BT has chosen Cardiff and the surrounding area to build and test the first portion of its £10bn UK-wide 21st Century Network (21CN).
The next-generation network will rely on internet protocol technology and will help BT offer new data and voice services such as voice over IP and video-on-demand to a wider audience.
BT will migrate around 350,000 customer lines in the Cardiff area to its 21CN infrastructure, including many served by other telephone and internet service providers and mobile operators.
BT said the experience and customer feedback from the first major 21CN customer migration project will help it finalise plans to roll out 21CN to customers across the UK by the end of the decade.
The Cardiff migration of customer lines to the new infrastructure is expected to begin during the second half of 2006.
More than 50 local phone exchanges will be upgraded and BT will implement a number of new IT systems to support the new 21CN infrastructure. Three new metro area nodes or “super exchanges” will also be built in Cardiff, Swansea and Newport.
Rhodri Morgan, first minister of the Welsh Assembly government, said: “The end result of the BT investment will transform our personal and business lives, and help attract high tech industry and services to Wales.”