UK carrier BT is to spend £1.5bn pounds ($2.99 billion) rolling out super fast broadband to 10 million (or 40 percent) of UK homes by 2012.

BT said on Tuesday that it would invest in rolling out fibre to the premise (FTTP) for new builds, such as Ebbsfleet in Kent and the Olympic Village, while existing homes and premises would gain fibre to the cabinet (FTTC).

The FTTP deployment will deliver headline speeds of up to 100MB/s, while the FTTP rollout will initially deliver speeds of up to 40MB/s (although BT is investigating ways of ramping this up to 60MB/s).

BT said it is already offering FTTP to 120,000 businesses, and could eventually allow customers to access the web at 1,000MB/s.

More realistically, the carrier said that fibre-based broadband will allow different members of a family to watch multiple high definition movies simultaneously, while others could play online games or download music files. As well as boosting download speeds, fibre-based broadband will significantly increase upstream speeds, meaning customers will be able to post videos more quickly.

However, BT has made clear that the move is dependent on UK telecoms regulator Ofcom, ensuring that there is a proper regulatory framework in place that allows it to get a decent return on the investment.

Ofcom meanwhile has welcomed BT's plans to upgrade its broadband network, which suggests that an agreement is not too far away.

"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, said Ed Richards, Ofcom Chief Executive.

The regulator said it would publish further detailed proposals for the regulatory framework for Next Generation Access networks in September.

Analyst Reactions
Meanwhile, BT's announcement has been given a cautious welcome by some industry observers.

"At last, BT has decided to invest in fibre on a large scale. This is great news for the UK, and will remove some of the awkward questions about why are we languishing behind many other nations in the provision of high-speed broadband,” said Matt Yardley, partner at Analysys Mason.

"Financially, this is a sensible step for BT, and should not preclude a move to more widespread FTTH in the longer term," he added.

Meanwhile, industry commentator Dean Bubley called BT's plans "a fairly prudent risk-management approach on BT's part given the current economic situation. Sufficiently aggressive to catalyse some regulatory change - and maintain clear water between fixed & mobile broadband - but not large enough to act as a boat anchor on the company as the UK economic falters."

He also said the investment could tie in with BT's entry to the WiMax market. "Depending on what happens in the UK's delayed 2.6GHz auction, it seems reasonable to assume that any future BT deployment of WiMax will also be supported by fibre."

Return on Investment
However questions marks still remain, especially over BT's insistence that the regulator ensures a fair return on investment and a proper regulatory framework.

"The regulations surrounding universal access for example need to be updated," a BT spokesman told Techworld. "The regulations currently say that BT has to install a copper line into every home, which would be pointless if we were to install a fibre connection instead."

"And yes, we are looking for a reasonable rate of return," he added. "Of course, the devil is in the detail." When asked who would decide on what is a fair rate of return, the spokesman said that BT would likely suggest a number, Ofcom would suggest a number, and they would agree somewhere in the middle.

He pointed out that Openreach is allowed to make a 10 percent return, but as BT deems this a more risky investment, it would want "something more than that." BT said it had already earmarked £500 million ($999 million) for the fibre investment, and today's investment is an additional £1 billion ($1.99 billion) on top of that.

Point of principle
And BT also expects others to play fair as well, as it will open the fibre network for others to use by offering a wholesale service.

"As a principal, all these networks should be open," said the spokesman, "We believe in wholesale, as a point of principle." He said that if Virgin Media uses BT's fibre network, then it would only be fair for it to allow BT to also use Virgin Media's network to reach customers.

The spokesman pointed to previous problems with fibre rollouts in other European countries, citing Germany, where Deutsche Telekom (DT) was controversially granted a 'regulatory holiday' for three years by the German regulator, in return for building a high speed fibre network connecting 50 German cities.

DT banned competitors from accessing its new high speed network, incurring the wrath of the European telecoms commissioner, Viviane Reding.

So who will get it?
In the UK, BT says it aims to make fibre widely available, and not just in the major cities. "We want to work with local and regional bodies to decide where and when we should focus the deployment," said BT boss Ian Livingston. "Our aim is that urban and rural areas alike will benefit from our investment."

The precise deployment of the fibre network is currently unclear then, and will depend on the engagement of government and regional and local authorities.

"It all depends on the reaction of local authorities," confirmed the spokesman. "If for example, a hospital in Devon asked for it, as it would help them with their ability to improve medical care, we will look at it. BT will look at deployment into non fibre areas on a case by case basis."

For the remaining 60 percent of the UK population, they will have to be satisfied with ASDL2+, which promises speeds of 24MB/s (although in reality this will be closer to speeds of 10MB/s upwards). This news in essence confirms Techworld's predictions that the UK will end up with a two tier broadband system in future.

Yet, BT said that we can expect regional announcements over the next couple of years as rollout plans are finalised. "This is a first step," said BT. "This (£1.5 billion) is what we will invest over the next four years. If people want more, we may invest more."