Mr Thompson said in an article in an internal magazine that cable television franchises already covered 14 million of BT's customers. Almost all the cable TV companies plan to offer telephone services and those that already do so are offering to undercut BT prices by up to 15 per cent.
Mr Thompson said: 'This constitutes an even bigger threat to our residential business than Mercury.' He also said that there was scope for BT to lose substantial revenues from businesses as well.
A spokesman for BT said the figures were several months old and that the company had already embarked on campaigns aimed at keeping the residential customer base.
'There is early evidence that we are succeeding in beating back the challenge. What the cable companies offer is a lot of promises and little else,' he said. He added that pounds 500m was a 'doomsday figure'.
BT, which is not allowed to deliver television and entertainment over its telephone network, is trying to form alliances with some of the cable television companies. Most cable firms use Mercury to carry calls outside their local networks, but BT has recently signed similar deals with Diamond Cable in Swindon and Cambridge Cable.
The largest investors in the UK cable television industry are big telephone companies from North America.
They include Nynex, Bell Canada and US West and are almost all using the television franchises as a springboard to enter the telephone market.
There are also plans to link adjacent franchises to offer telephone services on a regional basis.
Mr Thompson said: 'This means that for the first time BT faces competition from major overseas competitors on its home turf.'
He added that the companies had the advantage of not having to service unprofitable communities and of having relatively low overheads because of the combined telephone and entertainment services.
Many of the companies are also targeting local authorities, which make up one of BT's most important customer groups.Reuse content