The telecoms giant will use the video-on-demand service to continue its aggressive acquisition of broadband customers.
Its entertainment division, launched at the end of last year, is developing the service, and is in talks with film companies, music studios and broadcasters including the BBC about using content.
Chief executive Andrew Burke told Marketing that BT was not attempting to be a broadcaster but was looking to provide "blockbuster content" via broadband. He added that, with 5m customers, Freeview could be an ideal distribution platform.
"It is not about competing with Sky, but there is an opportunity to give extra value to Freeview customers," he said. "It will be relatively easy for them to get on-demand content via set-top boxes."
BT hopes to launch the service this spring, with confirmation of content deals expected imminently. It is planning a supporting multimillion-pound ad drive.
Separately, cable rivals NTL and Telewest are also entering the on-demand market. Their long-awaited services are set to go live in the coming weeks.
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