The battle for broadband customers looks set to warm up after it emerged the Post Office could be the next company to join the market.
The group already offers customers a fixed-line telephone service - HomePhone - in direct competition with BT and is now looking at ways to enter the high-speed internet access market.
A spokeswoman for the Post Office said yesterday: "We are looking to expand our telephony services in the future and broadband is one of the ways we wish to do that. We are currently examining ways we can enter the market."
She added any inquiries were at an early stage and no decisions had yet been made.
The battle for broadband customers has intensified in recent months.
Television group BSkyB launched its own high-speed internet product last month and in April, Carphone Ware-house entered the fray by offering its "free" broadband service TalkTalk as part of a bundle with line calls and rental.
Other companies were forced to slash their prices to stay competitive.
The Post Office already offers the cheapest fixed-line rental on the high street with call charges 20 per cent lower than BT. It launched Home-Phone, using the network of Cable & Wireless, in January last year and is now signing up 5,000 customers a day.
Broadband is increasingly being seen as an essential household product in the UK.
Earlier this week, a survey revealed the average UK broadband user spends around 50 days a year online.
Surfing the net is the most popular use for the high-speed internet connection. But the flexibility of broadband means users increasingly use it for chores such as banking and shopping, according to price comparison service uSwitch.
Meanwhile, Italian internet firm Tiscali is expected to merge its UK operations with privately owned HomeChoice, which offers TV, broadband and telephone services.
The move comes as competition heats up in the UK broadband sector, with companies like BT, NTL and BSkyB vying for dominance by offering a bundle of services, putting standalone internet firms like Tiscali under pressure.
Sources said that a merger of the two companies, which would involve HomeChoice's parent company Video Networks receiving Tiscali shares, may happen quite rapidly.
"Tiscali UK is very vulnerable because it doesn't have anything other than broad-band. Unless they have a triple-play operation it's hard to see how they'd survive," one added.
Tiscali has a ten per cent market share in the UK, behind BT, NTL and AOL.
The UK business made up 44 per cent of Tiscali's revenues and nearly half its earnings before interest, tax, depreciation and amortisation last year.
HomeChoice, controlled by former Microsoft employee Chris Larson, was among the first companies to offer TV over a broadband connection (IPTV), but it has struggled to reach critical mass. Its service is available to about 2.4 million households, mostly in London, but it had only 45,000 subscribers as of June.
"They started a marketing push that coincided with a broadband meltdown, with Sky, Orange and Carphone Warehouse entering the sector," said Daiwa Securities telecom analyst James Enck. "It's very difficult to build a brand and get any traction in this environment."
Mr Enck said many analysts expected Tiscali to eventually sell off its operations outside of Italy, but noted that could still happen after the deal with HomeChoice.
"The fact they're actually making acquisitions is surprising," he said. "People thought it would be sold to Vodafone or Orange or Telefonica."
Tiscali and Video Networks declined to comment.