E-content providers fear a distortion of the educational software market, with smaller, innovative companies, often formed by ex-teachers with bright ideas, driven out of business.
The decision, by culture secretary Tessa Jowell, came at the same time that education and skills secretary Charles Clarke announced details of a £1bn cash injection for e-learning, online training, laptops and broadband in schools and colleges.
Speaking at the Bett educational IT exhibition last week, Clarke announced that schools and colleges will, over the next three years, be given £300m of e-learning credits, teachers will gain £195m towards new laptops, and £358m will go to give all schools broadband capability by 2006.
Phil Hemmings, director of corporate affairs at educational IT supplier Research Machines, said, "More money in the market is good, but we would rather have a proper market. Having a monolithic state-controlled supplier giving its products away for free distorts the market, and the ultimate losers are the people and the teachers."
BBC sources said the move would help spur the educational IT market.
Clarke supported the BBC's move. He said it will result in a balanced, dynamic market.