Apple's iTunes may be about to lose the accolade of being the industry standard for online music.

Digital-music firm PlayLouder is to launch the first music-based ISP in conjunction with broadband provider Bulldog in the New Year. Rather than copying the tried-and-tested format of the iTunes Music Store, PlayLouder is offering a route for legal file-sharing.

Subscribers to the PlayLouder MSP (Music Service Provider) will be allowed to legally share, download and stream, via file-sharing programs such as KaZaA, licensed tracks from labels signed up to the scheme.

PlayLouder MSP director Paul Sanders confirmed that the service "will be Mac compatible". He also predicted that the Apple service and his MSP would be able to coexist happily: "We are a music ISP targeting a more defined segment of the market, with more-specific music tastes. I can see people using both services."

PlayLouder has secured licence agreements with MCPS-PRS – the licensing body that collects royalties on behalf of music publishers – and received the approval of a number of independent labels, including XL Recordings, Beggars Group, V2 Music, PIAS Recordings, Wiiija, Too Pure and Ninja Tune. Bands represented include White Stripes and Stereophonics.

Sanders told Macworld: "We are also talking to the major record labels, and I am quietly confident that we will get their agreement."

PlayLouder claims to be the first Internet Service Provider to pay royalties to record companies. "We will pay a proportion of our revenue to the record companies in return for their involvement," Sanders explained.

Subscription to the service is likely to cost £30 a month. For this, users will get a broadband Internet connection, "unlimited" access to legal music files, radio streaming and exclusive webcasts from high-profile live events, and a video jukebox.

Saunders added: "Our customers will get a better music experience online, faster downloads and more reliability for the price of a standard ISP."

PlayLouder also hopes to offer cheaper CDs and cheap gig-ticket offers as an additional benefit of subscribing to the service.

On its Website PlayLouder says: "You will now be able to share and download music with your mates and virtual chums all over the UK without worrying about Mr Big beating you with a truncheon, nicking all your cash and throwing your miserable ass in chokey. Because PlayLouder is the first Internet Service Provider to pay Royalties to Record companies."