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ADSL for £12.99 – How do they do that?

Freedial smashes through several price barriers

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What a curious week it's been for broadband. Last week BT boss Ben Verwaayen told journalists that it was highly unlikely that the monster telco would be cutting the wholesale cost of broadband in the near future.

As far as he was concerned, the price of ADSL was about right. Price, he argued, was no longer a major issue when it came to the provision of high-speed Net access.

The antics of this week suggest a different viewpoint, for there's been a flurry of interest concerning an ISP offering 512k ADSL from just £12.99 a month.

Freedial.biz says it can offer the service at well below cost because its strings-attached "budget" service will be subsidised by its "premium" services.

On its website the company writes:

Even selling the Budget DSL plan at "below cost" it more than covers it's cost for at least the initial 12month contract because of the modest surplus from the activation fee and connection equipment thanks to an exceptional deal we have made with the manufacturers.

It's an interesting approach, not least if you can imagine what it must feel like to be a customer of Freedial.biz's "premium" services knowing that you're paying for others to get cheap ADSL.

No one from Freedial.biz was available for comment at the time of writing despite a request for an interview. However, a quick scan of its FAQs yields the following Q&A.

Q. Some people have suggested you may be "fly-by-nights" or a "rip off"?

"We are in this for the long haul and have the finances, resources and background to be able to carry out our commitments to the full. We are determined to provide a service of integrity, stability and efficiency at an affordable price. We do not rely on bank funding, overdrafts, loans and such like and our overheads are very low in comparison to our competitors.

Of course, anyone who was around during the gold rush for unmetered dial-up access would be forgiven if they don't get the slightest touch of déjà vu.

Sheffield-based PlusNet, which operates on extremely tight margins and flogs its ADSL service from £20.99 a month, is sceptical.

Said a spokesman: "It's difficult to see how it can be sustainable. It's difficult to see how it can stay in business."

Other ISPs share PlusNet's concerns. Said one industry insider: "It'll be interesting to see how long it will last." ®

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