Regulator Ofcom ruled on Tuesday that it will present "no regulatory barriers" to the development of super-fast broadband infrastructure.
The ruling will allow BT to proceed with an investment of £1.5bn in the network, giving up to 20 million UK homes access to high-speed internet.
BT made clear it only wanted to make the move if regulator Ofcom allowed a fair return on that investment.
Ofcom said that hands-off regulation would lead to higher involvement.
"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."
The network would see the installation of fibre-optic cables to street-side cabinets, offering speeds of between 40 and 60Mbps, with about 1 million homes having fibre to the home and speeds of 100Mbps.
In a statement, Ofcom said that "Recent announcements of investment and planned investment, including Virgin Media's launch of a 50Mbps service, are very positive for consumers. Consumers will benefit even more from increased choice and wider availability."
However, the regulator has "a central role to play in enabling both investment and competition", it said.
That includes allowing wholesale pricing flexibility to allow BT to sell access to their network as a fair return on their investment.
Ofcom also suggested it would "minimise unnecessary inefficiencies" in the design and build of new networks, while "continuing to protect the consumer interest".
BT chief executive Ian Livingston welcomed the move, saying it "set expectations for the whole UK industry as the market evolves into a fibre-based world".
"Today's announcement gives us the green light to push ahead with our 1.5 billion pounds superfast broadband investment plans to reach at least 40 percent of UK households by 2012," Mr Livingston said in a statement.
BT in the past has urged Ofcom to nurture a "supportive and enduring regulatory environment" which includes removing current barriers to investment and making sure that anyone who chooses to invest in fibre optics can earn a fair rate of return.
The communications company hopes to lease access to its new network to third-party Internet Service Providers and be given pricing freedom in order to earn a financial return on its investment.
Currently Virgin Media is the only other provider of a fibre-optic network to a large number of people in the UK. Its fibre-to-the-cabinet offers speeds of up to 50Mbps.
Andrew Ferguson, editor of ThinkBroadband.com, said: "The options for Ofcom were limited since if it refused BT then the only next generation like network approaching national coverage would be Virgin Media who currently offer no form of wholesale access."
No responsibility can be taken for the content of external Internet sites.
Return to internet news headlines
View Internet News Archive