BT was/is obsessed with squeezing every last drop of bandwidth from POTS connections ... that wasn't what they wanted to do at all.
BT were preparing to do FTTH when I joined them in 1994 (I left in 2001). This was as you say going to be eye-wateringly expensive because BT have a universal provision requirement - they couldn't upgrade the network in the cities and not do it in the countryside. The idea was to pay for this by providing television services, but OfTel (now OfCom) said this would be unfair competition with the cable providers - who were cherry picking cities to make rollout cheaper. They would also have been in competition with Sky, which meant the Murdoch press lobbying against BT (among others; the media market is always a tangle of interests)
Additionally, local-loop unbundling (ie ADSL) was being proposed; BT were required to allow access to the last-mile network from in-exchange equipment, and do this at line rental prices that undercut themselves, in order to break their monopoly. OfTel were very likely to make the same requirement for FTTH/FTTC.
Of course, you pays your money you makes your choice - if BT had been allowed to go ahead with their TV services back then, we might've had FTTH way sooner, but BT probably still would have had a monopoly.
Source: I met the engineers doing FTTH on my first visit to Ipswich, I was part of the team working on the local-loop unbundling ordering systems (where other providers booked engineering time at exchanges) and gave presentations to them at OfTel's offices.
BT were preparing to do FTTH when I joined them in 1994 (I left in 2001). This was as you say going to be eye-wateringly expensive because BT have a universal provision requirement - they couldn't upgrade the network in the cities and not do it in the countryside. The idea was to pay for this by providing television services, but OfTel (now OfCom) said this would be unfair competition with the cable providers - who were cherry picking cities to make rollout cheaper. They would also have been in competition with Sky, which meant the Murdoch press lobbying against BT (among others; the media market is always a tangle of interests)
Additionally, local-loop unbundling (ie ADSL) was being proposed; BT were required to allow access to the last-mile network from in-exchange equipment, and do this at line rental prices that undercut themselves, in order to break their monopoly. OfTel were very likely to make the same requirement for FTTH/FTTC.
Of course, you pays your money you makes your choice - if BT had been allowed to go ahead with their TV services back then, we might've had FTTH way sooner, but BT probably still would have had a monopoly.
Source: I met the engineers doing FTTH on my first visit to Ipswich, I was part of the team working on the local-loop unbundling ordering systems (where other providers booked engineering time at exchanges) and gave presentations to them at OfTel's offices.