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New e-minister urged to intervene in broadband row

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Mike O'Brien - the new part-time ecommerce minister who replaced Stephen Timms in last week's mini Government reshuffle - has a tough job on his hands. His main role will be as Energy Minister formulating the UK's strategy at a time of rising oil prices and increased fears over global warming.

"I will also be responsible for 'e-commerce', which basically means the computing industry, including broadband," said the minister, who made it sound like the ecommerce job has been tagged on as an afterthought.

Except O'Brien is taking up his new position at a time when an increasingly vocal part of the industry is calling for a parliamentary enquiry into increases in the wholesale cost of DSL broadband which, critics claim, could force dozens of ISPs out of business. The newly created United Kingdom Internet Federation (UKIF) - which claims to have the support of more than 70 ISPs - believes Ofcom has been bamboozled by BT over the introduction of new industry regulations designed to increase competition. It's already actively lobbying MPs and Government over wholesale prices and will continue its fight even before O'Brien has a chance to get his feet tucked under his new ministerial desk.

Said the lobby group: "UKIF believes there is a case for a parliamentary enquiry into how Ofcom has regulated and consulted on this issue which is critical for the continued health of UK industry. UKIF has briefed several parliamentarians and new ecommerce minister Mike O'Brien will find this hot potato on his desk when he settles in from last week's Cabinet reshuffle."

Much of the industry unrest stems from the introduction of two new pricing structures - Usage Based Charging (UBC) and Capacity Based Charging (CBC). According to critics, these will lead to higher broadband prices for ISPs buying wholesale DSL from BT as the dominant fixed line telco moves from an unmetered charging pattern to one that is metered.

As UKIF's Jonny Mulligan puts it: "Up until now the wholesale cost of DSL has been unmetered, offered to ISPs at an all-you-can-eat price. Now, with the introduction of CBC and UBC, BT has effectively introduced pay-as-you-go charges for wholesale broadband. While CBC and UBC will benefit larger ISPs that can cash in on economies of scale, it will hit smaller ISPs hard."

While the proposed pricing structures are complex, the impact on ISPs and ultimately on consumers, is far easier to grasp. Malcolm Corbett from the Community Broadband Network said that if the price change has the effect predicted by UKIF it will "threaten the government's stated aim of broadband for all urban and rural areas in the UK by the end of 2005. Many smaller ISPs have specialist or local markets in which larger companies are often unwilling to invest."

Robert Kemp, MD of KeConnect said: "As an ISP based in Suffolk and serving the local business area - we will be unable remain competitive if BT forces these price increases on the industry. This will reduce competition and consumer choice."

Peter Milford, corporate manager at NewNet said: "At present, the current system doesn't make sense. The whole process with standard and capacity based charging acts against SME ISPs."

Voicing its concerns, industry trade group ISPA is "calling on BT to revisit the proposed UBC pricing model that at present places UBC at 65 per cent more expensive than CBC and puts the existence of small ISPs (SME ISPs) in jeopardy".

Industry insiders say the current unrest is down to Ofcom's failure to understand fully the implications of the new rules. UKIF claims the regulator has been bamboozled by BT. Other say Ofcom has been rattled by the critcisms that it has failed to protect the wider interests of the industry by making it harder for them to compete. Indeed, there is even speculation that unless this current muddle can be resolved, the regulator may even be forced to call time on the price rises and order a rethink on the whole matter.

BT insists that it is aware of industry concerns and that it is doing all it can to minimise any disruption to the industry.

"We're still talking to the industry and want to introduce a package of services that does meet their needs. We want to develop products that will allow companies to compete, we want to ensure that there is a level playing field for all ISPs," said a spokesman. ®

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