BT tells Brown to back off

The stock market reacted sharply to reports last week that chancellor Gordon Brown was to reduce the cost of internet access and speed up the process of giving BT's rivals access to its local exchanges.

The stock market reacted sharply to reports last week that chancellor Gordon Brown was to reduce the cost of internet access and speed up the process of giving BT's rivals access to its local exchanges. £2bn was wiped off the value of the company's shares.

In response, BT hit back at Brown claiming it was not his place to set a timetable for the shake-up.

In the end, however, the chancellor's speech to the Smith Institute contained little more than a commitment to support proposals already in place by Oftel. Brown said: "Let the industry be in no doubt that I stand full-square behind Oftel in these aims. We will not allow any foot-dragging here."

Sir Peter Bonfield, chairman of BT, said: "Shareholders own the network and BT not only needs to be consulted, but it has to agree on any timetable with Oftel. A deadline of 1 July 2001 has already been agreed with Oftel and there will be no change to this date without our agreement. Anyway, that would be a matter for Oftel and BT, not for the Treasury."

BT might not like the prospect of unmetered web access and the breakup of its monopoly on local networks, but resellers would benefit from the opportunity to sell new, higher-bandwidth technologies.

Brown spoke of the "disadvantage UK businesses face" if the country's internet economy lags behind the rest of Europe. A report from researcher Durlacher this week said internet use would increase three-fold if online access was unmetered.

BT has hit back, saying that its Surftime package, which was announced in December, will bring unmetered surfing to the UK. But while rival Telewest launched its unmetered service this week, BT's package remains stifled by regulators.

"It has not been introduced because we are bogged down in regulatory approvals which are much more complex in the UK than in other countries," said Bonfield.

BT is under pressure to make local calls, and therefore internet calls, free, as in the US. But BT has argued that line rental and standing charges are higher in the US, so the free calls model is a false economy for most users. BT has also claimed its pay-as-you-use model protects low-income customers who use their phones infrequently.

• Telewest jammed
• Telewest has been unable to cope with demand since its unmetered net service, Surfunlimited, was launched last week. Customers have been battling to access the £10 monthly service, despite the telco's claims that it was confident it could keep up with demand. According to sources, the problem is in Telewest's phone exchanges, and heads are believed to be rolling at the company.