BT is to invest £1.5 billion rolling out a new fibre network that will deliver super-fast internet access to ten million homes within four years.

The telecoms giant said that the network would reach 40 per cent of homes by 2012, and that a million households will have an even faster service, with fibre-optic cables all the way to their homes.

The fastest speed offered by the new network will be 100 megabits per second (Mbps) - more than 30 times the average speed most customers experience on an 8Mbps broadband package. Other homes could expect speeds of between 40 and 60mps, BT said.

BT said it would only go ahead with the project if the regulator Ofcom allowed it to get a good return on the investment. Ian Livingston, the chief executive, said the company would pay for new network by suspending a £2.5 billion share buyback programme.

“We now want to make a step-change in broadband provision which will offer faster speeds than ever before," Mr Livingston said in a statement. "This marks the beginning of a new chapter in Britain’s broadband story."

In his first major move since taking the reins at BT this month, Mr Livingston, 43, said that the new network would give customers the ability to use multiple 'bandwidth-hungry' applications - such as streaming high definition movies - on their home internet connection at once.

He also said that "supportive and enduring regulatory environment" was essential to the scheme, adding that BT would enter discussions with Ofcom on how to deliver the programme. Ofcom would have to be able to guarantee a "fair" rate of return for those investing in such infrastructure, BT said.

Ofcom said that it fully supported BT's proposals and that it would study the right incentives for operators to invest, adding that it recognised "the inherently risky nature of these investments".

"This is a clear sign that the UK market is moving in the right direction," Ofcom's chief executive, Ed Richards, said.

BT said that its £2.5 billion share buyback scheme, which was announced last May, would be suspended from July 31 to give priority to the broadband investment. But it added that it remained committed to delivering investors its promised dividend.

Mr Livingston is set for rewards of almost £7 million in his first year as chief executive of BT if he meets the targets of a new incentive scheme.

In May, BT announced details of the first high-speed broadband services that would use its long-awaited 21st Century Network, which relies on a technology called ADSL 2+.

Until then, only some providers, such as Sky, have been able to offer high speed packages of 20Mbps or more thanks to a technology called "local loop unbundling", which speeds up the existing network.

Critics have said that Britain's telecommunications infrastructure still lags at least five years behind that in France, where customers already experience speeds of 50-100Mbps thanks to a door-to-door fibre network.

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