According to The Guardian, a leaked Invitation to Tender document said the service will be available to the the telecoms company's 5.5 million broadband customers.
BT says it will unveil the service "in the near future" and is in discussions with record labels such as Universal Music and EMI. However, details of how the service will work are sketchy.
The service will initially be free to users for the first six to nine months, after the telecommunications company agreed to forfeit profit. However, after that, users will be charged.
"We are very keen to launch a music service in the near future, but it will have to be with a model that customers will want and can work financially for BT," the telecoms company told PC Pro.
"We are in the early development stage so we are not currently in a position to comment further."
See also: Single music downloads killing the LP