Broadband changes

BT Group PLC
26 February 2002

                                   February 26, 2002


           SWEEPING PRICE REDUCTIONS AS BT TARGETS BROADBAND MILLION

BT's chief executive today put his foot on the accelerator for broadband growth
throughout the UK, with dramatic price cuts to boost demand.

     Ben Verwaayen said: "Broadband is the future for Britain and we're putting
it at the heart of BT's plans for growth in the UK mass market. This will drive
the whole market forward by making broadband affordable, attractive and
accessible."

     He revealed BT's plans to target one million asymmetric digital subscriber
line (ADSL) broadband connections over BT's network by summer 2003, by:

  • cutting wholesale line rental for consumer connections from £25 to £14.75
    a month, from April 1
  • improving the experience of BT's wholesale customers and end-users through
    better network performance and service quality
  • boosting marketing, including joint projects between BT Wholesale and more
    than 40 service providers, to champion the benefits of broadband
  • encouraging all service providers, including BTopenworld, to use the
    wholesale saving to set new prices for consumers and businesses and to mount
    their own campaigns to promote broadband
  • searching actively for partnerships to extend broadband to less
    commercially viable areas.

He said: "This is a stretching programme, but achievable. Through substantial
reductions in the cost of providing service we can set prices that will
stimulate the market strongly, and make money on it. This is a sustainable
business model.

"We are committed to making broadband widely available. We are driving for
growth across the entire market. To be sure of meeting these targets we need the
support of the entire broadband community including particularly content
creators and providers."

Paul Reynolds, CEO of BT Wholesale said: "We have now achieved the price that
service providers told us they needed to get end user prices below £30. We have
made sustained improvements in network service levels in recent months and are
taking action on automation to help service providers to improve the customer
experience even further.

"We expect these new low prices to drive up demand for broadband. Now the
momentum for broadband take-up should build. Today's announcement is a first
step, but a significant one."

Notes to editors

Target: BT is targeting one million connections for its flat rate, always-on,
ADSL broadband products by the summer of 2003: currently there are 145,000 users
signed up by BT's 200 wholesale customers, up from 40,000 a year ago. With a
customer base of over one million, we are targeting a payback per user of below
three years.

Prices: The price of BT Wholesale's main consumer product to service providers
(BT IPStream 500) will drop from £30 a month, or £25 a month for the recently
introduced self-install version, (BT IPStream Home) to £14.75 for both. Rental
for existing ADSL wholesale customers of these services will also drop to
£14.75.

A review of BT Wholesale's entire price list for ADSL broadband products has
been completed and changes have been notified to Oftel today coming into effect
on April 1. This also reduces significantly the prices of ethernet business
products for service providers and BT Datastream products aimed at other
licensed operators.

     Together, the price changes will provide all service providers with an
opportunity to lower charges substantially to their residential and business
customers.

BT Wholesale has achieved the price cuts by a combination of lower input costs
and higher volume projections. Technology procurement costs have dropped with
volume demand from around the world, core IP costs have reduced and sustained
customer service improvements have significantly reduced engineering costs.

The introduction last month of self-install products has also provided a
consumer product that is easier and quicker to install. Self-install versions of
other existing products are now to be introduced. Economies of scale on
switching equipment have been achieved through the higher volume of expected
end-users. Greater automation has been introduced to the ordering process, and
the larger number of customers means a reduction in unit costs for each end
user.

Market stimulation: The new target will be achieved by cutting the wholesale
price to enable service providers to drop the retail prices; increasing
availability, improving service and actively marketing the benefits of
broadband.

A new BT Wholesale marketing campaign launches today. It signals BT Wholesale's
efforts to stimulate end-user demand. The business is also giving financial
support to assist the marketing campaigns of more than 40 service providers
through advertising and direct mail as well as consultancy, data analysis and
call centre support. Extensive marketing by service providers to end-users is
also expected.

Customer experience: BT Wholesale will continue to develop innovative systems
that will enable service providers to improve service to all broadband users.
Service level agreements now ensure provision commitments to service providers
are met and sophisticated systems are being piloted with more than 20 service
providers to provide a better flow of orders and lower provisioning costs as
well as benefits such as on-line order tracking. Network resilience is being
built-in to handle the anticipated increases.



Expansion: BT intends to expand its existing broadband availability beyond the
1010 largely urban exchanges already enabled, where clear demand indicates
commercial viability or in partnerships with others. These upgrades will be in
addition to 12 exchanges in Cornwall identified as part of an alliance formed
between BT, the South West of England Regional Development Agency, local
enterprise and education bodies with backing from the European Regional
Development Fund.

Partnerships are now being sought with other Regional Development Agencies,
local authorities and alliances to stimulate and meet demand.

Forward-looking statements - caution advised

Certain statements in this news release are forward-looking and are made in
reliance on the safe harbour provisions of the US Private Securities Litigation
Reform Act of 1995. These statements include, without limitation, those
concerning: driving the whole UK market forward by making broadband affordable,
attractive, available and accessible; expectations regarding reductions in
wholesale line rentals; improvements in network performance and service quality;
boosting marketing to champion the benefits of broadband, including with other
service providers; the support of other service providers in promoting
broadband; reducing costs, stimulating the market and making money on it.

Although BT Group believes that the expectations reflected in these
forward-looking statement are reasonable, it can give no assurance that these
expectations will prove to have been correct. Because these statements involve
risks and uncertainties, actual results may differ materially from those
expressed or implied by these forward-looking statements.

Factors that could cause differences between actual results and those implied by
the forward-looking statements include, but are not limited to: material adverse
changes in economic conditions in the markets served by BT Group and its lines
of business; future regulatory actions and conditions in BT Group's operating
areas, including competition from others in the UK and other international
communications markets; technological innovations, including the cost of
developing new products and improving the quality of service; developments in
the convergence of technologies; the anticipated benefits and advantages of new
technologies, products and services not being realised; BT Group's ability to
reduce costs, improve quality, find partners and to gain the support of, and
work successfully, with others in the broadband market.

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