The Chancellor of the Exchequer Gordon Brown is set to unveil plans to cut the cost of using the internet in the next three years.

At present people wanting to use the internet or send e-mail must connect via BT, paying local phone rates.

In the United States, where local calls are free, 50% of homes are connected to the internet but in the UK only one in five are online.

In an interview in the Financial Times, Mr Brown said he was concerned about high telephone charges putting off companies from developing e-commerce.

Telecommunications regulator Oftel had intended to open up competition to BT by July 2001 but Mr Brown is expected to tell an audience of financiers on Wednesday his intention to speed up the process.

He wants to opening up BT's "local loop" - the wires which run to every home and business - to competition.

By doing so Mr Brown hopes phone bills will tumble as a result of the ensuing competition, enabling the UK to catch up with other IT-based economies.

9 out of 10 businesses offline

Almost every day a major UK business announces plans to set up an internet venture.

But so far only one in 10 businesses sells online, with only one in four buying goods over the internet.

A Treasury spokeswoman said: "He feels that developing low internet costs is hugely important. It's about how we can widen access."

Telecommunications analysts Durlacher have estimated that internet usage in the UK would triple if flat-fee connections became standard and time online was unmetered.

Matt Peacock, a director of AOL UK, told the FT: "We welcome this intervention but all involved need to be aware of the pressing need for a change in the telecoms environment."