UPDATE 2-Britain's Openreach ramps up fiber-first broadband strategy

* Increases connections target by 1 million

* Earmarks eight cities for first wave

* Highlights need for acceptable return on investment (Adds quotes, government and competitor responses)

LONDON, Feb 1 (Reuters) - BT's Openreach will connect fiber broadband in 3 million premises by the end of 2020, it said on Thursday as it kicked off a drive to build the ultrafast network that British residents and businesses demand.

Openreach, the country's national broadband infrastructure provider, said it would recruit 3,000 engineers in 2018 to ramp up its rollout of fiber broadband to guarantee much faster speeds for users.

Britain is near the bottom of the European league for full-fiber connections, a position that critics say is down to lack of investment by Openreach's owner BT. About 500,000 premises have full-fiber connections on the Openreach network.

The company had previously aimed to supply 2 million properties by 2020, rising to 10 million by the mid-2020s.

It had largely focused on a fiber-copper hybrid technology, which can deliver speeds of up to 330 megabits per second, but performance depends on the distance from the full-fiber network. Full-fiber connections are not hampered by distance and can provide speeds up to 1 gigabit a second.

Openreach Chief Executive Clive Selley said the company had adopted a "fiber first" strategy.

"We are future-proofing the UK's connectivity and delivering an infrastructure technology that is not only significantly more reliable ... but one that supports the speed requirements of the country for decades to come," he told reporters.

Eight cities -- Birmingham, Bristol, Cardiff, Edinburgh, Leeds, Liverpool, London and Manchester -- will be upgraded in the first phase.

The government said that full-fiber connectivity is vital for Britain to attract investment in the global market.

"I'm glad that Openreach has begun to make this shift in strategy, away from reliance on copper-based systems and in favor of the best modern technology," said Matt Hancock, the government minister responsible for the broadband industry.


Selley said that Openreach had calculated the cost of connecting an urban property at 300 pounds to 400 pounds ($427-$569). At the midpoint, that would entail spending about 600 million pounds, plus connection costs of 150-175 pounds per property, in the first wave.

He added that the company needs to make an acceptable return on its investment and would require support from broadband providers that use the network, such as Sky, TalkTalk and Vodafone, as well as government and regulators.

Openreach would also need a switchover process that would ultimately force all customers on its legacy copper connections to move to the new network, he said.

Vodafone, which announced a rival partnership with fiber network provider CityFibre in November, said it supported Openreach's plan in theory.

"It's good news, but it then has to be translated into commercial offers," Chief Executive Vittorio Colao said.

TalkTalk said that Openreach had now accepted the need for greater full-fiber investment, but its plans depended on widespread take-up.

"That will only work if Openreach radically reduces proposed pricing, making full fiber affordable to all consumers, rather than just a privileged few," a spokesman said.

"It's crucial the transition to full fiber is not used to conceal large price rises for customers." ($1 = 0.7026 pounds) (Editing by David Goodman)