BT milks the hype cow

So, BT is basking in a warm glow of slightly surprised approval after a promise to "substantially" cut broadband prices.

The news was leaked on Sunday, announced twice on Thursday, and we have a full two weeks of speculation to go before BT will actually tell us what the price reductions are.

In the acting business, as well as in agriculture, this is known as 'milking it'. And BT's bucket is about to overflow.

The headlines have been great but we suspect that BT is either going to disappoint its customers massively, or turn three years of regulatory policy on its head and spend a year or two in a costly court battle.

It is good to hear that BT is committed to cheaper broadband. But it's not news. BT never boasted of a commitment to expensive broadband, though some might suspect otherwise.

The truth is, in fact, that the company has never had much room to manoeuvre. BT is not meant to sell broadband for less than it costs to provide it.

So there are three possibilities. Either Verwaayen has found a miraculous way to cut costs in his first week at the top, or he has dumped the principle that broadband should not be sold at a loss (unlikely), or he is going to disappoint everyone. Big-style.

The first possibility is not as far-fetched as it sounds - the number of DSL subscribers has been growing steadily, and costs do fall as subscriber numbers rise. Accountants, given the right encouragement, can always massage figures one way or the other.

So BT might be able to cut the price of broadband quite substantially without Oftel being able to say that it's selling below cost price.

Verwaayen sidestepped the question of whether the group will violate the principle of selling below cost. He said: "I agree with the regulator that internal subsidies within the BT group are wrong," but avoided the nub of the question.

If he does sell below cost, though, Oftel, all his competitors, the leader writers of The Economist and free marketeers everywhere will respond with extreme prejudice. If he doesn't deliver a nice fat price cut though, then a nation of disappointed net users will be mighty upset.

So we hope that the massage accountants are in mid-season form. Otherwise BT will find the hype cow getting a nasty case of mastitis.