The first step on the broadband ladder or consumer scam - opinions are split over BT’s move to slash the price of its cheapest broadband connection to under £20 a month.
A capped, entry-level service intended to win over those consumers put off by hefty monthly charges, BT Broadband Basic Costing costs £19.99 a month and runs just as fast as BT's mainstream consumer broadband package.
However, there are strings attached.
Consumers can expect to pay a set-up fee of £80 for a 12-month contract, which includes a payment of £30 for activation and £50 for the Voyager 105 DSL Modem.
Also, BT Broadband Basic can only be used by a single PC and does not support home networking, while phoning tech support comes at a price too.
Plus, the service has a 1Gb a month usage limit.
Duncan Ingram, MD of BT Openworld, insists that the 1Gb limit, which is enough to download roughly 650 short videos or 200 music tracks a month, is "plenty of capacity for half of broadband users"
He dismissed entry-level products from "some of our competitors who offer so-called low cost broadband packages which, at best, run at half the speed of BT's basic broadband service.”
“Getting not so broad broadband from other providers presents major limitations on what you can do on the Internet, with much more time spent waiting for things to download, like web pages, music tracks and video clips," he added.
However, rivals have been equally as vocal in their criticism of BT’s sub-£20 offer by pointing out that BT Broadband Basic is just as expensive as other no-frills offers already available on the market.
BT Broadband Basic may cost £19.99 a month, but take into consideration the £80 up-front set-up fee and you’re looking at an annual cost of just under £320 for the service.
Whereas its no-frills, access only service, BT Broadband, which costs £27 a month but incurs no set-up or modem charges, costs only £4 more.
Freeserve point out that with their cheapest package you can expect a full 512k, plus free modem and connection, for £15.99 a month for the first three months and £27.99 thereafter – which brings the total first year cost to £300, a full £20 cheaper than BT.
Likewise, Tiscali currently costs £24.99 a month plus free modem and activation, totalling £300 for the first year.
A spokesman for AOL said: "In theory, this is exactly the kind of product innovation we believe would be possible for all service providers if BT, or focused regulation, enabled greater wholesale broadband competition.
"In practice, because of the substantial up front charges this product is virtually the same total cost as BT Retail's original service over the first year - and more than many rivals - but with the additional severe restrictions on usage."
BT’s Duncan Ingram denied that the telco was trying to mislead people, insisting that the different prices were set out clearly for everyone to see and that many ISPs use a range of special offers to help bring down the cost of their services.
"£19.99 is a sustainable price - it is a breakthrough for a half meg service," he argued. And he didn't rule out special offers for the 'Basic' service at some time in the future.
"BT Broadband Basic is just the first initiative in our future broadband strategy. In the coming weeks we will be announcing a whole host of product developments and enhancements which will be key in helping BT hit its 5 million connections target during 2006," added Mr Ingram.
However, there are those that have come out in support of BT's move. Michael Philpott, a senior analyst at Ovum, said: "With BT's brand and marketing clout, together with a low price, there is no doubt that more customers will turn once again to BT."
The telecoms giant, which sees broadband as vital to its future health as revenues from its telephone business continue to decline in the face of stiff competition, hopes its new service will lead to an explosion in the number of new subscribers.
Since BT cut the wholesale price of broadband last year, take-up of the technology has soared.
The latest figures from communications watchdog Ofcom show that there are now over 3.2 million broadband subscribers in the UK, with around 2 million of those using BT lines and the rest through cable companies NTL and Telewest.
But industry analysts are united in their belief that prices must come down and a new range of attractive services developed to make broadband a mass market proposition and help BT chief executive Ben Verwaayen hit his target of 5 million connections over the company's lines by 2006.
Sources: BBC Online, Guardian Unlimited, New Media Zero, The Register
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