ISPs have reacted with anger to a surprise price hike on some of BT's broadband products, even claiming that it could put some of them out of business.

From 1 September the price of BT's wholesale IPStream Office services will increase by between £2 and £14 per month, excluding VAT. The telco blamed the rise on regulatory pressures from Ofcom over price margins.

"We took the difficult decision to raise these prices because we have to maintain the competitive price margins between DataStream and IPStream," a BT spokesman told vnunet.com.

"BT is continually reviewing prices across our wide product portfolio. This includes taking into consideration regulatory obligations which ensure continuing and appropriate levels of differentiation between product sets, so that competition is promoted at all levels of the value chain.

"The price rises planned are unusual, but necessary to ensure that we continue to remain compliant from a regulatory perspective."

The company added that prices for BT Office are still between 27 and 40 per cent cheaper than in April 2000.

The price differences between DataStream and IPStream have long been a source of unhappiness to ISPs.

DataStream is the delivery method that allows rival wholesalers or ISPs to offer services to other ISPs or direct to customers using their own networks.

Steve Dyer, chairman of Mailbox Internet, claimed that ISPs knew nothing of the changes until a telephone conference last week.

"This is the second [detrimental] change BT has introduced to prices this year that hinder smaller ISPs," he said.

"We will see a lot of smaller ISPs unable to cope and put up for sale. Already Pipex has bought Nildram for a very favourable price."

Ofcom stated: "We are not going to pass any comment until we publish our statement on the review of wholesale broadband access.

"BT has taken a commercial decision in advance of publication of our statement. Our focus is on sustainable competitiveness and one issue is the price margin between IPStream and DataStream."