Private companies had made complaints about BBC Jam under competition laws, alleging the licence fee gave the broadcaster an unlawful advantage. The BBC was forced into talks with the Government and the European Commission.
Chitra Bharucha, acting chair of the corporation, apologised to the 170,000 registered users. She said that despite tight operating limits, BBC Jam had attracted continual complaints. "We can't ignore the allegations or the ongoing prospect of challenge," she said.
The British Educational Suppliers' Association (Besa) laid the complaints with Brussels. Dominic Savage, Besa's director-general, said two of his member companies had gone into liquidation in the past month and others had been forced to lay off staff because BBC Jam impinged on their businesses.
"It was becoming increasingly harmful," he said. "But if the idea is for the BBC to look afresh at its role in education, then the industry would be keen to work with them on a truly innovative and genuinely distinctive solution."
David Blunkett, the former education secretary, initiated the BBC project, and has remained a vocal supporter, especially of its role in helping children with sight loss.
Jim Merrett, from Naace, the ICT teachers' association, said a lot of resources had gone into creating website material.
"I do hope means can be found to restore the service," he said.
Mark Thompson, the BBC's director-general, said he would spend the next three months looking at ways to provide learning content, but would subject new proposals to a market impact assessment by Ofcom, the broadcasting regulator. "The decision to suspend the service will come as a real disappointment," he said.
The Government had required that pound;45m of BBC Jam's budget be spent on commissioning content from outside companies. It had also tried to ease the effect on competitors by giving schools pound;530m in credits to buy their products.