The telecoms operator will launch a mass market television service next summer, combining pay-TV programming with more than 30 Freeview channels. BT unveiled the first of its pay-TV partners yesterday, with further deals to be announced later this month.

"They represent a cross-section of the kind of deals that we will be signing," said Dan Marks, chief executive of BTTV services. "What we are showing here is a music company, a broadcast company owning UK TV rights and a studio. We will be doing more deals in those categories. We will also be announcing the development of a whole series of interactive products."

Mr Marks, a former Universal Studios executive who is leading negotiations for BT's pay-TV deals, said the group was targeting the millions of homes in Britain that do not subscribe to pay-TV.

"We have very big ambitions ... Our view of the market is that everybody will have a digital TV and the question is how many will be using a subscription service. There are 78m TV sets in the UK, of which 11m are connected to a pay-TV service, which leaves a lot of TV sets," he said.

Mr Marks denied that the service was a direct challenge to BSkyB and the cable industry, despite telegraphing a statement of intent by signing three pay-TV content deals with more to come.

The BT service will be launched in the autumn and there will be no monthly subscription fee. Its premium content will be made available for a one-off charge either as a pay-per-view service, which is available at set times, or as an on-demand service that will be available at the touch of a button.

Customers will have to buy the set-top box that provides the service - for a price that BT has yet to disclose - which will include an 80Mb hard drive to save programmes and music. Mr Marks confirmed that the Paramount film deal will include recent releases, available at the same time as they appear on BSkyB's pay-per-view channels, as well as classic films.

"There is no mandatory subscription. If you just want to look at one item of content, you will be able to do that with a single payment," said Mr Marks.

Philips has been contracted to make the set-top box for the service, which will be attached to a BT phone line to deliver pay-TV content. The box will also carry a digital terrestrial tuner, giving homes access to Freeview.

The Freeview service is in 5m out of 24m homes with a TV, with 7.8m taking BSkyB and 3.3m receiving cable TV.

Source: http://business.guardian.co.uk/story/0,,1661623,00.html