Every home in the UK will have to pay an internet piracy tax as part of a new Government commitment to give every household broadband access by 2012.
Lord Carter's Digital Britain report suggested scrapping BT's obligation to provide fix line access and instead rolling out the new technology.
A so-called Universal Service Commitment would see everybody able to watch video online, including the BBC iPlayer, and put Britain at the vanguard of new internet technology.
The government also announced its plans to legislate around illegal internet file sharing, which would see online providers force to tell those breaking rules their conduct is unlawful.
Internet service providers will be required to collect information on serious repeat offenders and hand over details to music and film companies that own the content. They will then be subject to court orders.
As part of the clampdown the government will launch a rights agency to bring together figures in the industry to agree how to encourage and people to stop the practice.
The new rights agency would be funded via a levy - believed to be £20 - on internet service providers (ISPs) and the music and film industry.
Other conclusions could include a levy on broadband bills to compensate film and music companies for their losses from illegal downloads - which could a total of £1 billion over the next five years - and for Channel 4 to be pushed into a merger to ensure its future as a public service broadcaster.
Estimates suggest the cost of the universal broadband could run into hundreds of millions of pounds.
It is likely to be funded by service providers, such as BT, Sky and Virgin, as well as mobile phone operators, broadcasters and web content owners.
That raises the prospect that the BBC, which operates the popular iPlayer system to watch programmes online, could have some of the licence fee ring-fenced to help pay for the roll out.
Ministers see the communications sector as a growth industry for the country that can help boost the economy. The sector contributes £50billion to the UK, and the Government believes it will be the backbone of the nation's economy in the years to come.
'Internet access is not just about entertainment,' one source said last night.
'It is also an essential tool for business and learning. There's a social case for this commitment.'
About 40 per cent of homes did not have broadband by last year, according to Ofcom and some households - especially in remote areas - lack the necessary infrastructure to support it.
Under the Government’s universal service obligation, BT must provide fixed-line phone services and narrowband internet access to every household that wants them at a cost of up to £74million a year.
Communications Minister Lord Carter said this month that broadband 'is an enabling and transformatory service and therefore we have to look at how we universalise it'.
His final report, Digital Britain, will be published in June. It will outline plans to boost the internet and communications industries, as well as dealing with illegally copying and sharing music and films online.
The Times reported that Lord Carter is to propose creating a body to mediate between internet service providers (ISPs) and music and film companies.
It would provide information about people who repeatedly infringe copyright by copying and sharing files, and be paid for by a levy on ISPs, the paper said. Such a charge could be passed on to broadband customers.
Professor Martin Cave, a telecommunications expert from Warwick Business School, said the country needed to create a network of fast fibre optic connections.
'Large-scale fibre optic investment is essential and UK policymakers must resist introducing any sort of regulation that deters private companies from spending the money needed to upgrade our internet infrastructure,' he said.
'With the increasing use of the internet for online gaming and downloading music, we need to allow the internet to evolve and develop in order to cope with these new demands.
'New technologies such as the BBC's iPlayer require much faster processing and no delay in transmission.'
Lord Carter's report is expected to push for a merger between Channel 4 and either Five or BBC Worldwide to create a viable non-commercial competitor to the BBC.
Last week communications watchdog Ofcom warned that Channel 4 faced a bleak future unless such a deal could be reached.
In a speech today in London, Gordon Brown said Lord Carter's report 'sets out the scale of our ambition to compete in the digital economy'.
He will add: 'Our digital networks will be the backbone of our economy in the decades ahead.
'We know that every aspect of our lives - every school, every hospital, every workplace and even every home - will depend on the services the digital network provides.
'It is as essential to our future prosperity in the 21st Century as roads, bridges, trains and electricity were in the 20th Century.
'So even at this difficult time for the economy, we will not turn our backs on the future. Britain must invest in the industries of the future. THE MAIL