'Free' service set to drive down price of high speed internet access

Carphone Warehouse is expected to announce tomorrow that it will offer free broadband internet access to customers who pay for its Talk Talk fixed line telephone service.

Industry rumours suggest that Carphone Warehouse will set the monthly cost of a phone line and broadband account at less than £10.

The most widely quoted rumours suggest a free broadband connection for new Talk Talk users for the first three months, with a £4.99 charge thereafter.

This would compare very favourably with the standard broadband rate of approximately £14.99 a month, and is likely to spark a price war among broadband vendors.

Competition in the broadband market had previously come from other companies reselling the package offered by BT.

However, Carphone Warehouse is expected to invest £60m in installing its own equipment in 1,000 BT exchanges in order to offer its own service direct to 70 per cent of the UK population.

The company refused to comment on the speculation ahead of a trading statement expected tomorrow.

"There are a lot of rumours flying about but there's no official announcement yet," a spokeswoman for Carphone Warehouse said.

The company acquired One.Tel and Tele2 in December last year, swelling its number of Talk Talk phone customers to 2.4 million.