Oftel carried out a benchmarking survey of prices for dial-up, DSL and cable modem Internet services in the US, France, Germany, Sweden and the UK.
It found that the UK compared favourably for residential dial-up Internet services, consumers benefiting from good deals for both peak and off-peak use, including a wide range of unmetered dial-up packages. But it found that DSL services in the UK are more expensive than elsewhere.
Nevertheless, Oftel reported, demand is growing. In the last 12 months the number of cable modem users has risen by more than 500%, and the number of DSL users by more than 400%.
Recent falls in the cost of cable modems mean that the UK emerges as one of the cheapest countries surveyed for residential broadband packages, with only Sweden being cheaper.
But cable modem services are available to less than 40% of the population, compared to the 60% who have access to DSL services.
"For business customers, unmetered narrowband packages for UK businesses compare well with other countries surveyed," reported Oftel.
The survey noted: "Prices for DSL and cable modem services for business are broadly in line with prices elsewhere but metered dial-up prices are higher".
David Edmonds, director general of telecommunications at Oftel, said: "We are now seeing active competition between cable modems and DSL which should help drive down DSL prices."
The benchmarking report found that the average cost of DSL in the UK was £49 a month, compared to £35 in France, £30 in Germany, £28 in the US and £23 in Sweden.
With cable modem prices included in the figures, the average cost of broadband in the UK is £26 per month. Sweden is cheapest at £19 a month, but the UK comes in cheaper than the US at £28, Germany at £29 and France at £34.
Last week IT industry leaders expressed disappointment that the chancellor, Gordon Brown, had refused to accept calls for tax incentives to boost the UK's broadband infrastructure.
The Government accepted 14 out of the 15 measures proposed by the Broadband Stakeholders Group (BSG) when it published its UK Online strategy document, but spurned calls for tax incentives.
David Harrington, director general of the Communications Management Association, said: "It is a great opportunity missed. There should be tax credits for suppliers and tax relief for users to make the outlay on broadband tax-deductible.
If the Treasury is worried about a return on its 'investment' it needs to look to the South Korean example, where comprehensive government encouragement saw a return in 16 months."