U.K. telco and cable TV company Virgin Media has partnered with Universal Music on an unlimited download service described as a "world first" in that users will be able to keep all the MP3 downloads forever.

The announcement appears to pre-empt expected government calls for new digital music services to rival illegal file-sharing in the U.K.

Virgin Media says the new service will co-exist with measures to reduce piracy and protect copyrighted material including the "temporary suspension of Internet access" as a last resort.

The industry and government has welcomed the development after several months of anticipation about new services that can potentially offer an alternative to P2P. Stephen Carter, minister for communications, technology and broadcasting, is set to call on ISPs and labels to drive forward the development of new services in the Digital Britain report tomorrow (June 17).

Although the report is not expected to recommend cutting off access for file-sharers, there may be a role for a industry-run body that could impose some technical restrictions on the worst offenders. Trade body the Internet Service Providers' Association (ISPA) described disconnection as a "disproportionate response."

"Government has a role in creating the right legal and regulatory framework for rights and copyright," said Lord Carter. "However, the market will flourish through innovative commercial agreements between companies, and agreements such as this will help significantly in reducing any demand for piracy."

For a monthly subscription, still to be announced, the unlimited music download service will allow Virgin Media's broadband customers to stream and download as many songs and albums as they like from Universal's catalog. Users can listen to the tracks on any iPod, MP3 player, mobile phone or PC and keep them forever.

The service is set to launch later this year. Virgin Media says it is in talks with other U.K. major and independent music labels and publishers with a view to providing an extensive catalog of music at the time of launch.

An "entry level" offer will also be available for customers who download regularly, but may not want an unlimited service.

Virgin Media has been sending educational letters to P2P file-sharers, as part of the memorandum of understanding between ISPs and the music and film industry brokered by the government last July, and has now pledged to take further action.

"In parallel, the two companies will be working together to protect Universal Music's intellectual property and drive a material reduction in the unauthorised distribution of its repertoire across Virgin Media's network," said a statement.

"This will involve implementing a range of different strategies to educate file sharers about online piracy and to raise awareness of legal alternatives. They include, as a last resort for persistent offenders, a temporary suspension of Internet access. No customers will be permanently disconnected and the process will not depend on network monitoring or interception of customer traffic by Virgin Media."

A Virgin Media spokesperson told Billboard.biz that the period of the suspension of Internet access was still to be determined and said that, based on information from rights holders (in this case Universal), anyone infringing copyright would first receive a warning letter before any suspension. There have been reports that the suspension could last one hour.

He added that there would be no blocking or restrictions of Web sites as part of the service. Some reports stated that P2P sites would be blocked. Reports that the service could be free for those signed up to Virgin Media's super-fast 50MB service are also unconfirmed. The spokesperson said there would be a "tiered pricing" system.

"In terms of both convenience and value, our new music service will be superior to anything that's available online today and provides a fair deal for both consumers and artists," said Virgin Media's CEO Neil Berkett. "There is no better example of Virgin Media's commitment to harnessing digital technology to give customers what they want, when they want and how they want."

Richard Branson, chairman of Virgin Group, commented that the "agreement with Universal is a world first and lays the ground for a truly unique service when it launches later this year. It will give music fans all the MP3s they want for a small monthly fee whilst supporting the artists whose creativity is the lifeblood of music."

Other unlimited services such as Denmark's TDC Play are tied to a subscription and are DRM-protected, while Nokia's Comes With Music allows users to keep their downloads after a subscription expires, but they are protected music files and are assigned to a specific handset and PC. Sony Ericsson's PlayNow Plus all-you-can-eat service allows users to keep a limited amount of favorite tracks in MP3 format.

Following today's (June 15) announcement, Feargal Sharkey, chief executive of industry umbrella group U.K. Music, welcomed the news of the tie-up.

"This is fantastic news for music fans," he said in a statement. "U.K. Music has long advocated the potential of ISPs and music companies to strike commercial deals and launch groundbreaking new services. Today's announcement from Virgin Media and Universal Music is therefore hugely significant. We would urge other ISPs to follow Virgin's lead and create new music partnerships that offer the consumer legal access to the full range of content, regardless of platform."

U.K. trade body the BPI applauded Virgin Media's "graduated response" to P2P file-sharing.

"It is very encouraging to see an ISP and a record label working together as creative partners," said chief executive Geoff Taylor. "At the same time, the fact that Virgin Media will apply a graduated response system to tackle persistent illegal downloaders demonstrates that graduated response is a proportionate and workable way forward. We hope the government will support this positive move by announcing prompt and robust measures to deal with online piracy in its Digital Britain report this week."

IFPI chairman and CEO John Kennedy added: "This is the kind of partnership between a music company and an ISP that is going to shape the future for the music business internationally. It epitomises the way in which the music business is adapting to the digital world, embracing new business models and responding to the changing needs of consumers. It also marks new ground in ISPs' willingness to take steps to protect copyrighted content on their networks, and that sets a very encouraging example to the whole industry."

U.K. digital satellite broadcaster and broadband company Sky has also been developing an unlimited subscription service, although no further details have been confirmed since its partnership with Universal Music was announced in July 2008.