AOL UK has slashed the cost of it broadband service in a direct challenge to BT's no frills BT Broadband service.

The cost of its service will fall from a whopping £34.99 a month to £27.99 a month with a one-off charge of £85 for the modem pack. Those who originally signed up to the £34.99 package will be given the opportunity to switch to the lower-priced tariff.

AOL UK CEO Karen Thomson denied the decision to cut the price broadly in line with its major competitors was a climb down, insisting instead that the ISP was merely "taking price out of the equation".

However, the timing of the price cut - just as BT is in the middle of spending £33m plugging broadband - shows how companies such as AOL UK are prepared to hijack BT's ad spend and punt their own services.

It's also a signal that the race for mass-market broadband adoption is well under way with ISPs doing everything they can to attract large numbers of customers.

AOL UK's new package costs £27.99 a month and includes email, free customers support and broadband content. BT Broadband - the no frills, no email, no content service - costs from £27 a month.

Separately, AOL also announced that it now has two million customers in the UK, doubling its member base in less than two years. ®

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