BT price cuts expected as broadband revolution falters

Industry experts are predicting that British Telecom will drastically reduce the cost of its broadband Internet services when it...

Industry experts are predicting that British Telecom will drastically reduce the cost of its broadband Internet services when it announces its third-quarter results on 7 February.

The move will follow a warning from analyst group GartnerG2 that businesses planning to roll out broadband Internet services should hold back investment.

Following a survey in France, Germany and the UK, GartnerG2 has warned that consumers are not prepared to pay a premium for broadband. "Unless prices come down dramatically," the report states, "only 10% of households in France, Germany and the UK will have broadband Internet access by 2005".

Gartner noted that e-marketers and businesses, such as automotive manufacturers and clothing retailers, are anxious for broadband use to grow so they can use richer marketing material, such as high-resolution photos and revolving 3D graphics on their Web sites.

However, "given current market conditions," the analyst group recommends businesses "continue to optimise Web sites for narrowband access, delay investments in broadband Internet content and use rich media advertising sparingly".

Microsoft chief Bill Gates hammered home the same message when he spoke at the World Economic Forum in New York last weekend. The high cost of broadband is holding back demand Gates warned. Broadband costs for the US's 13.8 million users have risen by around 20% in recent months to approximately £40 per month.

In the UK broadband costs £40 to £50 per month and GartnerG2 argues that this must fall to less than £20 per month to drive widespread adoption.

The stakes for the UK are high. GartnerG2 said 34% of UK households currently have Internet access compared to 27% in Germany and 18% in France. However when it comes to broadband access, Gartner found only 9% of online German households were using broadband compared to 8% in France and just 2% in Britain.

The slow uptake of broadband in the UK is also likely to feature heavily in the House of Commons tomorrow when BT chairman Sir Christopher Bland, Energis chief executive David Wickham and AOL UK chief executive Karen Thomson, give evidence to the Culture, Media and Sport select committee.

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