From tomorrow homes across much of the UK will for the first time be able to watch “on-demand” television supplied through their telephone line, subscription-free. BT is launching its Vision service to customers with a broadband internet connection: what’s also new is that the pictures can be viewed on regular domestic television sets, whereas broadband television has usually meant watching the picture on a computer.

After subscribing to BT’s broadband service for £17.99 a month, viewers will be able to pay as they view and choose from an à la carte menu of films such as Reservoir Dogs, Premiership football, children’s shows from the Disney stable, plus a television back catalogue that includes drama such as Shameless and documentaries such as Jamie’s School Dinners. Free content is likely to mean news bulletins and “taster” compilations.

The real bait, however, is that the probable installation price of £100 buys you a Philips PVR, a personal video recorder containing two Freeview tuners plus a hard drive for recording or time-shifting live programmes. BT claims that 40,000 customers have so far pre-registered and warns that others are unlikely to receive Vision before the new year.

All this is the latest salvo in a commercial battle that is transforming the way we watch television. The tradition of by-appointment live viewing (Spooks at 9pm Mondays, say) is giving way to the “martini media” notion of deciding what we want, when we want it, driven by the growth of on-demand services.

Peter Fincham, controller of BBC1, makes a comparison with fast food. “Video-on-demand is to linear (live) viewing what the microwave is to conventional cooking. Quicker, more convenient, more attuned to a busy modern life.”

What has also been dramatically signalled is the beginning of the end for the annual TV licence fee. A spokesman for the Television Licensing Authority, which administers the fee, told The Sunday Times last week: “If your TV is not used to receive live TV programme services you do not need a licence.”

This unprecedented statement clarifies the previously confused rules about whether a licence is needed for viewing television on computers and a wide range of mobile devices. Catch-up services and any television delivered on demand now clearly fall beyond the grip of the licence.

A report published last month by Continental Research revealed that about 5% of UK viewers have used video-on-demand services and almost 30% said they were considering doing so in the near future.

Television-on-demand is already delivered to 3.5m UK homes by NTL cable and the innovative HomeChoice television service, which is supplied in its entirety over a broadband connection. HomeChoice is currently available only in London and Stevenage but was recently acquired by Tiscali, the internet service provider, which plans to roll out the subscription service nationally.

Rapid advances in technology are seeing an explosion in catch-up services — repeats of the week’s most popular shows without needing to record them in advance. Catch-up packages at NTL and HomeChoice include up to 160 hours of shows such as Planet Earth and Holby City, selected by the broadcasters. BT Vision has so far signed up only Channel 4’s catch-up TV service — 50 hours’ worth — but says it “hopes to get the BBC and the others soon”.

So what are the costs? Existing on-demand services charge up to £4 a pop for pay-per-view movies, plus a decent smattering of premium drama and recent comedy, such as The Thick of It, for no extra cost. Some include music videos or concerts and BT will offer 242 “near-live” Premiership games from the 2007/8 season, made available on-demand after 10pm on match days.

BT will reveal its tariff tomorrow, but the advantage of subscribing to its broadband internet service is that you pay no further monthly charge. BT insists on an engineer installing the set-top box and on ensuring your phone line can deliver a strong signal. It claims that a broadband speed of 2Mbps is fast enough for viewing TV, even when the kids are playing online games on their computers.

Ian Fogg at JupiterResearch warns that “the proof of the pudding will come once there are tens of thousands of Vision customers all viewing on a busy Friday night”.

The on-demand content provided by BT Vision will be better in quality than standard Freeview broadcasts, because it uses the newer Mpeg4 video standard — as does HomeChoice. Where the BT broadband link also excels over Freeview is in potentially handling surround sound for on-demand content.

The internet is a already threat to conventional television because one third of web surfers say they watch less television generally. But broadband is reshaping viewing habits in other ways, too.

Why the writing is on the wall for the TV licence

The pace of change is threatening to make the historic television licence fee redundant, or at least unenforceable. Viewers currently need a licence only to view live broadcasts but not for catch-up or on-demand TV services, or those downloaded over the internet, regardless of how they are viewed.

Much of the output offered by BT’s new Vision service, and its competitors, can now be viewed without a licence. As viewers increasingly choose to watch on-demand, the licence fee will not apply.

“If your TV is not used to receive live TV programme services you do not need a licence,” said a spokesman for the Television Licensing Authority (TVLA). “But you would have to demonstrate that you were not using it to view programmes in this way. Each case is judged on its merits, but not having an aerial and not having the channels tuned in would help your case, for example.

“If someone with BT Vision could demonstrate they were not using it for live programmes then they would not need a licence.”

Dave Chilvers, chairman of Continental Research, a media analyst, said: Watching TV over the internet is on the rise and there will be a migration to the personal computer as the home’s main entertainment hub. With companies like BT and Channel 4 entering the market comes the question: if you don’t have a conventional TV, why should you pay the licence fee?”

Even if you did break the law by watching live television over the internet, it’s hard to see how the TVLA could police this. Detector vans are unable to track internet data — though the TVLA may be able to force your internet service provider to squeal on you.

Emma Smith