Viag price cuts spark Net access war

NEWS German telecoms company Viag Interkom has cut its Internet access fees by 40 per cent, to a total of just Pf6 per minute for access and call costs. The move takes it into direct competition with T-Online, the Internet service provider (ISP) arm of Deutsche Telekom (DT). DT is also proposing to cut its prices to Pf6 per minute. AOL had objected with claims that T-Online was being illegally subsidised, but a German court ruled that the price cut is legal. However, it accepted AOL's call for the price to be split into access costs and call charges - rather than bundled as one complete cost. Daniel Bieler, analyst at Ovum, claims the cuts are part of a petty price war. "They are competing in terms of a traditional price war, but they should be looking to new opportunities," he said. "Freeserve has changed the universe in the UK - the same model could be applied to Germany." The concept of making profit from dial-up revenues is outdated, according to Bieler. He claims ISPs should be developing other revenue streams such ecommerce, advertising, content provision and entertainment. But a spokesman for DT denied the company was considering providing its users with free access. "Why should we?" he said. "This is Germany and we have these systems. People are always asking us to reduce charges." "T-Online is really under threat, despite being huge," Bieler warned. "But it will take a shock like Freeserve to wake up the market."