Richard Ireland head of telecoms at Ernst & Young says: Price wars do not always

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Richard Ireland, head of telecoms at Ernst & Young, says: "Price wars do not always work in favour of the cheapest players. Convenience is a driver for bundled services."It remains to be seen whether the media moguls are right that consumers will want an all-in-one solution to their entertainment needs. The market was betting yesterday that some will soon go to the wall.Sky is going to come in later this year with its own broadband offering, though it will not compete just on price. For the 12 months to March, a loss of £100m looks more likely - a poor return on some tough talking. BT Retail is profitable - but the consumer broadband arm is not.If BT can't make money at this, can the smaller players? At the moment you can get broadband from about 200 suppliers. It first expected Bulldog to lose £30m a year while it established itself.

The threat to BT from Carphone is real, but mass migration is unlikely." Carphone shares put on 6.75p to 313.5p yesterday, though this seemed to be a function of market buzz rather than certainty that it will soon make more money.Cable & Wireless once promised to make a similar splash with Bulldog, its retail broadband company. In the end, the big players with the long-term plan won that battle.Citigroup told clients: "Making big announcements is one thing Executing a profitable plan is quite another. If Carphone offers free broadband as part of a bundle, it will create a real challenge to its competitors."The City is watching developments with interest So far, BT's profit forecasts haven't been downgraded. Some are reminded of the fuss Freeserve created when it first offered a "free" internet connection back when dot s were going "boom".

At the moment BT isn't allowed to bundle - it can't offer fixed line and broadband in one package. This could hamper its ability to respond competitively, but it seems likely that Ofcom will free it from restrictions as the market opens up.Carphone Warehouse is clearly targeting BT, having invested £60m to install its own broadband equipment in BT exchanges, giving it more control over the product it can offer.After the three-month "free" period, it is expected that Carphone will offer broadband for £4.99 a month.Blair Wadman at uSwitch says: "This move will dramatically change the telecommunications market. So far Carphone Warehouse has failed to make any serious inroads into the broadband market.... Public inertia when it comes to swapping internet provider is probably less than for, say, banking.But it still seems likely that a large part of the population will choose to stick with the working system they have rather than swapping to an untested unit for the sake of a £5-a-month saving.While talk of a price war grows, the question for the providers is how much they have to charge to make money and for how long they are prepared to offer loss leaders in the fight for market share.Analysts think telecoms companies need to take £25 a month from every customer with broadband and a home phone before profit can be contemplated.So far, Carphone Warehouse has only 75,000 broadband customers, compared to 2.3 million for BT and 2.8 million for NTL, but it is aiming to take a much larger share of the spoils.BT is still subject to price controls imposed by Ofcom, the regulator, a legacy from its days as a monopoly.