BT is to roll out fibre-based services to up to 10 million homes by 2012 with initial top speeds hitting 100Mbit/sec and the potential for 1Gbit/sec in future.

The full 100Mbit/sec will be available only to houses built on new sites, where fibre will be taken right to the premises (FTTP).

Services to existing houses will take fibre only to street cabinets (FTTC), when top speeds will be 40Mbit/sec, though this may rise to 60Mbit/sec using new technology.

This FTTC setup is closest to that generally used by cable operator Virgin Media, except that BT will use existing phone lines for the final link to the home whereas Virgin uses more suitable coax cable.

This means Virgin should still have more headroom for bandwidth than BT on these links, which as the slowest section of the link will dictate the maximum speed. A spokesman for BT said it had yet to be decided what technology will be used for this section but it will be a flavour of DSL – ADSL2 + or VDSL.

One effect of the change will be faster uplink speeds, which could encourage more use of video telephony and will also be useful for businesses.

Real throughput is also likely to be closer to the link's rated speed, because the troublesome copper link will generally be much shorter then current ADSL links on which it runs right to the exchange.

There was one note of doubt in the BT statement announcing the plans. It said they depended on Ofcom "removing current barriers to investment and making sure that anyone who chooses to invest in fibre can earn a fair rate of return for their shareholders".

BT's announcement was welcomed by Ofcom chief executive Ed Richards. He said: "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."

Richards said regulation needed to provide the right incentives for investors as well as promote a vibrant competitive environment.

"We are already working closely with communications providers, and our wider stakeholders, to ensure there is a concerted dialogue on the regulatory environment to support investment and competition.

"Ofcom will publish detailed proposals for a regulatory framework for next-generation networks in September."

BT chief executive Ian Livingston promised that the company will aim to ensure that its investment will benefit people in the countryside as well as in towns. "We want to work with local and regional bodies to decide where and when we should focus the deployment," he said.