As rumoured at the weekend, Carphone Warehouse has launched an internet package it claims will cut residential bills by 60 per cent.

Customers using the phone operators' TalkTalk service will be able to make unlimited local and national calls from their home phone for £20.99 a month.

The package includes a broadband internet connection and unlimited calls to 28 European countries.

By joining up to the service, TalkTalk customers will no longer have to pay BT's line rental charge, but will pay a one-off connection fee of £29.99.

Charles Dunstone, Carphone Warehouse chief executive said: "For too long the British public has been charged costly fees for high speed internet access, or has had to use slow internet connections".

The news is likely to spark a massive price war, with BT already announcing that customers who sign up to its new BT Fusion service will also get free broadband. BT Fusion is the company's mobile landline tariff that automatically detects when you are in your home or away and charges you accordingly.