By Jane Wakefield
Technology reporter, BBC News
The UK's first "fibre town" could go online in the autumn, delivering speeds of about 100Mbps (megabits per second) to consumers' homes.
Laying fibre in sewers saves costly and disruptive road digging
Fibre firm H2O provides super-fast broadband via the sewers and either Bournemouth, Northampton or Dundee will be offered the service first.
It will compete with more established companies, such as Virgin Media, which is speeding up its cable network.
It follows government concerns that the UK is not embracing next-gen broadband.
While other countries' plans for next generation broadband - offering speeds of up to 100Mbps - are well advanced, the UK has slipped down the speed league tables.
For consumers, super-fast net connections could create a range of new applications including on-demand high definition (HD) TV, DVD quality film downloads in minutes, online video messaging, CCTV home surveillance and HD gaming services.
Last month BT announced that its own fibre to the home trial at Ebbsfleet in Kent would see the first homes connected by August of this year.
But this will initially be limited to around 600 new houses. The development will eventually have some 10,000 homes connected via fibre with speeds of up to 100Mbps but the project will take until 2020 to complete.
While BT has pledged to provide all new housing estates in the UK with fibre connections it has not yet made clear its plans for existing homes.
The current telecommunications system was never designed to carry data and many have called for an urgent fibre upgrade.
BT has argued that with costs of up to £15bn to roll out such a network it needs to be convinced of demand and have assurances from the government that it will be able to recoup its investment.
At the end of last year, Virgin Media announced that it would be upgrading its entire cable network - which covers half of UK homes - to provide speeds of up to 50Mbps (megabits per second) and this is expected to begin towards the end of this year and be completed in 2009.
London-based firm Geo, which also offers fibre via the sewers, serves mainly businesses but also leases its fibre to consumer providers such as Tiscali and Carphone Warehouse.
Antony Walker, head of the UK's Broadband Stakeholder's Group, cautioned that the H20 scheme could not create a fibred Britain alone.
"There are clearly benefits to using the sewers and this fibre deployment is good news but it is only a small piece of the jigsaw," he said.
The burgeoning fibre market is going to be a tough one for providers, according to Ian Fogg, an analyst with JupiterResearch.
"An optimistic view is that they will need penetration rates of between 15 and 20% of households in a particular area and with so many providers offering services that makes the business case very challenging," he said.
Mr Thomas of H2O is confident that its mega-fast service will have instant appeal for consumers and is pleased to be the first to offer such high speeds.
"We are talking here about fibre speed; not that dreaded word broadband," he said.
The service will be delivered to individual homes via a four-inch box attached to the house.
It will also serve local businesses and council services.
Bournemouth, Northampton and Dundee have been selected because H20 has already installed its fibre service to local council buildings.
The fact that the sewer-based fibre takes advantage of existing ducting means there is no need for expensive and disruptive road digging, making the system faster and cheaper to deliver.
"While deploying traditional fibre over a two-kilometre area would be six to 12 months in the planning. We can do it in four hours," said Mr Thomas.
Mr Thomas said the sewers solution was a lot cheaper than the conventional route of digging up roads.
"An average town of 75,000 homes would cost someone deploying traditional fibre between £50m and £70m. We can do it for 20 to 30% of that," said Mr Thomas.
H20 said it is in "advanced talks" with media partners and internet service providers who will offer the service to consumers. The first of these partners is due to be announced next month.
Roll-out in the chosen town will begin in September and take 18 months to complete.
Mr Thomas hopes to add another 14 towns over the next five years.