Tiscali have begun legal proceedings against BT, after it was revealed this week that the UK’s leading internet service provider had mailed letters, containing “defamation and malicious falsehood” to Tiscali customers.

The letters, sent in the wake of the announcement earlier this year that Tiscali - currently the fourth biggest ISP in the UK - was searching for a buyer, cast doubts on the company’s future and advised customers to switch to a provider with a more stable long-term prospects, i.e. BT.

“We can understand why you’re wondering what might happen to your Tiscali broadband service,” the letters said. “And because no one really knows the answer just yet, it could be a good time to look for an alternative broadband service.”

BT have defended their actions saying that sending the letters to Tiscali customers was legitimate business practice: “Following media reports suggesting that Tiscali was up for sale we recently approached a number of Tiscali customers, and pointed out the benefits of our service. We believe this is a legitimate and reasonable business practice - comparative marketing is an important aspect of a competitive market.” Many are suspicious as to how BT obtained Tiscali’s customer information in the first place but BT insisted that it used “reputable external sources.”

The move by BT is just another example of the cut-throat nature of the consolidating UK comms market as ISPs try desperately to attract new customers and the top dogs try to stay on top. Arash Amel, an analyst with research group Screen Digest believes that as competition becomes tougher, only ISPs backed by big businesses such as Sky and Virgin Media can hope to survive in the long-term: “The standalone ISP business model is looking increasingly shaky… For every gigabyte of data customers use the bigger the costs for ISPs and their small profits start to disappear.”

Indeed; Tiscali last year bought Pipex, who had previously purchased Bulldog and Toucan - this swelled Tiscali’s total broadband consumer base to around 1.9 million. Vodafone, the world’s biggest mobile phone network, was once touted as a possible buyer for Tiscali’s broadband services, which would have meant for further market consolidation, but negotiations reportedly dissolved at the last minute.

Tiscali are reportedly seeking legal advice with a view to take BT to court, after the leading UK ISP sent letters to the homes Tiscali customers, which suggested that their broadband connections may be compromised in light of sell-off rumours.

Regular readers will be aware that part of Tiscali’s big strategy for 2008 includes finding a potential buyer for its European broadband operations – mobile giant Vodafone were famously tipped to take over from Tiscali, but talks dissolved at the last minute.

Seemingly taking advantage of understandable customer concern, BT sent letters to Tiscali and Pipex subscribers which bore the headline ‘Tiscali chief plots sell-off’.

“We can understand why you’re wondering what might happen to your Tiscali broadband service,” said Gillian Lewis, customer services director for BT Total Broadband, in the letter. She goes on to say that “Changing your provider to BT could be the right move if you’re worried about the future of your broadband service. Because BT Total Broadband is the most complete and is here to stay.”

Understandably, people are concerned as to how BT got the names and addresses of Tiscali’s customers in the first place. A BT spokesman had the following to say in justification of its actions: “We use direct marketing as part of our customer-acquisition activity on an ongoing basis, sourcing customer details from reputable external sources. We often mention competitors in order that comparisons can be made – this direct mail is no different.”

Theoretically, BT would have access to such details through BT Openreach, its wholesale division, which is supposed to be run separately from the rest of the business as it is set up to facilitate LLU and nothing more. The letters to Tiscali customers seem to suggest otherwise.

In a surprising, but not unexpected turn of events, Tiscali have just told the world that they plan to sell off their broadband business outright to Vodafone, the world’s biggest mobile phone network.

Taking over Tiscali’s network would see Vodafone automatically leap into fourth place behind BT, Virgin Media and Carphone Warehouse, and become a triple-play provider, selling mobile and fixed line calls as well as broadband – no news yet as to whether the Tiscali TV IPTV package will be bundled as part of the deal or not. This will put the wind up mobile network rivals O2 and Orange, who would be competing for market space with Vodafone on multiple new fronts.

Last year it was revealed that Toucan – owned by Tiscali via Pipex – launched their own mobile phone service which piggybacked off of the T-Mobile network. It’s unclear as to what will happen to customers who signed up for contracts with Toucan, whether their contracts will remain, be taken over of Vodafone or T-Mobile or whether customers will be given a choice.

Earlier last month, a Carphone Warehouse bid was rejected by the Tiscali. As well as Toucan, Tiscali also own the Pipex and Nildram networks.

At last weeks ISPA awards ceremony, Eclipse Internet, the overall winners of the 2007 awards, scooped the titles of Best Business ISP and Best Business Email at the 2008 Internet Service Provider Awards (ISPAs) in London on Friday 14 March.

Mark Thomas, Head of Sales and Marketing at Eclipse had this to say: “Over the last 18 months we have complemented the business-grade broadband access we offer with a range of new services that help businesses to operate more efficiently, including online data back-up, hosting services, hosted applications and e-commerce solutions. We are delighted that our growing reputation as the ISP of choice for businesses has been recognised by the industry through the achievement of not one but two business ISPA awards.”

All of the Eclipse business broadband packages come with no download limits, and provide top download speeds of 8Mbps, with varying levels of IP addresses and webspace; this way smaller businesses who do not require as much space for hosting are not priced out of higher speeds and can enjoy the same level of service as larger outfits.

Eclipse aren’t intending on resting on their laurels. According to Thomas, the plan is to “keep investing in the type of services and the level of customer and technical support that businesses want.” As the commercial broadband market is continually consolidating, the business broadband sector is set to become another hotbed of competition. Tiscali are to branch into the market via Pipex, and both O2 and Sky are offering ADSL2+ services to companies via Be Broadband Pro and UK Online, up against ISP stalwarts Demon
and NamesCo.

The tenth ISPA event, now in its tenth year, recognises innovation and good workplace practice (which is why HMRC were awarded the ISPA equivalent of the Golden Raspberry) in the ISP sector.

It appears that O2 plan to match Tiscali’s new business SME packages that the Italian Stallion has just launched through Pipex. A new fixed-line broadband service will offer small and medium-sized businesses ADSL2+ download speeds, mirroring the Business Pro package available from O2 stablemates Be.

O2 also have plans to upgrade of its HSDPA based mobile broadband network to increase the maximum download speed to 10.2Mbps, beating mobile rival Vodafone’s 7.2Mbps service available with the popular Vodafone Stick.

Tiscali has axed the “king of the internet” David Hasselhoff ad campaigns, for its subsidiary Pipex, as prepares to rebrand the Pipex arm of its network to specifically target SME customers.

Tiscali have launched a range of ADSL2+ packages specifically for small businesses, and have also launched Pipex Business Portal, a one-stop resource page combining a Google-enhanced search engine, along with useful tools such as glossaries and databases of legal, marketing and HR contacts, a tax calculator and a currency converter.

Neal McCleave, the managing director of media services at Tiscali, said that the company has high hopes that the Pipex Portal will become the “the home page of many small businesses”.

A piece in the Financial Times quoted Tiscali overlord and chief executive Tommaso Pompei saying that Tiscali may well sell off the UK broadband arm of the business within the next two years.

Noting the consolidating climate of the UK broadband market, Pompei states that whilst Tiscali’s UK services are not up for grabs per se, he isnt ruling out a sale either. Predicting a second wave of consolidation within the marketplace, Pompei does not expect that Tiscali will be able to compete as aggressively in the market as they have been. “We do expect to be part of this process,” he told the FT. “This year for sure we’ll be 100% focused on our results, but we are prepared to react should the consolidation take place.”

BT, Orange and O2, all of whom already have or are planning to roll out IPTV would be interested in buying up, as would Carphone Warehouse for the same reason – CW is the only Top 6 ISP that does not have IPTV or has not made mention of setting up a service.

The FT interview also reveals that Tiscali has turned in its first net profit (approximately £15million) since it was founded in 1998 by entrepreneur Renato Soru. Tiscali began life as a fixed-line telephone service provider, becoming an ISP a year later, before going on a trans-continental shopping spree that saw Tiscali having significant brand presence in 15 European countries and South Africa.

If a sale goes ahead, Tiscali would be following in the footsteps of acquiree Pipex, who also opened their wallets for Bulldog and Toucan in 2006 before offering themselves to the highest bidder last year.

Not content with snapping up Pipex, ploughing ahead with LLU, and IPTV rollout, Tiscali are all set to ascend follow in the footsteps of Virgin Media, by becoming a ‘quad play’ provider, by using the mobile network previously ran by ISP Toucan, who Tiscali quietly acquired in the summer.

ToucanMobile, which currently piggybacks on T-Mobile’s network and has 7,000 customers, will be rebranded under the Tiscali name; proposed launch of the four-play platform is said to be somewhen in the last quarter of 2008. Mary Turner, Tiscali chief executive, said to The Telegraph: “The assessment is not if, it is who and when. The business case has already been approved by the board.”

This development will Tiscali in direct competition with Virgin and eventually Orange, when they get their IPTV service sorted, on all four fronts. Bundle providers such as BT and Sky who offer fixed line calls and digital TV services along with their broadband should also be worried – Tiscali have begun the new year with renewed optimism, a desire to win customers and shake up the broadband league table.

2007 has also seen much consolidation in the Broadband marketplace, with mergers and acquisitions seeing old players shake hands and donning new team colours.

At this stage in the financial year, there’s still everything to play for up until April 2008, with takeovers from Tiscali and Carphone Warehouse hopefully giving former stragglers Pipex and AOL a shot in the arm, and with Sky connecting customers at a phenomenal rate since the launch of their successful See Speak Surf squad formation. Up and coming ISP Be Broadband, has also been a keen player, thanks to partners O2, who have just launched their own broadband service using the Be network.

We’ve taken a quick look at the total take-up of the big six so far, and had a look a some of the more prominent ‘tier 2′ ISPs available.

UK Broadband Premiership – Q3 Figures 07/08 Season

BT Group (BT Broadband/PlusNet/Brightview) - 4.1 million

Virgin Media (including Virgin Media Cable and ADSL) - 3.3 million

Carphone Warehouse (TalkTalk/AOL UK) - 2.5 million

Tiscali (Tiscali Broadband/Pipex) - 2 million

Orange (Orange Broadband) - 1.6 million

Sky (Sky Broadband/UK Online) - 1 million

UK Broadband Division 1

O2 Telefónica - have launched O2 Broadband, using the Be Broadband ADSL2+ network. O2 Broadband comes at a discounted price to O2 Pay Monthly mobile customers who pay more than £30 a month.

NamesCo – one of the veterans of the ISP league, NamesCo may not hold as big a market share as the big hitters, but specialise more in hosting, and provision of webspace. NamesCo have generous packages for businesses and residential customers alike.

Eclipse Internet – with word of mouth spreading, Eclipse are slowly winning over customers with a solid broadband service that doesn’t rely on flashy bundle deals or expensive ad campaigns. Eclipse is owned and ran by KCOM, who handle all telecommunications within Hull and around the Kingston area.

Demon Internet – Like NamesCo, Demon have been doing the rounds since the early days of dial-up and are an established and trusted brand. Demon also specialise in hosting, providing webspace, unlimited emails, and static IP addresses with their home and business packages.

Pipex have relaunched their consumer broadband packages, in a bid to shake up their image following the very public Tiscali carve-up. The most significant aspect of this rebranding sees the ISP following AOL’s lead by introducing transparent data allowance limits, putting an end to the confusing and frustrating misuse of the word ‘unlimited’.

The three old Pipex packages, Mini, Midi, and Max are joined by a fourth – Pipex Pro – offering customers usage limits of 2GB, 10GB, 30GB and 100GB, all at the same maximum speeds of 8Mbps.

The Pipex Mini package, available for £9.99 a month comes with evening and weekend landline calls included, as well as a SpeedTouch 510 Ethernet modem. This same modem comes included with the Midi package, although Mini and Midi customers have the option to upgrade to the wireless SpeedTouch 585 router for £30 – this comes included with the Max and Pro packages as standard.

Pipex customers who are currently still signed up to the previous packages will continue to be billed until the end of their contract as per usual, although we assume that if you want to switch to one of the new packages you will be able to do so, with the time left on your existing contract added to the new one. Standard contract length for these new packages is 12 months.