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Last Updated: Tuesday, 11 April 2006, 14:22 GMT 15:22 UK
Q&A: Carphone Warehouse's internet foray
Broadband internet user
Carphone Warehouse plans to tap into the broadband internet market

Carphone Warehouse has launched a high-speed broadband internet and landline phone call package which, it claims, will cut bills by 60%.

BBC News examines the phone retailer's plans, and asks what it will mean for competition in the UK's growing broadband market.

What is Carphone Warehouse offering?

From July, the company's TalkTalk phone service will offer subscribers a broadband internet connection with unlimited local, national and international calls to 28 countries.

Carphone Warehouse says its customers will be the first in the UK to receive their broadband internet connection for free, although the entire package - including calls and line rental - will cost 20.99 a month.

There will also be a one-off connection fee of 29.99.

How fast will it be?

The new Talk3 International plan will offer users a download speed of up to 8Mb (megabits per second). That's fast by current broadband standards.

Myself and my wife already have broadband and I wouldn't be without it
Andy, Falkirk

However, for the time being most customers are likely to experience download speeds closer to 2Mb.

The package also offers a monthly download limit of 40GB, which is more than enough for the average user.

Carphone Warehouse has set a target of covering about 70% of the UK population with the service by May 2007.

How do the company's prices compare with its rivals?

Carphone Warehouse says its service will seriously undercut equivalent offerings from rivals.

BT Broadband's Option 3 service currently offers a download speed of up to 8Mb and a usage limit of 20GB for 26.99 a month, plus 11 line rental.

Cable firm NTL offers a telephone and broadband service with a download speed of 2Mb, for 32.99.

Could Carphone Warehouse's package mark the start of a price war?

Quite possibly.

Carphone Warehouse Talk3: 20.99
BT Option 3: 26.99 + 11 BT line rental
NTL Telephone & Broadband: 32.99
Tiscali Broadband & Anytime Talk: 21.99 + 11 BT line rental

Prices are for monthly standard rates, including some free landline phone calls and a minimum download speed of 2Mb

Analysts have described the move as a "land grab" on the UK's broadband market, designed to hit rivals BT and NTL.

"Carphone Warehouse is positioned well to compete on price with BT. However, it is just one of many competitors to BT with a strong hand to play," says Richard Ireland, head of telecoms at accountants Ernst & Young.

"Price wars do not always work in favour of the cheapest players," he adds.

Meanwhile, Carphone Warehouse will itself feel the heat when satellite broadcaster BSkyB enters the broadband market later this year.

What's behind this foray into broadband?

Chief executive Charles Dunstone says that "for too long the British public has been charged costly fees for high speed internet access, or has had to use slow internet connections."

Carphone Warehouse is keen to expand its TalkTalk service and wants to become former monopoly BT's main rival in the UK landline market.

The company currently has 2.6 million residential voice customers through its TalkTalk service and is aiming for 3.5 million by March 2009, with more than 50% of them also using it for broadband access.

It is currently installing its own equipment in 1,000 telephone exchanges across the UK - a process known as Local Loop Unbundling - to cut its dependence on BT.

Will Carphone Warehouse's new service breathe new momentum into the UK's broadband market?

Most analysts believe so.

Broadband now accounts for 64% of all internet connections in the UK, according to the latest data from the Office for National Statistics.

But figures also show that by far the greatest number of connections to broadband are from existing customers switching from slower dial-up services.

Carphone Warehouse will be hoping that its new service will attract customers who currently have no broadband internet access from their homes.

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