C&W said on Thursday that it is committing up to £100m to the scheme, which follows its takeover of Bulldog Communications.
It is targeting around 400 exchanges in urban areas -- which will allow it to reach almost a third of UK homes and businesses. It will offer broadband at speeds up to four megabits per second (Mbps) -- much faster than the broadband that is on offer from BT at present.
C&W chief executive Francesco Caio said on Thursday evening that the company will target business customers, and will also offer a broadband service for consumers who want to access television down their phone line.
C&W's services will be sold under the Bulldog brand, and the telco is aiming to be generating broadband revenues of £250m within four years.
C&W has been a fierce critic of BT in the past, but until now it has made little progress in actually competing with the company in the broadband market.
Bulldog was one of the few operators to take on BT head-to-head through local-loop unbundling (LLU). It installed its own telecommunications kit in exchanges in central London and offered broadband services that were much faster than BT's.
LLU had been a flop in the UK, with just a few thousand lines being unbundled, and the failure pushed Ofcom into forcing BT to cut its LLU prices earlier this year. "For the first time through local loop unbundling, we feel we have a bit of a level playing field vis-a-vis BT," said Caio.
Analysts believe C&W's move will be good for competition.
"This looks like a sensible way forward for the UK's second operator. C&W certainly needs a better position in the broadband market," said Julian Hewett, chief analyst at Ovum.
Hewett added that C&W's backbone network passes close to BT local exchanges in many UK cities and towns. This will help it to reduce the cost of rolling out its new services because using its own network to link to the Internet will be cheaper than using BT's.
