BT has confirmed that it carried out a secret trial of the Phorm advertising system which tracks internet users' online behaviour.
Phorm monitors the websites a user visits and delivers advertising based on this information.
Following reports that 18,000 people had had their usage patterns mined by the Phorm software, BT stated that a test did take place but that the data was anonymous and did not therefore break the law.
"BT can confirm that a small scale technical test of a prototype advertising platform took place for two weeks during September and October 2006," said Adam Liversage, chief press officer at BT Group.
"The purpose of the test was to evaluate the functional and technical performance of the platform. It is important for BT to ensure that, before any new technologies are deployed, they are robust and fit for purpose.
"No personally identifiable information was processed, stored or disclosed during this test."
Phorm has provoked a storm of controversy after BT, Virgin and Talk-Talk signed up to the platform. Privacy groups have protested that it is intrusive, and possibly illegal.