BT has announced plans to roll out fibre-based broadband to as many as 10 million homes in the United Kingdom by 2012. The £1.5 billion investment will deliver speeds up to 100Mbps with up to 1Gbps in the future. Although a welcome sign, the planned investment is considerably less than many estimate will be required to bring high-speed broadband to most of Britain.

“Broadband has boosted the UK economy and is now an essential part of our customers’ lives,” said chief executive Ian Livingston. “We now want to make a step-change in broadband provision which will offer faster speeds than ever before. This marks the beginning of a new chapter in Britain’s broadband story.”

“This is a bold step by BT and we need others to be just as bold,” he said. “We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment.”

BT says that a “supportive and enduring regulatory environment is essential if this investment is to take place”. It will be “discussing with Ofcom the conditions that would be necessary to enable this programme to progress” to ensure that anyone investing in fibre “can earn a fair rate of return for their shareholders”.

BT is only planning to invest an additional £100 million over each of the next two years. A futher £800 million will be spread over the following three financial years.

A billion pounds over five years is not a massive investment for BT which last year made a pre-tax profit of nearly £2 billion on a turnover of more than £20 billion.

The plans involve fibre-to-the-premise and fibre-to-the-cabinet deployment, the split of which it says “will be driven by the interest shown by government and regional and local authorities”. The former is likely to be limited to new build sites, such as the Olympic Village.

BT says its fibre-to-the cabinet delivery will deliver speeds of “up to 40Mb,” which is less than cable can deliver. It says that the plan will not be limited to major cities, but this will be dependent “on the engagement of government and regional and local authorities”. BT also says it is “totally committed to a wholesale market” and so will make its services available on an equivalent basis to all communications providers.

“BT’s firm belief is that all next generation networks in the UK should be open as this approach will boost competition and consumers and businesses will benefit,” it said.

This could increase pressure, possibly regulatory intervention, on cable operator Virgin Media to offer similar services.

BT also says it has made it cheaper for companies to buy extra capacity on the backhaul links from exchanges to the core network and will invest significant funds in improving core network capacity.

Controversially, BT states that “both measures should ensure customers on BT’s network will enjoy a higher quality of service than those on cable networks where contention and internet congestion has been more of an issue”.

Virgin Media hit back by saying that it already has a fibre optic nationwide network. Virgin Media rather disingenuously markets its broadband service as being fibre optic, although the connection to the home is over an ordinary coaxial cable.

“We’ve already invested £13 billion in a fibre-optic network and the launch of our 50Mb product later this year will mean 12 million UK consumers won’t have to wait to get access to next generation broadband,” said said James Kydd, of Virgin Media.

Ed Richards, the chief executive of Ofcom welcomed the news. “This is a clear sign that the UK market is moving in the right direction, with a growing number of plans to deliver super-fast broadband services to consumers.”

“These new networks will be a critical part of the UK’s infrastructure and will change our experience of communications. They will support and deliver innovative applications and services as well as helping create new opportunities for businesses of all kinds.”

The announcement from BT pre-empts the publication of a government policy on broadband due in the autumn.

“With this announcement industry will need further regulatory detail and that is exactly what Ofcom will provide,” said the chief executive of Ofcom. “We will be publishing further detailed proposals for the regulatory framework for Next Generation Access networks in September.”