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According to Ofcom's market report for 2005, 90 per cent of broadband users have never heard of contention ratios and 70 per cent believed their service to be uncapped, despite the fact that both are almost ubiquitous.

The regulator acknowledges that at present neither has a significant affect on the 'user experience', except for a small minority of users who download large amounts of data, largely because service providers have gradually increased network capacity to cope with growing demand for bandwidth.

But Ofcom believes that both restrictions could have a significant impact as consumers start to use high-speed connections for services such as streaming TV that require large volumes of data at a constant delivery rate.

Concerns aside, the Ofcom report welcomed much greater value for money across the telecommunications industry.

'In many sectors, increased usage or signing up for new or more advanced services would inevitably lead to increased

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costs to the consumer,' Ofcom said. 'However, in the communications sector, a combination of new technology, intense competition between providers and regulatory intervention, where required, has led to significant reductions in retail prices.'

Between 2004 and 2005 typical household telecoms costs fell by 5 per cent (from £80/month to £76/month) while the cost of a broadband connection faster than 1Mbit/s fell by 60 per cent (from around £41/month to around £16/month). Without continuing downward pressure on retail prices, typical household costs for telecoms services, based on 2001 prices, would have been more than 50 per cent higher in 2005 than actually was the case.

Falling prices helped to stimulate a 63 per cent increase in households with broadband connections to nine million. As a result, the Internet is playing an increasing role in the lives of young Britons, at the expense of television. On average 16-24 year-olds watch television for one hour less per day than the average viewer, while more than 70 per cent of the age-group use social networking websites and are almost three times as likely to have contributed to a blog or message board.

'Our research reveals dramatic and accelerating changes across all communications industries,' said Ofcom chief operating officer Ed Richards. 'The sector is being transformed by greater competition, falling prices and the erosion of traditional revenues and audiences. A new generation of consumers is emerging for whom online is the lead medium and convergence is instinctive.'