BT unveiled plans yesterday aimed at revolutionising television viewing in Britain, with a £1.5 billion investment intended to connect ten million homes to high-speed fibre-optic broadband by 2012.

The technology's vast capacity will allow high-definition programmes to be transmitted across the network and give households access to broadband at speeds starting from 40 mbs (megabits a second) where fibre optic is run by BT to a local telephone exchange or street cabinet.

About a million homes will get the chance of buying faster capacity still, with fibre networked directly into the home and speeds of 100 mbs or more - 50 times faster than a typical connection today.

However, BT said that it needed concessions from the telecoms regulator to make a return on the cost of the programme.

Ian Livingston, BT's new chief executive, said that he would abandon the plan if he did not secure a fair rate of return from Ofcom and he gave a string of demands without which, he said, “we don't do it”.

Mr Livingston wants competitors to pay extra to gain access to the new fibre-optic network and said that Virgin Media should also be forced to open up its broadband fibre-optic network to rivals. “If Virgin Media is the largest provider in an area, why should BT be regulated?” he said.

To help to pay for the investment, BT said that it would cancel £700million of planned share buybacks. It will spend £100million this year, rising to £300 million at the turn of the decade.

Existing copper-based phone networks probably can run broadband at speeds up to 25 mbs. Moreover, the need to share capacity with other homes, not necessary with fibre optics, already means that BT and other internet providers are straining to accommodate the BBC iPlayer, which allows viewers to watch any BBC programme transmitted in the past seven days.

Virgin said that BT's plans could cost more than was originally outlined.

Other competitors were also unimpressed. Charles Dunstone, chief executive of Carphone Warehouse, which provides the TalkTalk service, said that he was “pretty underwhelmed - it's an excuse to cancel the share buyback ... In reality, there is a long-term future for copper, though they want people to believe that BT is riding to the rescue.”

Howard Watson, Virgin Media's chief technology officer, said that it was too early in the development of the market for his employer to be forced to open up its network. He added that BT's budget seemed low because of an optimistic assumption of the cost of installing a fibre-optic network in existing ducts used for copper phone lines.

Virgin Media is already ahead of BT for speed. It wants to make a 50mbs connection available to all 12 million homes that can take its service from the middle of 2009 and Mr Watson forecast that the cable company would be able to offer 200mbs speeds by 2012.

Ed Richards, chief executive of Ofcom, who is reviewing the regulation of fibre-optic broadband. said: “Given the potential consumer benefits, regulation needs to provide the right incentives for operators to invest.”

Investors took a negative view, as it was not clear who would win the battle to come. BT shares fell 5 per cent, or 9.7p, to close at 192.3p.

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