according to Macsween.

"This climate was also compounded by ill-informed commentators who were bemoaning the high-cost of Internet access in the UK. In fact for average users of around 400 minutes or less per month the UK has had probably the cheapest Internet access in the world," he claimed.

Macsween also attacked Oftel over the ADSL local loop unbundling pricing policy the regulator had agreed with BT.

"We quickly learned that building any competing network to BT under the scenario envisaged by Oftel was untenable, as the economics are fundamentally flawed by the BT price structure agreed by Oftel. In the absence of a major policy shift, we believe that BT will remain a de facto monopoly for the forseeable future."

For this reason, Iomart restricts itself to reselling BT's broadband prodcuct - it reckons it is third or fourth in the ADSL market in terms of installed connections and "sales continue to grow".

Iomart announced the disposal of Madasafish at the same time as its annual results. The company lost £4.4 million prior to one-off costs on sales of
£3.6 million.