Sky entered the 'free broadband' war this morning, promising reduced bills for its pay-TV customers and a sunny outlook for investors.

Sky Broadband's 'Base' package will be offered free to Sky's eight million existing digital TV subscribers, regardless of the TV package to which they subscribe.

The broadcaster claims that the deal could cut some household bills by as much as £300 a year. 

The free product has download speeds of up to 2Mbps and 2GB monthly usage. Sky's premium products, Sky Broadband Mid and Max, have download speeds of 8Mbps and 16MB respectively for an extra £5 or £10 per month.

All customers also get a free wireless router, a year's free McAfee Security and the option of professional home installation. 

In addition, the package includes Sky Talk, which allows unlimited UK landline calls for £5 per month. 

However, in order to receive Sky Broadband, customers need to be covered by Sky's broadband network.

The network currently covers 28 per cent of UK households, including London, Birmingham, Manchester, Edinburgh and Glasgow. It is expected to cover 70 per cent by the end of 2007.

Unveiling the package at this morning's event for analysts and investors, Sky chief executive James Murdoch said: "Sky Broadband is a compelling product which rewards our customers with a quality service offering flexibility and great value."

Murdoch embraced the opportunities arising from local loop unbundling. Sky, it seems, wants to dominate every corner of the communications media.

"Sky is ideally equipped to enter the large and growing markets of broadband and telephony. By pushing the boundaries of the home entertainment market, we will help our customers realise the full potential from technological convergence," he said.