US internet company AltaVista is to increase the price of its headline-grabbing cheap UK internet service which is due to be launched at the end of this month.

The company says research shows that customers would rather pay more for better quality.

The search engine operator was praised by Prime Minister Tony Blair when it promised in March to give Britons unlimited access to the internet for �30-50 ($45-$75) in the first year and �10-20 in subsequent years.

The move was expected to ignite the biggest shake-up in the industry seen since the launch of Freeserve in mid-1998 and revolutionise internet usage in the UK.

However, the company now says that following consumer research and a recent Oftel ruling on unmetered access, it plans to charge just under �60 a year for the service.

A spokeswoman said research commissioned by the company showed people would rather pay more than put up with the marketing e-mails and automatic disconnection AltaVista had proposed.

"We've taken out some of the revenue streams but had to put up the costs," she said.

Oftel ruling

AltaVista also said the ruling last week by telecoms regulator Oftel that BT should allow other operators to provide their own unmetered internet products had changed the pricing structure in the industry.

The ruling means they will be able to buy circuit capacity wholesale from BT.

Unmetered deals will no longer come with strings that force people to use BT as their telecoms provider, for example, or make a certain value of voice calls a month.

Price may come down

The spokeswoman for AltaVista said the higher prices were based on connecting only 10 people to each BT circuit, a low number that will provide a better quality service.

If, when BT finalised prices for the circuits, the cost per head comes to less than AltaVista's annual charge, the ISP will cut its price to match it and refund people who have already paid. BT has indicated it will charge �400 to �800 per circuit, she said.

AltaVista plans to limit the number of subscribers to its new service, signing up a maximum of 90,000 in the first month.

Many other unlimited access deals, either free or for very low monthly fees, have been launched in the wake of the AltaVista announcement in March.