Business Secretary Lord Mandelson is trying to push through the scheme to tackle illegal filesharers that was first detailed in the government's Digital Britain report, which was released earlier this year.
However, BT has estimated implementing the technology to track illegal downloaders and then contact them and implement a suspension is likely to cost around £1m a day.
BT's consumer division chief John Petter said that ISPs would not be able to swallow the entire cost, and would have to pass some of it on to consumers.
"We feel that instead music labels should develop new business models," said BT.
"At the moment, they just want to outsource all their problems to ISPs. Legislation before the introduction of Digital Britain did allow music labels to go after people that downloaded copyrighted music, but they did not take advantage of it because it would have generated bad PR for themselves."
The Department for Business said it had issued a consultation on the proposals and has "asked industry for reliable figures on both the damage caused by file-sharing and on the cost these obligations will involve".