American, British and other internet users are constantly bombarded with offers of low-priced internet connections.

Accessing the web via a telephone line – which may sound old-fashioned but is still used by millions – costs just a few dollars a month.

Yet people’s willingness to pay more than the absolute minimum needed for a basic web connection has surprised stock market investors. So much so that last year’s fears of an all-out price war that would erode profits – which hit cable and telecoms stocks – have all but disappeared.

Many investors now think data distribution via the internet is not the commodity it was feared to be. This switch has led to an increase of more than 50 per cent this year in the shares of Comcast Corp, the biggest US cable operator, and sharp rises in cable and telecoms stocks in the US, Europe and elsewhere.

“Providing broadband connections is the one element of communications services still seeing growth in the overall pie,” said Aryeh Bourkoff, analyst at UBS.

“The view that distribution services are a commodity is being reconsidered. With the growth in new uses of the internet, such as watching videos online, people are paying more for using the broadband pipe.”

Other factors that have contributed to the share rally include a switch of focus by investors from the potential for competition for subscribers to television, internet and phone services, and a realisation that there are other business lines.

For telecoms groups, the growth of mobile services – as well as cost savings after huge mergers in the US and a reduction of price falls for business customers – has underpinned share prices.

The potential for gains from mergers and acquisitions has fuelled shares of US satellite groups Echostar and DirecTV in particular. “Satellite TV investors are drunk with speculation about M&A,” said Craig Moffett, analyst at Sanford Bernstein. In addition, as cable, telecoms and satellite companies compete to provide customers with bundles of services, the reality has sunk in that it may take a long time for these companies really to battle head-to-head in large parts of the US.

“It’s a bit like Coke and Pepsi,” said Larry Haverty, portfolio manager at Gabelli, which owns shares in the cable and telecom sectors. “There is room for both.” Nevertheless, analysts and investors say they are concerned that the replacement of last year’s gloom by an unquestioning optimism could lead to some dents later.

For telecoms companies, the progress of the mergers will be closely watched, particularly following US government changes last week. Competition between cable and telecoms companies for both video and high-speed internet customers may come back into focus. Whether DirecTV and Echostar merge or are acquired could become clearer too.

“Last year everyone was a loser. Now everyone is a winner,” Mr Moffett said. “That positive perception is unlikely to last for all the sectors.”

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