The service will be launched on 15th July, initially using 40 domestic cable television network companies, with a view to expanding to the services of 200 companies. Sega also plans to sell game software through the broadband cable network.
Sega hopes the service will lift sales of Dreamcast as the company struggles to find the success of rivals Sony and Nintendo.
Meanwhile, rival Sony also plans to connect its PlayStation2 to the internet following release of a hard disc drive for the console this winter. Sony is also launching the PSone game machine, a portable version of its original PlayStation, which can be connected to mobile phones.
Sony plans to phase out the original PlayStation in favour of the new PSone and anticipates that the new product will sell in the region of 6 million units per year.
Sony also said it would spend 125 billion yen (almost £780 million) to boost output of chips used in the PlayStation2 in anticipation of its overseas launch in October this year.