The promotion, launched this week, includes posters in the East End of the capital reinforcing the price message with the slogan "British Telecon".
The phrase has incurred the wrath of BT's in-house lawyers, who are understood to have written to Bell Cablemedia warning that such claims are untrue, may be defamatory and could infringe laws on trademarks. A BT spokesman declined to say whether Bell would be served with a writ if the advertisements continued.
"BT reserves its position on this issue until we've examined these adverts further," he said.
Bell Cablemedia refused to discuss details of the campaign or confirm the advertising slogans had been used on poster sites. The dispute is the latest fallout from increasingly tough price competition in the industry.
Cable operators are seeking to maintain their price advantage despite BT's aggressive cuts in charges to comply with the annual price formula set by the regulator, Oftel. At the same time BT, under the chief executive, Sir Peter Bonfield, has made price comparisons more confusing by introducing discount packages such as the Friends and Family scheme.
It also emerged yesterday that BT had abandoned a planned court case against AT&T, the US telephones giant, after claiming the American group's British operation had also used allegedly "misleading" advertising. The decision to drop the action comes a month after a High Court judge refused to grant BT an injunction to prevent AT&T continuing with the promotional claims. AT&T had said on direct mail literature that it was 40 per cent cheaper than BT on selected international calls.
A BT spokesman said: "Failure to get the injunction showed how difficult it is to take action against someone even where there is an overwhelming case. Anyway AT&T has dropped the advertising claims and we are not ones to bang our heads against brick walls."
However, a spokesman for AT&T insisted the promotional literature had not been changed: "The reason BT has dropped the case is that after losing the injunction it was clear there was no case for us to answer. We are still using all the claims in our advertising that BT had objected to."