THE Advertising Standards Authority (ASA) has upheld complaints against Talk Talk’s controversial “free broadband forever” campaign, the centrepiece of Carphone Warehouse’s assault on the high-speed internet market.

Talk Talk, Carphone’s fixed-line subsidiary, has enraged competitors such as BT and Tiscali by claiming it is offering free broadband. Customers have to sign up for a line-rental and calls package costing £20.99 a month, and pay a one-off connection fee of £29.99.

The widely publicised offer has attracted more than 300,000 customers in only three months.

In a rare setback for Carphone and its chief executive, Charles Dunstone, the ASA has ruled against the company.

Talk Talk will have to change its pricing to retain the ability to describe its broadband service as free.

It will be forced to trim the cost of its basic calls package by £1 a month, and drop — or at least rename — its connection fee. In future, customers will be charged £29.99 for the modem that most need to receive the 8 megabits-per-second connection.

These changes are likely to shave profit margins that are already wafer-thin. But Carphone is expected to argue that the overall impact will be modest. This is because most customers will still have to pay £29.99 at the outset — now described as the cost of the modem instead of a connection fee — and it expects many to agree to pay an additional £1 a month for free international calls. In other words, Talk Talk believes most customers will pay the same as before.

BT and other rivals are expected to claim victory when the ASA announces its ruling on Wednesday. It is understood that Talk Talk will also have to drop the “forever” claim from its marketing.

However, Dunstone already claims he has secured what is most important to him — the right to describe Talk Talk broadband as free. On his internet blog he has written: “We are delighted and relieved to report that common sense has prevailed and we will still be able to advertise the service as free.”

The competition in the fast-growing broadband market will intensify on Tuesday when BSkyB, the satellite broadcaster, enters the market. Sky is 38% owned by News Corporation, owner of The Sunday Times.

In a roll-out likely to cost more than £200m, Sky is expected to undercut the mainstream offerings of BT, Orange and AOL, and offer attractive deals to customers who also subscribe for its premium television packages or its Sky+ service.

City sources reckon that Sky remains the favourite to buy AOL’s UK business after Orange indicated it was unwilling to pay more than €500m (£345m).

The turmoil in the broadband market has encouraged Tiscali to appoint Goldman Sachs to pursue a merger with Video Networks, which operates the Homechoice television and broadband service in London.

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