Small internet service providers (ISPs) are to lobby MPs over BT's suggested alternative model for supplying wholesale broadband to them.

Increased competition among ISPs has helped reduce broadband costs from around £30 per month for 512Kbps connectivity to around £20 per month for 1Mbps lines.

But BT is under pressure from regulator Ofcom to introduce more options for ISPs and to bring the pricing of its two technologies, IPStream and DataStream, closer together.

In May BT brought in capacity-based charging (CBC), through which ISPs can choose to buy a fixed maximum network bandwidth. But smaller ISPs have said they do not have the scale to make the scheme work.

BT has now suggested usage-based charging (UBC). But ISPs have argued that this proposal could "reduce quality of service" or even put them out of business.

Under the proposed UBC model, ISPs would pay a set amount to BT for each user, plus monthly charges based on how much data their customers use.

BT last week put forward three possible price points: £0.33, £0.45 and £0.58 per kilobit per second per month. But ISPs claim that these are all far too expensive.

"Many small ISPs will go out of business and others like ourselves will have to hold on by our fingernails. BT's pricing is outrageous," said Robert Kemp, managing director of ISP KeConnect.

ISP trade association the United Kingdon Internet Federation (UKIF) claimed: "BT proposed that ISPs could now put up to 22,600 users onto a single [155MB] pipe that would usually take only 6,000 users."

BT said this would be possible because not everybody would stay online all the time. But UKIF said many small ISPs have businesses for customers who are always online.

UKIF now plans to meet MPs next week. The group wants CBC-priced charging modified and UBC pricing looked at again.

Fellow trade association the Internet Service Providers' Association is also calling on BT to revisit the proposed UBC pricing model.

BT said it was still in discussion with ISPs. A spokesman for the telco said that "nothing has been decided".