Bulldog has been upbraided by the Advertising Standards Authority (ASA) for a "misleading" advert, which claimed customers could buy "up to 8 meg broadband for only £15.50 per month".
Competitor NTL complained that the Bulldog ad was misleading because, due to the technical limitations of high-speed broadband, the maximum 8Mbps speed would not be available to a "significant number of people".
The ASA upheld the complaint on Wednesday, saying that users' downstream broadband speeds would vary depending how far they were from an exchange, due to degradation of the signal.
"[NTL] said broadband speeds of 8 megabits per second (Mbps) or close to 8Mbps could be achieved only by people who lived within 3km of an exchange," said the ASA ruling. "Beyond that distance the achievable speed dropped rapidly because of unavoidable signal attenuation caused by line length and quality."
The 35 percent of people living further than 3.8km from an exchange would only be able to achieve maximum download speeds of 5Mbps, according to the ASA.
The ASA said that users were likely to be attracted to an 8Mbps service because of the uses high bandwidth could be put to, such as video streaming.
"We understood that users of an up-to 8Mbps service could take advantage of capabilities such as video streaming, file sharing and online gaming but that there would be a noticeable degradation of quality of the service when speeds fell below 6Mbps."
As service speeds were "significantly affected" by signal attenuation, a significant proportion of consumers could not achieve speeds close to the headline speed, said the ASA, which asked Bulldog to amend the ads.
"We asked Bulldog to indicate prominently in future ads (for example in the body copy of non-broadcast ads) that top speeds varied significantly, in particular because of a user's distance from their local exchange," said ASA.
However, some bloggers have taken exception to the ASA's reasoning. Keith McMahon, a communications blogger, said that the reasons given by the ASA for the ruling were "just plain wrong".
"[Signal attenuation] can be proportional to the distance from the exchange," said McMahon in his blog, but can also be due to BT cabling problems, outside of the control of ISPs.
"[Attenuation] can be due to poor cable quality and shielding, poor quality splicing or large internal exchange cabling, which are really OpenReach problems," said McMahon.