Virgin Media's broadband service has been forced to suspend plans for a legal peer-2-peer (P2P) music file sharing service ('Virgin Music Unlimited') following pressure from several major record labels, which included Universal Music and Sony Music.

It's understood that the labels made several last-minute anti-piracy demands, most specifically requesting that the ISP block uploads and downloads of songs from customers PCs (duh?). Naturally that kind of defeats the whole purpose.

The Register reports that Virgin Media is extremely unhappy at the demands, especially after reports claimed that it invested an unknown eight figure sum into the project. The ISP has also been one of the most co-operative with the music industry.

Typically Virgin Music Unlimited (VMU) had not yet been officially announced, though privately many UK ISPs were known to be watching its development with interest. It could have formed part of the solution but instead has left VM with a hole in its pocket and perhaps a little less willingness to co-operate with record labels.

Virgin Media doesn’t comment on rumours or speculation and several record labels have also refused to comment. However Virgin’s partner on the project, PlayLouder, confirmed that the deal was off. We suspect that more about this will be released soon.