BT today launched its Dotmusic on Demand music download site, Europe's first legal unlimited music download service supported by dozens of record labels.

The service, acquired from United Business Media around 18 months ago, is powered by digital distribution company OD2 and offers users access to more than 150,000 tracks.

"We are here to wholeheartedly support this launch," said Peter Jamieson, executive chairman of the BPI (British Phonographic Institute). "The year-on-year decline in music sales is around 10 percent with EMI's share price falling to below £1 per share for the first time ever.

"There are 15 million users of P2P networks with access to 900 million files at any one time. This is the first step in improving options for consumers, allowing them to enjoy music with a clear conscience while letting profits flow back to those who have invested time and money in the industry," said Jamieson. "Now there is a quality legal alternative."

The service will allow users to download tracks, read information about their favourite artists, view lists chosen by other people, and listen to radio stations without adverts and interruptions. The company is currently in talks with Sony, one of the few companies yet to agree to the service.

The problem for BT is encouraging people away from illegal 'free' services to its paid-for content.

"We are offering value-added content not available elsewhere and once people start using the service they will see its benefits," said Ben Drury, head of music at BT. "We are the first to offer unlimited downloads and we have pushed the price down, which is important."

BT is using the service as a way of encouraging more people to sign up to broadband, to reach its 2006 target of five million subscribers. But to achieve its aim, the telco first has to overcome two problems. To start with, the streaming service only runs at 32Kbps (kilobits per second), whereas other legal sites such as Pressplay and MusicMatch offer 128Kbps.

"We don’t class [32Kbps] as poor. We started off at 32Kbps so the service works for broadband and narrowband users alike, but a higher quality will be delivered at a later date," said Edward Pertwee, head of OD2.

But many broadband customers will be put off by the low quality service, perhaps BT would have been better off creating different services for both types of internet subscribers.

The second hurdle for the telco is that subscribers to NTL's and BT's own no-frills ADSL packages are limited to a maximum of 1GB of downloads per day — around 200 music tracks. Jupiter Research has predicted that tiered payment systems are a sign of things to come so heavy users could be expected to pay charges of £35 per month on top of BT's music service subscription costs.

Unless users want to sign up to the £9.99 per month unlimited service, they will have to pay a hefty 99p to £1.49 per track, which works out far more expensive than buying CDs or DVDs from high street stores.

However, BT's Drury said it is inevitable prices can and will come down.

The telco is offering a free three-day trial to users wanting to experience the service before they pay. People who sign up to the unlimited package before 30 April will receive 10 free downloads.