Half of all households in Britain now have a connection to the internet, according to figures from telecoms regulator Oftel yesterday.

The study found that 12.5m British homes are online, with 750,000 connecting to the world wide web in the last three months alone.

Efforts to promote broadband - which speeds up connection times dramatically by giving customers a permanent link to the web - also appear to be paying off.

The telecoms regulator estimates that about one million dial-up customers are likely to upgrade to broadband within the next year, which could provide a boost for e-commerce companies.

Oftel also compared prices for internet services across Europe and found that the cost of both dial-up and broadband connections were cheaper in Britain than in other countries.

David Edmonds, director general of telecommunica tions, said: "Growth in internet access, coupled with some of the lowest prices in Europe, is excellent news.

"Oftel's policy of creating competitive markets for internet access continues to drive the growth in Internet access."

The regulator has waged a lengthy campaign to persuade BT to lower wholesale prices it charges internet service providers for providing connections essential to the provision of broadband services.