Seventy UK ISP's have united to form the UK Internet Federation (UKIF), an organisation designed to oppose BT's recent business broadband price hike. The group feels that poor regulation coupled with BT's hike could put smaller providers in serious financial trouble:

Smaller ISPs - unable to exploit the efficiencies afforded by larger ISPs - are worried that they will see the wholesale cost of their services rise making them uncompetitive. And while BT increased the cost of some of its business-focused broadband packages lately, there are fears that this is just the thin end of the wedge and that the UK's dominant fixed line telco could increase the cost of consumer products too.

One irate industry source told us: "[The changes being made] are potentially hugely more expensive for smaller ISPs. The wholesale cost of broadband is going up except for the very largest of ISPs - including BT. Ofcom [the communications regulator] is trying to increase competition but it is having an opposite effect.It's a move against the entire industry."

In essence, the row brewing in the industry boils down to margins between different wholesale ADSL products. Ofcom wants to ensure that margins between these different products is sufficient to enable rival operators to compete with BT at a wholesale level. UKIF reckons that Ofcom has got its numbers wrong.

It's clearly a very serious problem for so many providers to take the step of forming their own action group.

One can perhaps understand why when you consider that a good deal of ISP's sell (for example) 2Mbps services on 12, 24 and even higher month contracts. Typically the 30%+ increase on a 2Mbps package would hit those providers extremely hard.

So many questions remain, such as why, if BT knew about the margin squeeze test in May 2004, did it not issue a warning then? Not to mention why they're basing the changes off a 'test' that OFCOM has yet to validate as official. More @ The Register.