BT's Total Broadband offers a range of services

The telecoms giant said the new service would bring together several broadband products, including video on demand, internet calls and video phones.

The move follows broadband and phone service launches from Carphone Warehouse and mobile phone firm Orange.

Former BT mobile arm O2 has also joined in, announcing that it is to buy broadband firm Be for �50m.

BT is struggling to fend off growing competition for residential customers.

The former telecoms monopoly said earlier this month that it had lost more than half a million retail customers to rival operators.

'Better quality'

BT said its new service would offer faster download speeds of up to 8Mb, and free evening and weekend UK voice calls with BT's Broadband Talk service.

COMPARING BROADBAND COSTS Carphone Warehouse Talk3: �20.99 BT Total Broadband Option 3: �26.99 + �11 BT line rental NTL Telephone & Broadband: �32.99 Tiscali Broadband & Anytime Talk: �21.99 + �11 BT line rental Prices are for monthly standard rates, including some free landline phone calls and a minimum download speed of 2Mb The implications of Carphone Warehouse's move

But with a monthly charge of up to �26.99 a month plus line rental, BT Total Broadband remains more expensive than Carphone Warehouse's new broadband service, which retails at �20.99 including line rental.

However, Ian Livingston, BT Retail's chief executive, said his company's service would enable customers to do more than simply surf the internet.

"Our competitors don't actually offer high definition talk, which gives you a much better quality of sound when you chat with your friends over the internet," he told BBC Radio 4's Today Programme.

"They don't offer video telephony, they don't offer free wi-fi," he said.

Carphone Warehouse said earlier this month that it had signed up 340,000 customers to its new broadband offer, beating market expectations.