The third largest broadband provider in the UK could be created if Sky completes a £450 million takeover of Tiscali.
An initial bid is thought to have been tabled by Sky for the Italian-owned company, which has fallen on hard times.
Carphone Warehouse were at one stage involved in the bidding process but have pulled out, leaving Sky as the main takeover contender.
Should Sky acquire the company, is would become a bigger operation than rival Carphone Warehouse, behind only Virgin Media and BT in the UK broadband stakes.
Commenting on the news, James Ashton of the Times pointed out that up until now Sky has marketed broadband as a part of bundled TV offerings.
He said: "The purchase would also mark a strategic departure for the company, which has only offered broadband to date to customers who also subscribe to its television package."