Customers will have access to an extensive library of on-demand content via broadband and will receive more than 40 Freeview channels through their aerial.
The library will enable people to watch programmes at their convenience rather than having to stick to the advertised schedules.
BT Vision is delivered through a new HD-ready set-top box which contains a personal video recorder able to store up to 80 hours of content as well as the ability to pause or rewind live TV and record programmes at the touch of a button.
The V-box is made by Philips and runs Microsoft's IPTV Edition software. BT Vision also features a Replay TV service, allowing customers to catch up with broadcast TV programmes they may have missed during the previous week.
"BT Vision is all about giving control to the viewer - control over what they watch, when they watch it and how they pay for it," said Ian Livingston, BT Retail chief executive.
"BT Vision is ideal for people who want more choice than Freeview delivers but who want that extra choice without being tied to a pricey, long-term subscription."
Enrique Rodriguez, corporate vice president of Microsoft's TV Division, added: "BT Vision is a revolution for TV services in the UK.
"BT's pioneering approach and Microsoft's next-generation IPTV technologies have enabled a unique TV service that lets consumers control their TV experience."
BT has signed an agreement with sports broadcaster Setanta which, combined with BT's existing FA Premiership rights, allows customers to watch three quarters of all next season's Premiership matches in full.
The telco has also signed agreements with Warner Brothers for movie content and EMI for music.
The box is free, but customers will need to pay a £30 connection fee and £60 engineer installation fee.
Films start at £1.99 while Replay TV content is available from 99p per episode. Customers can also take out a monthly TV subscription package for £6 a month, Replay TV for £3 and Music Videos for £6.
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