AOL Plans to Take on BT

AOL announces plans to take on BT

Ben Child Sunday January 22, 2006

[TELECOM Digest Editor's Note: This is an advance peek at an article planned for this Sunday's issue of the Guardian in the UK. All the numerical values shown in this article, when they refer to money, are using British Pounds. PAT]

Guardian Unlimited

Internet giant AOL today announced plans to invest at least 50 million in a new telecoms infrastructure and promised higher quality services and greater speeds to its broadband customers.

The company will use new technologies to bypass BT completely and provide internet, telephone and other broadband-related services direct to its customers.

Companies like Bulldog have brought the cost of broadband to an all-time low by taking advantage of the same local loop unbundling (LLU) technologies which AOL is now investing in.

However the American firm said it would not be cutting prices but would invest the savings it will make through lower ongoing running costs in providing a better service.

"The market is already at its low point in terms of pricing," said spokesman Jonathan Lambeth.

"Bulldog is pricing itself ahead to the levels that LLU may eventually allow costs to come down to. What we need to see now is who can offer the most value."

AOL is promising to increase speeds for customers and offer extra features such as the ability to receive TV through a broadband connection, video on demand and advanced gaming services.

The initial phase of its LLU programme, costing 50 million, will take place in the first half of 2006 and will reach the equivalent of 20% of UK households. If successful, AOL will roll out to an additional

50% at a cost of 70 million.

Blair Wadman, broadband product manager for price comparison website Uswitch.com, said the move would allow AOL to compete on a level playing field with BT in terms of both phone lines and broadband.

"The only other company at the moment is Bulldog, which is only in the major cities," he said. "AOL are backed by Time Warner and there's the potential there for them to roll out across the whole country far faster than one would have thought Bulldog capable of."

Bulldog currently offers up to 8 meg speed broadband for 9.75 a month, while BT offers slower 2 meg speeds from 14.99 a month.

For the time being AOL will continue to offer its customers 1 meg broadband at a cost of 14.99 for the first six months and 17.99 thereafter.

"We've never been the cheapest and don't aim to be," said Mr Lambeth. "We would say we have the best customer service and provide better value for money."

Guardian Unlimited Guardian Newspapers Limited Copyright 2006

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[TELECOM Digest Editor's Note: Just a reminder that all the money amounts shown above are British Pounds, the symbol for which I am unable to reproduce in ASCII text here. PAT]