BT is to invest £1.5bn in fibre optic cables, giving up to 10 million UK households access to faster broadband.
The plans would bring 40% of homes in reach of an ultra-fast service by 2012.
BT is also planning to put fibre-optic cable into about 1 million homes, making the service even faster for those customers.
However, the communications group has made clear it will only make the move if regulator Ofcom allows it to get a decent return on that investment.
Remaining customers would be offered broadband speeds of between 40 and 60 megabits a second (mbps), it said.
In order to pay for the project BT has said it will suspend its £2.5bn share buy-back programme in July - by which time it will have returned more than £1.8bn.
'New chapter'
"Broadband has boosted the UK economy and is now an essential part of our customers' lives," said BT 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."
But the firm has warned that conditions need to be right for its investment.
BT has urged Ofcom to nurture a "supportive and enduring regulatory environment" which includes removing current barriers to investment and making sure that anyone who chooses to invest in fibre optics can earn a fair rate of return for their shareholders.
A spokesman for the firm said BT hoped to discuss updating its current universal service obligation with the watchdog.
Under current rules BT must provide a copper connection to all homes, however, the firm says this is out of date and unnecessary for updated services based on a fibre-optic connection.
BT's rival Virgin Media already uses fiber-optic cables, which are faster than BT's copper lines, although the final connection to the home user is done with traditional coaxial cable.
Meanwhile, other BT competitors including Carphone Warehouse and BSkyB are switching clients to their own networks so they do not have to rent copper lines from BT Wholesale.
Better returns
BT's spokesman also added that the business would be hoping to get a better return on its fibre operations as it would represent a riskier investment.
"At present we are allowed a 10% return on the capital put into our Open Reach service, we would be looking for more than that," he added.
Britain has been slower to invest in fast broadband than some countries, with BT in particular cautious about spending the large sums involved.
The group's plans should enable homes to run so-called "multiple bandwidth-hungry applications" which would enable some family members to watch high definition movies while others were gaming or working on complex graphics projects.
Broadband comparison service broadbandchoices.co.uk welcomed the move saying it showed BT's commitment to bringing the UK's broadband service "up to speed" and provide better coverage for users in both rural and urban areas.
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