Broadband revolution is set to unleash the power of the Net

Not long ago the copper wire linking a house to British Telecom's local phone exchange and on to its national network was used only for delivering voice calls. The same network has now been pressed into use to provide internet access. However, by summer the conventional capacity of BT's copper-wire network is to be substantially enhanced, creating a new industry that could generate £5bn a year by 2007.

BT will lift the veil on this new world next month when it completes the first phase of a £250m upgrade to provide high-speed ADSL (asymmetric digital subscriber line) service. By June, BT local exchanges serving six million households in cities from London to Glasgow will go live with ADSL. By 2002, ADSL will be available to two-thirds of Britain's 25 million households.

Yes Television is one of more than 300 firms jockeying to offer ADSL services. Huw Price-Stephens, technical director, said: "Services are delivered off a common technology platform that allows you to select Web, broadcast television or interactive video content, or mixtures of the three.

"We don't want people to see their TV as a segmented service. We want all forms of interactive and conventional TV content to be seamless in the eyes of the consumer."

The first benefit of ADSL will be a dramatic increase in Net access speeds.Modem technology now limits access to a poky 50 kilobits a second; fine, perhaps, for text-oriented websites with limited graphics, but unsuitable for higher bandwidth applications combining extensive graphics, video feeds and television channels.

The early version of ADSL will offer Web access at 500kbs, boosting surfing speeds by a factor of 10. Before long, industry watchers expect access speed to double to 1 megabit per second (mbs) and then 2mbs. At the higher access rate, consumers will be able to order movies and other video programmes from high-speed servers.

Unlike pay-per-view movies on Sky Box Office, or cable's Front Row service, movies on ADSL can be ordered at any time and paused, rewound or forwarded. Videonet, a private firm that has raised £80m in venture capital finance, has set up video-on-demand services in 1,500 homes in north-west London. The service offers feature films, music videos, children's and lifestyle programming and archived TV programmes, including ITN news, on demand.

Simon Hochhauser, Videonet chief executive, expects its library of 800 films to grow to more than 5,000 in two years. Videonet offers themed TV packages from £5.99 a month, and films range in price from £1.50 to £3.50. "The potential for the British market is huge," said Mr Hochhauser, noting that ADSL could reach 20 million homes - double the reach of cable networks.

BT's role is vital to ADSL, as the company's network will distribute the services. In April, BT will begin installing high capacity connections linking its network with the servers and equipment of service providers such as Freeserve, Yahoo!, Tesco and others. From June those companies will be able to market a branded service, technically facilitated and provisioned by BT but billed and run by each broadband player.

Consumers accustomed to limited network competition are in for a shock. Chris Gibbs, managing director of BT's wholesale broadband arm, said more than 300 companies are gearing up to launch some form of service, ranging from high-speed internet access to broader offerings. Indeed, high-street players such as Tesco and financial services companies such as Barclays Bank count themselves among the broadband wannabes. But this could be just the beginning. Mr Gibbs said: "I see no reason why companies that are using their brand today on the internet wouldn't be part of the broadband revolution."

Initially BT will charge branded broadband providers £100 to install ADSL equipment at its local exchange and connect up a household. The service provider pays BT £35 a month for an always-on 500kbs connection. Service providers to businesses will pay a £260 connection charge, with monthly charges of £70 to £110 for access speed ranging from 500kbs to 2mbs.

What consumers will pay isn't known yet. Analysts believe charges will range from £35 to £60 a month, depending on services, although prices are sure to fall as more users subscribe.

"We have made it very easy for the service providers," said Mr Gibbs. "The BT wholesale product doesn't require them to build any infrastructure at all."

For Freeserve, Britain's biggest ISP, broadband via ADSL is a new challenge, but it is also a chance to exploit e-commerce opportunities and move into video-on-demand. "One of the issues is that the economics of ADSL look better when we amortise the costs over many services rather than just one," said John Pluthero, Freeserve chief executive. "We are looking at how we can bundle our offer with other services to give customers a compelling reason to choose us."

If Mr Pluthero is champing at the bit to offer broadband services via BT, so are many telecoms and cable rivals. NTL and Telewest plan to expand beyond their cable franchises into national distribution by offering TV channels, movies and internet access as branded ADSL providers. They will be joined by network operators such as Colt Telecom and MCI Worldcom, which plan to market broadband data service to small and medium-sized businesses outside their business district networks.

Yet it is in the consumer market where competition will probably be strongest. BT Interactive, the provisionally named broadband service, plans to invade the market for video-on-demand and television service now held by cable companies and BSkyB.

"We think broadband is going to be big," said Ben Andradi, managing director of BT Internet & E-Business. "People are used to the narrowband experience, but broadband is going to be qualitatively different. People will really see the power of the internet."