The aggressive moves by Carphone Warehouse and Orange to offer free broadband have backfired, according to uSwitch, the price-comparison service, which has found that 2.8 million - or more than 40 per cent - of UK broadband customers are not satisfied with their supplier.
The broadband land-grab is set to intensify after BT said it would slash the cost of its wholesale broadband product from May next year. That will enable smaller broadband suppliers that lease capacity on BT's network to compete more effectively with larger companies that have invested millions of pounds installing equipment in BT's local exchanges.
BT said it would reduce the cost of leasing a line from the company by 9 per cent to £7.63 in May next year ahead of wider cuts in January 2008.
More than 1.5 million broadband customers have signed up this year. Yet despite a 17 per cent decline in prices as a result of competition among suppliers, customer satisfaction levels have gone into free fall.
Steve Weller at uSwitch said: "Customers are saying: 'You are giving us something for free, but we are paying for it.' They are starting to become more wary of 'free' offers. There is no point in a supplier giving you a car if it has no wheels."
Over the past year, uSwitch has surveyed 50,000 customers who have been with their supplier for at least three months. It found that, over the past six months, customer satisfaction scores dropped by 16 per cent, with the "free broadband" operators Carphone Warehouse and Orange the worst hit.
The two companies were bottom of the broadband pile in eight of the ten categories, with Carphone's TalkTalk last in the customer satisfaction stakes. One in three TalkTalk and Orange customers said they were not satisfied with the product.
Frustration has boiled over into other products. Only 53 per cent of TalkTalk's voice customers said they were happy with the service, compared to 63 per cent only six months ago. Mr Weller said that consumer trust in suppliers of voice and broadband products has hit an all-time low as a result.
Virgin.net, owned by NTL, came out top for customer satisfaction in the broadband market, and Telewest was considered best for customer service. The company will rebrand its operations under the Virgin Media banner and adopt the Telewest customer service model next year.Reuse content