Every home in the UK is to have broadband internet access by 2012 under Government plans announced today.
Lord Carter's Digital Britain report proposed to scrap BT's obligation to ensure every home has access to a telephone line and replace it with a requirement to provide broadband.
This so-called universal service commitment would aim to ensure everyone had quick enough internet access to watch videos online.
The report also proposed the creation of a new body to deal with the problem of people illegally copying and sharing music and films over the internet.
The new rights agency would be funded via a levy on internet service providers (ISPs) and the music and film industry.
Lord Carter also said new legislation was likely to be brought in requiring ISPs to take action against customers who repeatedly infringe copyright by sharing files.
ISPs would have to tell customers their activities were illegal, and collect information on repeat offenders.
This information would have to be passed on to rights-holders - film and music companies - on receipt of a court order.
The new broadband obligation would involve all the major players in the field, the report said.
Lord Carter said: "At the moment there is no universal service commitment to broadband at all.
"We're saying it should be provided by the entire industry. It could be via fixed line connection or wireless."
Lord Carter's interim report outlines plans to boost the internet and communications industries, which contribute £50bn to the UK and which the Government said will be the backbone of the nation's economy in the years to come.
Before the publication of the final report later this year, the Government will decide whether public money should be used to help create a new superfast broadband network for the UK.
Ministers are concerned that internet providers may not have the inclination or finance needed for such a project, which would need substantial investment in new infrastructure.
The Government will look into regulator Ofcom's recommendations for a second Public Service Broadcaster to rival the BBC which would involve Channel 4 becoming part of a larger organisation.
In its report last week Ofcom left the door open for partnerships involving BBC Worldwide, the corporation's commercial arm and Five.
Today's report said that while it made sense to begin looking at public sector bodies like Channel 4 and BBC Worldwide, the Government was also looking at a "range of options".
The report said: "Channel 4 would continue to be the broadcast licensee within such an entity.
"For the public the viewing experience would be the same or better than today but as a sustainable part of a wider whole, operating successfully across the whole range of digital devices and platforms."
The report re-emphasised that the BBC was the "cornerstone" of audio visual public services.
Lord Carter said that any second entity would be subject to questions about competition.
Asked whether a merger with Five had been ruled out Lord Carter said that the Government had never made any comments on Five.
He added that it was a private company.
The Government said it was inviting the BBC to play a leading role in encouraging broadband take up.
The report talked about the development of "public service champions" of universal provision.
The BBC's role would be similar to that which it has played over digital broadcasting to market and drive up interest in getting broadband.
A plan to transfer existing FM radio stations to digital broadcasting, known as DAB, was outlined in the report.
Car manufacturers will be encouraged to make DAB radios standard in new vehicles.
Lord Carter said setting an "artificial" date for the end of FM broadcasting would be unhelpful.
The switchover would happen once DAB coverage was comparable to that offered by FM, and when half of radio listening was done over the DAB network.
The Government hopes these criteria will be met by 2015.
Intellect, the trade association for the high-tech industry, welcomed the report.
Sam Ingleby of Intellect said: "Stephen Carter's Digital Britain report has become more important in the context of a recession and I think that some of the announcements made today are exciting in their ambition and scope.
"The bold aim for universal broadband coverage by 2012, and the commitment to a digital future for radio are exactly the kind of shots in the arm that the UK economy needs to fight off its current malaise.
"However, there are still some big questions to answer. How do we get to superfast broadband which we believe will be the creator of thousands of jobs, and new types of jobs?
"How do we deal with illegal file sharing without just penalising ISPs?
"There is still a window for debate on these issues, but that window is closing. Stephen Carter has done very well to get here so quickly, but now he must go even further, faster."
Stephen Crowne, chief executive of Government technology agency Becta said: "There is a wealth of evidence to suggest that learners with speedy access to the internet at their place of learning and at home, benefit from enhanced learning and raised attainment levels.
"We firmly believe that reliable, widespread broadband access is an essential tool that will help equip learners with the training and skills that are required for a truly 'next generation' work force."
Andy Burnham, the Secretary of State for Culture, Media and Sport, said Lord Carter's 22-point plan would help the country reap the economic and social benefits of the digital age.
Outlining the report to the House of Commons, Mr Burnham said: "The challenge now is this: how to build the networks and infrastructure that help businesses and consumers get the most from the digital age; and funding the quality content that enhances our culture and economy."
But opposition politicians were united in their criticism of proposals for two megabit broadband, pointing out that national average access speed was already 3.6 megabits.
Jeremy Hunt, the shadow culture secretary, said: "Isn't the scale of the Government's ambitions pitifully low, simply saying it wants to ensure the whole population has access to half the current average speed by 2012?
"Why have we got such low ambitions, such a low target?"
BT said the report was right to recognise that the UK had one of the most developed and competitive communications industries in the world.
A spokesman said: "We welcome the clear sense of direction that Lord Carter has brought to the debate and are encouraged by his recognition of the need to incentivise investment.
"It is right that the Government are looking for ways in which everyone in the UK can benefit more from further investments in the UK's digital future."
Concerns were raised about older people being alienated as Britain goes digital.
Gordon Lishman, director general of Age Concern, said: "New ways to give people greater access to the internet are always welcome, however targeted efforts will need to be made to ensure all older people can benefit from the Digital Britain initiative.
"There's a lot on the web for older people. Accessing services and shopping online to get the best deals can be a real lifeline for some. However, not every older person has a computer at home ...
"We would not want to see a Digital Britain emerge where technology serves to entrench and exacerbate the exclusion of older people."
David Sinclair, head of policy for Help the Aged, said: "The strategy for a Digital Britain has huge potential to help improve services and better engage older people, allowing them to make a greater contribution to the UK economy.
"However, currently one in 10 older people describe themselves as out of touch with society and Government will need to make sure that the new strategy does not contribute to the alienation of older people.
"For many older people, the vision of a Digital Britain is not one they recognise - the benefits of high speed broadband are irrelevant to the seven out of 10 over-65s who have never used the internet.
"Many older people want to learn how to use the internet but those who choose not to go online should have an alternative source of information and services.
"In the report the Government restates the potential for digital radio switchover, however we are yet to hear a convincing case for it and Help the Aged will be monitoring plans closely to make sure the needs of older listeners are not sidelined in the rush to turn digital."
RadioCentre, the industry body for Commercial Radio, welcomed the report.
Andrew Harrison, chief executive of RadioCentre, said: "The report offers a real opportunity to secure a viable digital plan for radio.
"In particular, we welcome the report's recognition of the importance of extending digital radio coverage."
David Lammy, the minister for intellectual property, said developments in technology - particularly the ease with which high-quality copies of CDs and films can be made on home computers - had created new challenges for the copyright system.
"I want consumers to be aware that by downloading music or film from unauthorised internet services they are breaking the law and harming our creative industries," he said.