The hotly contested price war between Britain's broadband suppliers sizzled up today as BT confirmed it was slashing prices by up to 25% in a bid to reverse falling market share.
The former telecoms monopoly said it was cutting the prices of most of its tiered broadband offerings and dropping connection and modem charges for online purchases as it tried to stave off rising pressure from rivals.
BT said it was reducing the price of its 512Kb service from £29.99 to £26.99 and its faster 1Mb connection from £40.99 to £26.99, but also said it was introducing a cap on the amount of material users could download.
Users of its two 512Kb services will be restricted to downloading 15Gb a month, which BT says will still enable users to surf for 15 hours a day or download 250 music tracks and 180 minutes of video every week.
The move comes as new research from Enders Analysis shows BT is losing broadband customers to rivals such as Wanadoo and Tiscali. Two years ago BT Retail connected 58% of UK broadband customers - this year that has fallen to just 42%.
As one of the few European telecoms companies without a mobile arm, BT is relying on broadband to boost its bottom line, which is coming under increasing pressure from rivals.
Companies such as Carphone Warehouse, who are the sponsors of this year's Big Brother; Tesco Telecom; OneTel; Tele2 and the latest arrival US-backed ToucanTalk All-You-Can are all eating into BT's fixed line revenues.
Recent figures suggest the company could be losing as many as 150,000 customers a month, attracted to promises of unlimited free talk or very low call rates. BT saw pretax profits before financial charges increase 10% to £2bn in the year to end of March.
The chief executive of BT, Ben Verwaayen, has bet the farm on broadband, setting bullish targets of 5 million high speed internet customers by the end of 2006.
Last month Mr Verwaayen claimed the company was "enabling broadband Britain."
"We now have approaching 2.5 million connections, a 162% increase in a year. We aim to have over 99% of the UK broadband enabled within a year, putting the UK towards the top of the broadband league," he said.
However BT's decision not to drop the price of its "no frills" entry-level broadband service means that it is still being outmanoeuvred by rivals.
Wanadoo, for instance, offers a similar package for £17.99 a month, while Tiscali offers a "broadband lite" service from £15.99.
Analysts predict the land grab for broadband customers will continue as rivals continue a strategy of tempting dial-up users to convert to cut price, lower speed broadband packages and then trying to "upsell" them to higher speed, higher cost and higher margin services.
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