Telecoms watchdog Oftel has ordered BT to make wholesale unmetered internet cheaper.

Oftel has mandated an 8.5 per cent price cut to the charges BT levies on rival telcos such as Energis, Colt and Thus to buy internet capacity on its network.

The capacity is then resold to internet service providers (ISPs) so they can offer consumers unmetered internet access packages.

David Edmonds, Oftel's director general, said this reduction meant that operators would now be able to buy capacity from BT cheaper than before.

"Operators have the opportunity to pass these savings on to ISPs and through them to consumers," he said.

The price reduction follows a review of the volume of unmetered internet traffic over BT's network since the telco began to offer a flat-rate wholesale internet access product. Edmonds said that previously the watchdog has had to use estimates to assess BT's charges.

Last August, BT was ordered by Oftel to offer cheaper, wholesale broadband to alternative telcos. The change increased competition in the broadband market and allowed other companies to cut costs.

Oftel yesterday let BT off the hook when it ruled out separating its network business from the group.

Despite calls from MPs and other operators for BT to be broken up, such a move was "not on the agenda", the regulator said, as competition in the market continued to improve.

But there has been criticism that true competition will not be possible until BT makes further concessions in local-loop unbundling, allowing other telcos to set up their own wholesale and retail broadband products and services rather than relying on those of BT.