BT's discussions with the government over its plan to deliver universal high-speed broadband across the UK are reportedly "close to collapse".
Ministers have promised to implement a new broadband Universal Service Obligation (USO) that ensures everyone in Britain has a legal right to request minimum speeds of 10Mbps by 2020.
According to the government, this is the speed that will meet the typical needs of a family that wants to browse the web, stream films and carry out video conferencing at the same time.
However, BT has volunteered to deliver universal high-speed broadband to all areas of the UK, as an alternative to regulation.
Under BT's offer, which would be primarily delivered by Openreach, many premises would receive speeds substantially faster than 10Mbps. As a result, the proposal could render the planned USO unnecessary.
The government has recently been in talks with BT to develop the plan, which would be legally binding if it is approved.
However, sources have told the Telegraph that the discussions are not going well, with the possibility of legal challenges from rival firms proving to be one major stumbling block.
Indeed, the Times reported last month that Sky Broadband, TalkTalk and Hyperoptic would be willing to challenge the plan if it is approved by ministers.
An unnamed source told the newspaper: "The law is very clear on how a USO should be delivered.
"BT and government can’t simply call the USO something else and hope the law doesn’t apply."
The source added that if BT persuades the government to ignore the legal framework, it could face "years in court", which would "derail the process and leave customers waiting even longer for the fast broadband they deserve".
The Telegraph understands that an official announcement on the outcome of the talks will be made in the next few days.