Some of the biggest price comparison sites make a good living out of telling us that we’re almost all overpaying for our broadband services. They tell us broadband can be had for less than you already pay and that those paying more than the bare minimum are losing out. This is an increasingly common and often damaging mistake. It effectively assumes that broadband is no different from the other major utility services, such as Gas and Electric.

To view broadband purely based on price is to adopt an extremely narrow perspective that could do consumers more harm than good. Take electricity as an example, if you change supplier and spend less the product itself does not change, electricity is still electricity; it’s only ever either on or off, there’s no in-between.

By comparison broadband is a much more dynamic service where paying less can mean a significantly lower quality of service (slow speeds), support and features. It should come as no real surprise that many consumers are often forced to face such problems when the product they buy might not be giving the ISP enough revenue to adequately reinvest in their network.

Few situations illustrate this better than the impact online TV (BBC iPlayer etc.) and video (YouTube etc.) services are having upon some of the cheapest providers. Ofcom recently revealed that the proportion of people with an Internet connection who are watching TV programmes online more than doubled from 8 to 17% in twelve months.

Consumer demand for these services has risen dramatically and providers face real challenges in adapting to this. Some would rather impose greater restrictions upon their services than raise prices to help support network development. Others have opted to subsidise their broadband with new content and advertising opportunities, although these may not be able to fill all of the gaps, especially for expensive development of future fibre optic broadband products.

Failing to keep pace with modern demand is something no ISP can afford to do, especially in a market where, for many of the established players, new customer growth is either slowing or stalled. The Office of National Statistics recently revealed that new Internet connections for Q2-2008 actually decreased by 0.3%. ISPs are of course only too aware that any hint of price rises could also have an adverse affect upon customer churn.

Naturally service quality is not the only aspect that can be negatively impacted by budget level pricing. The cheapest usually prefer to concentrate solely on access, while other ISPs do more than offer access: rich e-mail, website hosting, newsgroups, static IP’s, well trained UK based customer support, bigger data usage allowances and higher quality connection hardware are just some of the benefits to be had from paying a little extra, it all depends upon your needs.

There are of course exceptions to every rule, with both O2 (Be Broadband) and Sky Broadband having achieved more success balancing service reliability with lower prices than most. Similarly, provided people accept that cheaper services are a gamble and avoid getting too frustrated when problems occur, those savings can be worth the risk.