With effect from 1 April, BT will cut the cost of wholesale broadband access to internet service providers from £25 to £14.75.
E-minister Douglas Alexander said the price cuts would "be the catalyst for a major step change toward higher broadband use in the UK". David Edmonds, director general of Oftel, the government's telecoms watchdog, echoed Alexander's opinion and said the move "could drive mass take-up of high speed services".
Karen Thomson, chief executive of AOL UK said: "We are currently examining the details, but it is already clear that this takes us much closer to the dawn of Broadband Britain."
The Communications Managers' Association (CMA), a long-standing critic of BT's business practices, also welcomed the cuts.
"This is good news for business users. But it is a pity we could not get to this point sooner," a spokesman told CW360.com.
The CMA hopes BT's move will provide a much-needed kick start to the service provider industry.
However, analyst firm GartnerG2 warned that while the BT price cuts were a step in the right direction, they were not enough to create a mass market.
Gartner analyst Journi Forsman said: "There is a strong correlation between price and the take-up of Net access." He noted that while the UK is regarded as technically advanced in Europe, the slow take-up of broadband has put it "in the middle tier."
A monthly charge of £30 would still be too expensive to appeal to the majority of current home Internet users, Gartner warned.
The new pricing, it told CW360.com, will appeal to about a million UK households. This may not be enough to drive up investment from businesses anxious for broadband use to grow so they can use richer content, such as high-resolution photos and video streaming, on their Web sites.
Along with price, Gartner believes that any large-scale roll-out of broadband services would require BT to ramp-up its efforts on self-installation. Gartner also suggested that service providers would also need to provide rich content that makes the most of the extra speed and always-on features of ADSL.
While the cost of access has come down, Gartner's Forsman noted that user might not necessarily see the value of fast Internet access. "Users want convenience and something that saves them time and money. Carriers have made the mistake of pushing just the technology," he said.
Research for CW360.com conducted by ICM Research in early February showed that 12% of the UK public did not understand the concept of fast Internet access. And 72% out of the 1006 people asked had no plans whatsoever to buy broadband Internet services.