ONdigital joins war for 'free' set-top boxes

The move will be seen as a direct challenge to rival digital provider BSkyB, which announced free boxes from the beginning of June. Previously ONdigital subscribers could only get free set-top boxes when they bought goods worth £199. Now they are free to anyone -- as long as you subscribe to ONdigital for a year.

ONdigital will also drop the £20 connection charge but monthly subscriptions will go up by £2 to £11.99 for all 17 channels - or £9.99 for six. There will be additional charges for Sky sports and movies. Although it is difficult to compare like for like, BSkyB offers around 20 channels for £7. According to a press release Sky will "relish" the prospect of consumers making a direct comparison between the services. "We are confident that viewers will see the advantages of SkyDigital which offers much more choice and better value, with over 150 channels," the statement read.

Both services will offer 40 percent telephone discounts for customers and, in a nod to the Internet, both will launch e-mail via the TV in the autumn. ONdigital customers will have Internet mail access through TV or PC, although the set-top box will not be able to open attachments. Sky will also offer e-mail and online shopping via the Open TV platform. Neither ONdigital nor SkyDigital plans to offer full Internet access. A Sky spokesman claimed this was due to broadcasting laws regulating the content on TV. "Clever broadcasters will come up with things like Open," he said. "We don't think Internet TV is going anywhere," he added.

The decision to drop charges will cost ONdigital an additional £200m over the next year but the company is hoping to attract two million subscribers within three years. Chief Executive of ONdigital Stephen Grabiner believes today's annoucement will mark "the beginning of the end of analogue TV."