British Telecom is cutting one in five jobs at BTopenworld, the company's main internet business.
A spokesman last night confirmed that BTopenworld, which houses its mass market online interests, is seeking to reduce headcount by about 200. He likened BTopenworld to "any other start-up" in the internet, facing the need to reassess staff levels.
The division incurred an operating loss of £107m on turnover of £68m during the third quarter.
The retrenchment marks another low in the downturn in new media. BTopenworld includes BT's dial-up narrowband internet offering but more significantly is home to the company's broadband consumer services.
BTopenworld is also the name of the company's broadband portal which uses DSL (digital subscriber line) technology to upgrade the old copper wire network.
BT has been accused of dragging its feet over the opening of its local network to competition in order to give its own broadband business a head start. The so called "unbundling of the local loop" to allow rival suppliers to install their own DSL equipment in BT exchanges has lurched from one crisis to another.
Staff were told of the cuts in the business at the end of last week. The spokesman said those leaving BTopenworld would be offered jobs elsewhere within the wider group.
"We always set out to throw a lot of resource at this business at the beginning and now six months on, some people will be absorbed into other parts of BT," the spokesman said.
BT has boasted that it aims to see BTopenworld as the AOL of the broadband market - what it terms the "second wave of internet growth" - but so far BTopenworld's broadband service has attracted only 15,000 subscribers.
The service offers high-speed internet access, video-rich content, CD-quality audio and fast downloads for a one-off connection fee of £150 and a flat rate of £40 a month.
It has signed up about 90 content partners including MTV, CNN, Reuters, Thomas Cook, First Choice and EMI.
The company's narrowband service, BTinternet has 1.2m users around half of which are using unmetered access - paying either £9.99 a month for weekends and evenings or £14.99 round the clock.
The third leg of BT's consumer online business is Genie, the mobile internet portal which is also housed in the BTopenworld division.
The BTopenworld division was formed as part of the restructuring of BT and became one of four international businesses. The BT group is coming under intense pressure to reduce its £30bn debt.
