Mobile operator and ISP O2 UK ( Be Broadband ) has released its latest first quarter (Q1) results to the end of March 2011, which rather disturbingly showed a worrying decline in its broadband subscriber base from 671,600 in Q4-2010 and down to 669,200 now (-2,400).

The situation is serious for O2, which has seen a sharper than expected decline in the growth of its broadband subscriber base since the end of last year. For example, O2 gained +17,600 broadband customers in Q2-2010, then +13,800 in Q3-2010 and just +7,800 in Q4-2010 before today's fall.

Despite this the operator remains extremely well rated for the quality of its broadband internet access services and continues to receive awards. However, the problems may have more to do with their recent package and pricing changes.

It's perhaps no coincidence that the biggest slowdown began shortly after O2 launched their revised broadband packages (here), which did away with promises of "unlimited" downloading and confusingly began promoting "download as much as you want" alongside a Fair Usage Policy (FUP). Customers still have to click around a bit just to find the FUP.

On top of that O2 then caused a high level of consternation among its existing customers by raising their prices in February 2011 (this was on top of the recent VAT rise). However, those still on the older and more popular legacy home broadband packages (e.g. the ones offering "unlimited downloads") were hit by significantly higher rises (here).

Clearly O2's recent changes and price hikes, despite being done in the name of wider network investment, have gone down like a lead brick. The operator now faces a scramble to reverse its declining trend. At least it has some company, with both Orange and TalkTalk experiencing their own falls, albeit for different reasons; O2 still has good service quality on its side.

On the bright side they managed to grow their fixed phone line customer base, which is often bundled alongside the related broadband packages, from 86,700 at the end of last year to 116,100 now.