According to The Guardian BT unveiled a prototype of the mini PC to city analysts this week.
The telecoms giant hopes the as-yet-unnamed device will encourage home owners to dump their regular landline phones in favour of these touchscreen versions that also offer access to the web.
BT's rival to the iPad will be slightly smaller than Apple's device
"It is like a mini-PC with the telephone of the future. Someone also made a reference to it being a bit like the iPad but it is not. It is a different size and shape apart from anything else, but it is meant to stay in the home," BT chief executive Ian Livingston told the newspaper.
However, Livingston did admit there were a number of similarities with Apple's Slate PC, including visual voicemail, access to email and text messaging and even the ability to download apps that offer information such as news and weather reports.
The Guardian said the device's dimensions were somewhere between those of the Apple's iPod touch and the iPad.
It features a speaker which allows owners to use the telephone facility, or alternatively, it can be paired with a Bluetooth headset.
"Clearly people want to use their phone in a different way. We have seen that with smartphones outside the home. So we have been developing a concept around how you get that sort of capability into an in-home environment. Obviously you can make phone calls through it, but it also has a touchscreen," added BT Retail chief executive Gavin Patterson
"What we have seen is people really like to use it in the kitchen because it is always on and they can just snack on their communications and snack on their video clips," said Patterson.
While BT admitted it has developed the software itself, the company wouldn't identify who it had been working with on developing the hardware.
The telecoms giant said it would sell the device to consumers directly and it is likely to bundle with a broadband and phone package.
BT also revealed it also plans to offer a game service in the UK later this year, which will allow gamers to play latest releases on the web. They won't require a console such as Playstation 3. Instead, they'll simply need a TV and controller.
See also: BT fibre broadband to reach 66% of UK