Mandybill Ian Livingston, the boss of Britain's biggest ISP BT, is lobbying for the government's proposed technical sanctions against filesharers to be replaced with fines.
He said suspending internet access for the most persistent copyright infringement, as envisaged by the Digital Economy Bill, could deny those accused a fair hearing.
Instead, Livingston proposed, they could choose to pay a penalty or fight in court. Under the bill, people who dispute accusations of infringement could take their case to a new tribunal rather than the courts.
The cash raised by fines could be used to "create a fund" to "get some good, rather than getting some hurt out of people infringing copyright", Livingston said.
The suggestion marks BT's strongest public intervention in the debate so far and brings him in line with the Open Rights Group, the campaign organisation planning a demonstation against the Digital Economy Bill outside Parliament later this month. It has also said fines would be fairer than temporary suspension.
Separately today, Livingston joined the bosses of TalkTalk, Virgin Media and Orange in a letter to the Financial Times. In it, they criticise last week's amendment to the Digital Economy Bill by Liberal Democrat peers, which would allow copyright holders to injunct ISPs and force blocking of specific web addresses.
It has replaced the government's proposals for reserve powers allowing ministers to extend copyright enforcement without a vote in Parliament. Both measures target the growth in the use of locker services such as Rapidshare to exchange copyright material illegally via the web.
The ISP bosses wrote: "Endorsing a policy that would encourage the blocking of websites by UK broadband providers or other internet companies is a very serious step for the UK to take.
"Put simply, blocking access as envisaged by this clause would both widely disrupt the internet in the UK and elsewhere and threaten freedom of speech and the open internet, without reducing copyright infringement as intended."
The letter is also signed by web firms including Google, Yahoo!, Facebook and eBay.
The peers behind the amendment have argued that since all major ISPs already block a list of URLs carrying images of child abuse, they have the technical means to comply with injunctions demanding copyright blocking.
"The injunction will only be granted where copyright owners had first requested ISPs to block access to the site and where they had also requested the site operator to stop providing access to the infringing material (either by removing the material itself or removing the ability to access the material)," said Lord Clement-Jones.
Livingston and his fellow ISP chiefs descibed the amendment as "very poor lawmaking".
The BPI, the record label trade association, responded to the criticism this morning by backing the amendment.
"Contrary to the claims in the letter, service providers would in every case be able to ensure that the decision as to whether a site should be blocked is made by the High Court," said chief executive Geoff Taylor.
"The court would be required to consider the extent of legal content on a website, any impact on human rights, and whether the website removes infringing content when requested. So the suggestion that the clause would lead to widespread disruption to the Internet or threaten freedom of speech is pure scaremongering." ®