BT declare price war on broadband rivals; Phone giants slash price for internet users.

BT yesterday slashed the cost of broadband services in a move likely to escalate the internet price war.

Mid-priced and higher-priced broadband services will be cut to pounds 24.99 from pounds 27 and to pounds 26.99 from pounds 29.99.

Both services offer internet access at a higher speed than some of their cheaper rivals.

BT are also cutting the price of their speediest 1Mg service to pounds 29.99 from pounds 40.99.

BT, who have no mobile division to propel growth,have decided to look to their broadband arm instead.

Their share of the retail broadband market has fallen to 42 per cent from 52 per cent over the last year.

'The key question is whether BT are successful in improving their market share,' said one analyst.

'Much will depend on the reaction of competitors,and while BT's move is bold, aggressive pricing of broadband is likely to continue.'

BT are hoping the new prices, coupled with a new free modem and connection deal for their no-frills BT Broadband Basic package, will help them double wholesale and retail broadband customers and hit a target of five million by the end of 2006.

Investment manager Henk Potts,of Barclays Private Clients, said: 'BT are getting more aggressive, and their ability to sell new technology is key to their future as their traditional fixed-line business faces competition.'

The new prices come into effect today, when BT's new voice-call charges and simplified tariff structure also kick in.

BT, who have about 20 million residential phone users in the UK, are raising line rentals for standard rate customers by pounds 1 to pounds 10.50 per month. But customers will be able to access cheaper call tariffs provided by the company.

BT, who control about 70 per cent of the home telephone market, have seen rising competition from Tele2 of Sweden, mobile phone retailer Carphone Warehouse, supermarkets and cable companies.

Meanwhile,more than150Scottish communities have been given new or improved dates for getting BT broadband.

The announcements mean that by next July, broadband exchange coverage in Scotland will have increased from82per cent to almost98per cent.

It will leave just 50,000 homes and businesses in rural Scotland awaiting an upgrade. The Executive have said they will ensure every community in Scotland will have broadband by the end of next year.

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SURFING FOR A BETTER DEAL: BT costs will plummet