Make no mistake: BT’s decision to drop Phorm is a cataclysmic blow for the advertising firm (as reflected by the sharp drop in its share price this morning). In one stroke, it’s lost the UK’s single biggest ISP and its closest ally.

Phorm’s three UK ISP partners – BT, Virgin Media and TalkTalk – have been playing a cowardly game of chicken over the past 18 months. The service has attracted so much negative publicity that all three have sat on the fence, hoping that one of the others would be brave enough to roll out the service, so they could judge just how much of a PR disaster it would be.

BT was the only one of the three to have completed a full public trial of Webwise and has long been the favourite to deploy first. Now, it’s decided it’s perfectly comfortable collecting splinters on the fence. “The interest-based advertising market is extremely dynamic and we intend to monitor Phorm’s progress with other ISPs and with Webwise Discover before finalising our plans,” the company claims.

The harsh truth is Phorm has made startlingly little progress with either of the other ISPs. Virgin has been repeatedly forced to deny stories that its interest in Phorm was waning over the past couple of months, while its customer service team has (unofficially, according to Virgin) been sending out letters reassuring worried customers that it has no plans to roll out Phorm.

TalkTalk, meanwhile, has just bought Tiscali and its associated ISPs, and faces months of complicated integration work ahead. A distraction like Phorm is the last thing it needs. Neither Virgin or TalkTalk have even tested Webwise with their customers, let alone committed to a rollout.

BT has also undermined Phorm’s chief selling point: that it’s a money-spinner for ISPs. “Given our public commitment to developing next-generation broadband and television services in the UK we have decided to weigh up the balance of resources devoted to other opportunities,” BT claims, suggesting that it views Phorm as a cost rather than a pot of gold. So much for the service that was going to help boost the finances of ISPs.

In short, despite a public relations onslaught and concerted attempts to convince everyone from ISPs, to politicians, to advertisers about the merits of its technology, Phorm seems no closer to rollout in the UK than it was 18 months ago, when it first arrived on these shores.  In fact, its chances of success have never looked weaker.