The people of Cardiff and the surrounding area will be the first to receive services over BT's 21st Century Network (21CN), including phone calls, broadband and Ethernet, when it is rolled out to a regional concentration of customers for the first time.

BT's migration of customer lines to the 21CN converged IP-enabled network is expected to begin for around 350,000 customer lines around the Welsh capital during the second half of 2006.

The telco hopes that the experience and feedback from the first mass customer migration project will help it to smooth the main rollout to customers across the UK by the end of the decade.

Stewart Anderton, principal consultant at Ovum, said: "The risks are too high not to carry out trials of this nature.

"Many telcos are watching BT with interest, and they will benefit from the fact that it has a very open attitude to sharing information. Our view is that all telcos will need to take a similar path sooner or later.

"We are not concerned about BT's ability to develop and build the 21CN, but the question remains whether BT will be able to generate significant additional revenues from 21CN."

In the case of data services to enterprises, Anderton believes that BT's investment will pay off as flexible IP-based services will be able to take over from costly leased lines, ATM and frame relay.

The multi-service access nodes will allow BT to offer and deploy services more efficiently than other operators, Ovum predicts.

However, Anderton said that BT's consumer market case is less clear. "It is increasingly easy for content and other service providers to make use of broadband access in a way that generates no additional revenue flows to BT, such as Skype for voice calls and iTunes for music content," he explained.

"BT will have to work hard to capture and retain revenues from the new application markets that will emerge as broadband increases in capacity and uptake."

Upgrading the Cardiff area to the 21CN infrastructure will require the replacement of equipment in more than 50 local exchanges, and the implementation of new IT systems to underpin the delivery of services to customers.

Before services go live over the new infrastructure, all exchange sites in the area will be assessed for power supply, space and logistics planning.

Three new metro nodes, or super telephone exchanges, are to be developed in Cardiff, Swansea and Newport, with a further 10 new transmission sites also developed across the region.

Rhodri Morgan, the First Minister of the Welsh Assembly Government, said: "It's incredibly exciting for us that Wales has been selected to provide the test bed for BT's new 21CN."

Matt Bross, chief technology officer at BT Group, added: "The operational experience that we gain in Cardiff and the surrounding area will enable us to move full steam ahead and deliver 21CN to everyone in the UK, migrating a total of 30 million lines in just four years."

The 21CN will require an investment by BT of up to £10bn by the end of the decade.