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Only its premium subscribers, who currently pay £41 per month for access to the satellite broadcaster's entire programming, will get the free service, which will be delivered down a broadband Internet connection rather than via the dish.

Sky World, Sky Sports World and Sky Movies World subscribers will be able to view programmes on either a PC or through the Sky+ box on TV. The launch is expected to coincide with an upgrade to the Sky+ box, the company's combined decoder and PVR.

Initially, sports watchers will only be able to download highlights, interviews and news,

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not whole games or matches. Film fans will have a choice of 200 movies.

However, the Sky service will require programmes to be downloaded in advance, which could take around an hour for hour's worth of viewing. Sky's rivals, the soon-to-merge cable providers Telewest and NTL are beginning to introduce on-demand services which will not require prior downloading and as broadband speeds increase across the UK, the major ISPs can be expected to try and get in on the act. A smaller provider, HomeChoice, is already offering a combined Internet and IP-TV service across London.

Sky's service will also be limited to the provision of TV content; users will not be able to gain Internet access through the free broadband connection.

Nonetheless the company's record in driving new technologies and gaining subscribers is impressive and its competitors will be hard pushed to withstand its foray into Web-based broadcasting. High-street and online DVD hire shops will also be under threat.

Sky is hoping that the service will help to attract the additional two million subscribers that it hopes to have by 2010. It currently has around 7.7 million paying viewers.