BT is struggling to compete with other service providers on the price of broadband.
BT provides most of the fat pipes that carry broadband
According to research from Enders Analysis BT is rapidly losing broadband customers to rivals such as Wanadoo and Tiscali.
It has led to speculation that BT could announce price drops imminently.
BT's overall broadband investment remains good as its wholesale unit continues to supply the majority of connections.
Victim of success
But the story for its customer division is not so bright.
Two years ago BT Retail had a commanding 58% of all broadband customers in the UK. That has fallen to 42% this year.
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"That is a big drop and it will continue to fall," said Dr Alice Enders, head of research at Enders Analysis.
"Almost everything on the market is priced at less than BT," she added.
One of the main reasons that BT is not competing with its rivals on the price of its broadband packages is because it has become a victim of its own success.
"BT has a dominant market share according to Ofcom so cannot engage in so-called predatory pricing. It is shackled on price," explained Dr Enders.
As Ofcom considers the way forward for broadband, BT has offered a trade-off - accepting stronger regulation in areas such as opening up its network to other operators in return for lighter regulation on price.
Enders Analysis research has found that customers who initially chose BT because it was a recognised brand are now deserting the telco for cheaper alternatives.
It also found that BT is attracting a smaller share of new subscribers than it did two years ago.
"Its market share remains at risk and everyone is out-manoeuvring it on price but the market will eventually move away from this fixation," said Dr Enders.
When other services, such as broadband telephony and video-on-demand, become of more interest to consumers, price will become less of a factor and BT will be in a great position to capitalise on the innovative services it has begun to offer broadband customers.
"It has good products and ideas but these are not headline grabbers like price," said Ms Enders.
For other operators, attracting subscribers comes at its own cost.
"At the moment we are in a land-grab situation. No-one is terribly happy with the cut-throat competition and no-one is making a pot of gold out of it," said Dr Enders.
In separate news, BT has announced that it is to take action against a scam hitting dial-up internet users.
Illicit software applications that are downloaded onto computers to provide access to pay-per-view sites are running up large bills for users.
The rogue diallers connect to premium-rate telephone lines without users' knowledge.
BT Retail will block calls to premium rate numbers allegedly associated with rogue diallers.
"We have decided that BT does not want a penny of the money generated by these problems," said Gavin Patterson, BT group managing director.
"We have decided to act on this issue, which is causing genuine concern to us and thousands of our customers," he said in a statement.