O2 offers free broadband to counter Orange's iPhone threat

O2 is offering its iPhone customers free home broadband as an incentive to keep them from defecting to rival network Orange.

After two years of network exclusivity, the iPhone is officially available on Orange as of today, and O2 has moved quickly to fend off the competition.

The new Total Connectivity package takes O2's previously unloved and overpriced 3G data tethering and makes it a far more enticing proposition.

For a monthly fee of 9.79, subscribers get tethering with up to 3GB of data, and O2 throws in its 8Mbps standard Home Broadband package for nothing.

Alternatively, should customers want a faster broadband service, O2 will discount the value of the standard deal (7.34 per month) from the cost.

The move appears to be aimed at Orange as O2's two-year iPhone exclusivity deal with Apple comes to an end. Orange is offering 18 or 24 month deals for 29.36 per month, with a free iPhone 3G or an iPhone 3GS for as little as 125 (on the 24 month deal). However, the deal restricts you to 150 free minutes and 250 texts per month.

Some of Orange's deals are all but identical to O2's. A 24 month deal on Orange with 1,200 free minutes and 500 texts will set you back 44.04 a month, with the iPhone 3GS coming free. The same deal on O2 is just one penny more.

But while O2's unlimited mobile internet truly is unlimited, Orange has specified a fair use limit of 750MB a month over fears of a data use free-for-all.

While O2's home broadband incentive shows how seriously it is taking the threat from Orange, it has also gone on record saying it welcomes the competition even offering to unlock its customers' iPhones for use on other networks.

"Once the iPhone becomes available on other UK networks, we will allow O2 customers to unlock their iPhones," O2 chief executive Matthew Key said yesterday, "although of course they will still need to honour any outstanding contract period they have."

They will also have to pay O2 customer services a fee of 14.97.

The offer of free home broadband with O2's Internet Tethering Bolt On runs until 31 December.