UK cable operators Telewest Communications and NTL are joining forces to sell high-speed Internet services in the UK at a price that undercuts British Telecommunications.
NTL and Telewest, Britain's number one and two cable operators, said they would join in marketing broadband Internet service from a price of as low as £25 a month for digital TV customers.
The two groups have borrowed heavily to build their cable networks as they bet on eventually selling telephone, Internet and pay TV services to customers. Offering a low Internet price would help them lay cable and gain access to more homes, where they could sell additional services to become more profitable.
Telewest plans to reach total monthly revenue per customer of £60-70 and profitability within five years.
A comparable Internet product sold by BT costs around £40 a month, the companies said. BT uses a different technology, which boosts transmission speed over regular phone lines, and recently said it was rethinking its Internet strategy because of flaws in the economics of the technology.
Between them, NTL and Telewest had just under 45,000 broadband Internet customers as of the end of March. NTL, with 26,300 of those, has set itself a target of 100,000 cable modem subscribers by the end of 2001.
Nine million British homes are ready to access broadband cable, and the two companies forecast 11.6 million homes would be able to use the technology by the end of 2002.
The initiative is the latest example of cooperation between the two groups, whose networks do not overlap. They also have a joint venture selling video on demand, called Front Row, and have recently combined their media-sales operations.
Some analysts expect the two cable operators to merge eventually to take on British Sky Broadcasting Group Plc in the lucrative pay television market.
The companies also said they expected the cheaper broadband services to boost Internet usage in the UK. Though Britain is ahead of everyone in digital TV, with 30% penetration via cable, satellite or terrestrial signals, it has one of the lowest broadband penetration rates in the industrialised world.
