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BT to pay ISPs to run broadband ads

Millions of pounds will be handed back from British Telecom's BT Wholesale unit to its ISP customers, so they can advertise high-speed Internet services.

BT Wholesale, a unit of British Telecommunications, is preparing to give millions of pounds to its Internet service provider customers to help the companies advertise their high-speed Web services.

The move is an attempt to boost the use of broadband in the United Kingdom, which has been extremely disappointing so far. By encouraging ISPs to advertise broadband services that they offer, BT is hoping to stimulate demand for ADSL (Asymmetric Digital Subscriber Lines).

ISPs have known about the scheme since mid-December, and BT Wholesale has received plenty of interest. "The amount of money available will run into the low millions of pounds altogether," a BT Wholesale representative said. It's possible to buy ADSL from around 190 ISPs in the United Kingdom, all of which resell BT Wholesale's broadband products.

BT Wholesale will not pay for an advertisement unless it clearly promotes ADSL. "As long as the (advertisement) is specifically for broadband, and not just a generic ad for the company, money could be available," said the BT Wholesale representative. The company says it is not prepared to pay for the whole cost of a campaign.

BT Wholesale will be subsidizing rivals of BTopenworld, the consumer arm of the telecommunications operator. "We're not allowed to treat BTopenworld any differently than other ISPs, and this move proves that we take that seriously," the BT Wholesale representative explained.

"It's a bit like Intel Inside for DSL," said one industry source, "and whether BT will similarly insist on some sort of 'BT Behind' branding in exchange for the money remains to be seen. Other interesting questions are whether Oftel will regard this as some form of cross-subsidy, especially if BTopenworld benefits from this plan, and why BT doesn't just use the money to drop the price of the service."

BTopenworld is the largest ISP offering ADSL in Britain and would undoubtedly benefit from a rise in the public profile of broadband.

BT has repeatedly insisted in the past, though, that it cannot drop the price of broadband--because the regulatory framework bans it from selling a product at a loss.

There are currently only 100,000 ADSL customers in the United Kingdom. This is despite BT making over 1,000 of its local exchanges to become ADSL-enabled--covering more than 60 percent of the country's population.

Many industry observers claim that the pricing, around $58 per month, is simply too high for a mass-market consumer product. But a lack of public understanding about broadband is also blamed. BT Wholesale's move seems certain to result in a significant increase in broadband advertising and could help boost demand for ADSL.

Staff writer Graeme Wearden reported from London.