People who have so far resisted high-speed net services could be tempted by broadband for under £10 a month from UK Online.
232 telephone exchanges have been upgraded for the service
The firm has launched a service for £9.99, available to the four million homes that have access to its network.
At 512 kilobits per second, it is at the slower end of the broadband scale but the firm is hoping it will attract a new set of high-speed surfers.
BT's cheapest broadband offering is £17.99, with no set up fee.
Broadband is a buyer's market at the moment as service providers rapidly reduce prices and offer free speed increases.
UK Online is also reducing the cost of its 8Mb (megabit per second) service to £29.99.
It was the first UK service provider to launch an 8Mb service and both this and its cut-price offering are possible because of local loop unbundling.
This is a process by which other operators can put their own equipment in BT's telephone exchanges, allowing them more freedom in the type and price of service they offer.
"Local loop unbundling has meant that we could offer the fastest broadband in November and now we can offer the cheapest," said Chris Stening, general manager of UK Online.
Other internet service providers currently dependent on BT's network are mulling opening up their own networks.
There are concerns that local loop unbundling will lead to operators cherry-picking profitable areas such as those in towns and cities, leaving more rural places with slower, more expensive broadband.
"I expect that we will see more offers like that of UK Online and the rollout of unbundled services will mirror the initial rollout of broadband," said Ian Fogg, an analyst with Jupiter Research.
"This could lead to a polarisation between urban and non-urban areas in terms of speed, price and the type of service being offered," he said.
UK Online is considering extending its network, which is spread across urban areas in the UK such as London, Birmingham and Glasgow, and has a pre-registration scheme, which allows people to request an upgrade to their local exchange.
It is also looking at launching new services, such as IP television.
Its £9.99 broadband service will have no monthly download caps but will require users to sign up to a 12-month contract.
There is also a £25 one-off set-up fee.