Tesco packages up broadband for £2.50

Tesco has launched an 'unlimited' broadband package that costs just £2.50 per month in the hope of wooing customers from more established internet service providers.

The deal, which launched on Tuesday, will cost £2.50 per month for the first year, after which it will increase to £6.50 per month. Phone line rental is not included in the deal — but is a pre-requisite of signing up — and adds £13.75 a month to the total bill. All Tesco broadband packages are provided on an "up to" 20Mbps basis.

The service is billed as 'unlimited' but users are subject to a fair usage policy that can come into effect if people regularly exceed 100GB of downloads per month.

Tesco, like some other ISPs, also uses traffic management — also known as traffic shaping or throttling — to manage network resources at peak times; meaning that high-demand, non-essential services, such as peer-to-peer (P2P) and online storage services could have their speed throttled.

The deal does not include any up-front set-up or equipment fees and also provides the option of allowing users to pay for the service using Tesco Clubcard points.

Rival low-cost ISP TalkTalk — which was rated worst in a customer complaints survey conducted by Ofcom in 2011 and was, in August 2011, fined £3m for incorrect customer billing — is currently offering a £3.25 per month for one year on an "up to" 24Mbps package. Obligatory phone line rental adds an extra £13.80 per month to that figure, making a monthly total of £17.05 for the first 12 months.

Fibre-based services, such as those offered by Virgin Media and BT, offer a potentially higher top-speed and get far closer to delivering the advertised speeds, an Ofcom report found in January.