The two-year project will also see the fibre-based network deliver passenger information on bus routes and give motorists updated information on car parks.
Local firm Optilan will undertake the work. The scheme will involve laying 87 miles of fibre optic cables around Coventry. The project, which involves digging up the city's road, will be completed by October 2009.
Councillor Ken Taylor, leader of Coventry City Council said, "We are working very hard to keep disruption to a minimum as we carry out this work, and we hope that Coventry people will be patient with us, as the long term benefits will be massive.
"We will have one of the best IT networks across the country, improving connections for schools, providing a more resilient network and a traffic management system that will keep everyone moving."
Schools across the city will benefit from an impressive 1Gb broadband network, which is a significant increase on what is currently available.