BT plans to invest £1.5bn to deliver high-speed fibre broadband to 10 million homes by 2012.
The new network will give users access speeds of up to 100mbps. Most current users of BT broadband services over standard copper wiring get no more than a maximum 8mbps.
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BT is helping to finance the investment through the suspension of its share buy-back programme.
BT is already spending around £10bn on its IP-based 21st Century Network, to deliver a greater variety of services to consumers and businesses.
BT chief executive Ian Livingston said, "Broadband has boosted the UK economy and is now an essential part of our customers' lives. 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."
He added, "This is a bold step by BT and we need others to be just as bold. We are keen to partner with people who share our vision for the next phase of the broadband revolution. We want to work with local and regional bodies to decide where and when we should focus the deployment. Our aim is that urban and rural areas alike will benefit from our investment."