The government has renewed its threat to introduce laws to force ISPs to control online illegal downloading and file-sharing of music and films.
But the Internet Service Providers' Association (ISPA) has hit back, warning the government that legislation could result "in cumbersome regulation".
Malcolm Wicks, business, enterprise and regulatory reform minister, told Parliament government had to recognise that its hopes for a "voluntary agreement" with ISPs to regulate illegal file trading online "might be too ambitious".
He said in a written answer to MPs: "It would be very disappointing if we have to legislate — but nobody should doubt our willingness to do so if an agreement cannot be reached."
The government previously said it would prefer for ISPs to take voluntary action but warned it would turn to statutory regulation if a solution was not found by April 2009.
Wicks said the government still preferred a voluntary solution and that this approach had been informed by meetings with ISPs, intellectual property holders and consumer groups.
But the ISPA replied saying there are numerous obstacles to a legislative response and as "mere conduits of information, ISPs bear no legal liability for content on their servers".
An ISPA spokesman said: "It is ISPA's preference to agree a non-legislative solution which carefully considers the complex legal framework — as recognised by the Culture Secretary — in which ISPs operate. This includes the Electronic Commerce Directive Regulations 2002 and the Data Protection Act 1998 which can limit what action ISPs can lawfully take against users' private communications.
"These limitations are balanced against past experience of legislation in this area which can result in cumbersome regulation and may not offer an optimal solution."
ISPA said it is committed to finding a "practical" solution to address intellectual rights holders' desire to issue notices to individuals engaging in illegal downloading or file sharing.
Virgin Media recently became the first ISP to voluntarily address the problem of file sharing by agreeing to send out letters to households where music is being illegally downloaded or shared.
A music industry survey this week found that the average teenager's MP3 player contains more than 800 illegally copied songs, and separate research commissioned by the music industry body British Phonographic Industry showed 6.5 million people in the UK engaged in online music "piracy" last year.