BSkyB today unveiled a £400 million plan to offer internet telephony and "free broadband" connections to its satellite television customers.

The move into the so-called "triple play" arena - combining TV, telephony and broadband - will see existing TV customers covered by Sky's internet network offered a 2Mb internet connection with a cap of 2Gb-worth of downloads a month, enough for about 500 music tracks.

Customers who choose this basic option - called Sky Broadband Base - will have to pay a £40 connection fee and an optional £50 for professional installation. But there will be no monthly fee.

The lion's share of the £40 fee effectively goes to BT Openreach, which charges Sky for switching customers from BT's network at "unbundled" BT exchanges where Sky has installed its own equipment.

Price comparison website uSwitch.com said the Sky offering "will herald the dawn of a new era and revolutionise the telecommunications market."

The City was less enthusiastic. Shares in the media company, which is 38 per cent owned by News Corporation, parent company of Times Online, fell 5 per cent or 27.5p at 513.5p, as it emerged costs linked to the long anticipated venture will be at the top end of analyst expectations.

"The market has clearly been taken aback by the scale of BSkyB's ambition," Numis analysts wrote in a note to clients.

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The move pits Sky against broadband market leaders BT, NTL and AOL. However, Sky's internet network currently only covers around 28 per cent of households, including London, Birmingham, Manchester, Edinburgh and Glasgow.

Only 1 million of Sky's 8 million customers are expected to be able to access the service when it goes live next month. Coverage is expected to reach 70 per cent of households by the end of next year.

Subscribers will be able to upgrade to a faster "Mid" 8Mb option for £5 a month and a "Max" 16Mb offer, with unlimited downloads, for £10 a month.

The Mid comes in at £20 for connection and £50 for installation. Both charges are scrapped for the Max option. To get the broadband deal customers must have one of Sky's television packages, which start at £15 a month on a 12-month contract.

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