Telecoms watchdog Oftel has triggered an ISP price war over itst on Net access calls. judgement on the dispute between UK telephone companies about their respective revenue shares from internet access calls.
The government body ruled last week that the revenue share will not change at present, but that control of pricing on internet access calls will be freed from the likes of BT and allowed to be set by internet access companies and ISPs. This will allow an ISP to offer its customers a subscription that either includes free calls or offers a reduced rate for the cost of the access call.
The dispute arose due to the explosion in internet access caused by the blossoming of no subscription ISPs. The call revenue is shared between the company providing the user's line, usually BT, an internet access company, such as Energis or UUNet and the ISP.
David Edmonds, director general of Oftel, stated that adding the flexibility to pricing would allow ISPs 'to vary the prices they charge for a call, to reflect the level of service they provide to their customers'. He added that this would lead to some service providers pricing their calls below the local rate.
Edmonds added: 'I believe our proposals strike the right balance between supporting the growth of the internet and meeting the needs of telephone operators and internet service providers to generate funds necessary for investment in their respective networks to cope with growth.'
Adam Daum, analyst at Inteco, said: 'It will favour the larger free ISPs because they will be better placed to survive the price wars. This is a move of diplomatic brilliance by Oftel, which can portray itself as promoting competition and flexibility. Allowing free ISPs to set the retail price of internet calls is inviting them to cut their own throats.'
Nick Gibson, analyst at Durlacher, added: 'The idea of different internet access call charges will raise a number of interesting possibilities.
It will mean a significant restructuring and re-pricing of internet packages.'
The recent influx of companies into the no subscription ISP business has been rapid, with the bulk following in Dixon's footsteps, which launched FreeServe in September 1998.
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