Ofcom has ruled it will present "no regulatory barriers" to the roll out of super-fast broadband infrastructure.
The regulator announced plans to encourage the development of broadband that runs at speeds in excess of 40 megabits per second (Mbps).
The ruling will permit BT to progress with an investment of £1.5 billion in the network, giving up to 20 million UK homes access to high-speed internet. BT’s Openreach infrastructure division, along with other telecom providers, will be able to charge ISPs for its super-fast wholesale broadband services in order to recoup the significant investment costs.
"Our message today is clear: there are no regulatory barriers in the way of investment in super-fast broadband," said Ofcom chief executive Ed Richards.
"We want to promote investment but also ensure that there is fair and effective competition for the future."
In its 91 page report Ofcom also said it is consulting on extending BT's duties, so that the telecoms giant, which is currently a wholesaler of traditional copper-line broadband connections, would have to share fibre-optic lines with other providers in the future.
Ofcom said it was looking to ensure pricing freedom, solid rates of return on investments and efficient networks, while promoting competition.
BT chief executive Ian Livingston said the policy framework supports BT's current investment case and rollout plans.
"Today’s announcement from Ofcom has set expectations for the whole UK industry as the market evolves into a fibre-based world. This is an important step and will allow the market to develop the next generation of the UK's broadband infrastructure, which is so critical to the UK’s future as a knowledge-based economy," said Livingston.
"The stage is now set for a wide variety of players, of all different shapes and sizes, to do their bit in providing consumers with a choice for superfast and innovative services. Now it’s all about delivery."
Livingston said BT Openreach has already signed up five communication providers to provide up to 30,000 residential customers in Whitchurch and Muswell Hill with fibre-based services in the next few months as part of a trial. BT is soon expected to announce the locations of the next 500,000 homes to be fibre-enabled, which will begin in January next year.
"At our pilot at Ebbsfleet Valley, consumers are, today, enjoying speeds of up to 100 Mbp/s – the fastest available to consumers anywhere in the UK, and comparable with anywhere in the world," said Livingston.
Ofcom's policy for super-fast broadband of up to 40Mbps is significantly bigger than those of the communications minister, Lord Carter, whose recent interim Digital Britain report announced a target of providing universal broadband of up to 2Mbps by 2012.
With next generation broadband, businesses would be able to use simultaneous services such as two-way video calls, improved data retrieval and it would also provide more opportunities for working from home, Ofcom said.