The move comes just one week after Telstra said it had cancelled its field test of the platform.
BT said on Wednesday it plans to offer a combination of over-the-air Freeview broadcast with a broadband video-on-demand subscription service. There were no plans to go into broadband TV broadcast because of the logistics involved.
"We want to deliver a seamless video-streaming service combined with digital terrestrial channels in a two-in-one box," said a BT spokesperson. "The combination of Microsoft technology with BT's 21st Century Network (21CN) will result in an exciting set of next-generation entertainment and communication services," he claimed.
BT's 21CN project will see its circuit-switched networks replaced with a single IP-based network. The launch of the IPTV service could encourage broadband take-up.
Broadband already has widespread availability in the UK, with BT reaching five million connections in March this year. By the summer of 2005 BT expects to have broadband-enabled enough local exchanges to give 99.6 percent of UK homes and businesses access to high-speed Internet access.
Renai LeMay contributed to this report.