BT IS to impose a new penalty charge on rival broadband operators whose customers defect to another provider.

The “cessation” charge, which is likely to face fierce opposition from other internet providers, is part of a wider pricing shake-up within BT’s wholesale division. The overhaul is designed to help it to compete against the cheap offerings of rivals such as Carphone Warehouse.

The £33.75 penalty charge will be levied on service providers — and on BT’s own retail division — when customers switch to a rival. BT Wholesale said that the charge reflected the fees that it is charged by Openreach, its stand-alone division, when a customer switches providers.

The cessation charge to BT’s 300-plus wholesale customers, the group said, would be more than offset by cuts in wholesale prices, announced by the company yesterday. BT also pointed out that the charge would not be levied where the losing provider gives the customer a special switching code, or MAC, to make the move easier.

Yesterday the former monopoly laid out new pricing plans that will take effect once the key landmark of 1.5 million unbundled lines has been met.

Under a deal with the regulator in 2005, the telecoms group agreed not to lower the price of its wholesale broadband products either until next spring or until 1.5 million lines had been unbundled.

The deal was aimed at ensuring that the so-called local loop unbundling (LLU) process — under which competitors install their own kit in BT’s exchanges — had time to develop. The 1.5 million target is now within sight, triggering greater pricing freedom for BT and, crucially, giving it a mechanism to fight back against LLU rivals such as Carphone.

Charles Dunstone, head of Carphone Warehouse, one of BT Wholesale’s customers, said: “It feels as though you could end up with BT being paid twice — once for terminating the customer and then again for reconnecting the customer.”

As BT retail’s division takes BT’s wholesale product, known as IPstream, it could lower its own prices. The cut in wholesale prices will also, the group hopes, encourage other broadband players to opt for IPstream rather than for LLU. Rival companies taking IPstream are more lucrative for BT.

From May 2007 the rental charge for IPstream will fall by 9 per cent, from £8.40 per line per month to £7.63. BT said that the price is expected to be cut further in January 2008.

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