If a deal is made, BT will be able to provide TV programmes, football matches and films on a delayed-time, on-demand basis to its broadband customers.
BT will launch a pilot programme by the end of 2004 to introduce the technology to its customers and gauge interest. The move is being driven by BT chairman and former BBC chief, Sir Christopher Bland.
BT is keen to stress that it is not intending to become a broadcaster and merely wants to attract extra customers by offering a range of programmes from other content providers.
The idea is that BT will be able to offer its subscribers "something different" and will compete effectively in the crowded broadband market.
A BT spokesman said: "We have made no secret of our desire to develop this technology. BT has been talking to a range of companies, although we are not in a position to confirm company names yet and will reveal more details at a later date."
Last week, BT announced pre-tax profit for the three months to September 30 rose to £549m from £528m a year earlier. Revenue rose 1% to £4.6bn, boosted by a 36% rise in revenues from areas such as broadband and business computing.
Last week, it was revealed that Sony and Walt Disney are to be allowed to launch films on demand to millions of NTL and Telewest cable subscribers after winning approval from the competition regulators. European regulators said video-on-demand services would help UK cable companies fight Sky's dominant position in the pay-TV market.
As such, an Ofcom telecoms review, which is currently in its second phase with a view to outlining BT's place within a converging communication and media sector, could turn out to be favourable for BT in the marketplace.
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