Government couldn't see past the old world of cable and watching football, BT pretty clearly could see far past just the TV. It was popping up on the news pretty regularly in the late 80s along with all the interesting things it might bring.
Me, I just wanted to consign my BT Home Highway (128K ISDN) to the bin.
What we ended up with was a travesty with BT restricted to copper only and exchange sharing for ADSL. As someone else pointed out most of what they invented got sold off to S Korea.
That has not been my experience. I live in an urban area where BT has a monopoly (no Virgin). They were not even slightly interested in deploying even FTTC -- the coverage was full of "notspots" where one house in a street had decent broadband and another up the road had none at all. BT have been quite lazy from where I stand, leaving players like CityFibre an opening.
Also, blaming Thatcher towards the end of this decade seems not to be very useful. More recently, Ofcom asked BT to consider FTTH repeatedly in aughties (2000-2010). BT declined to deploy saying "no business case" right up to Dec 2017 when their hand was forced by Ofcom. If BT were better run, they'd recognize the value in FTTH by the end of the aughties surely?
CityFibre is deploying fiber to a bunch of cities like Milton Keynes and Peterborough.
I do agree that there are a number of ISPs, like Sky and Talktalk, who are content to ride on OpenReach's coattails and build no last-mile infrastructure of their own. Virgin Media do have their own last-mile infrastructure but it's very, very limited geographically afaik.
[1]https://www.ultrafibreoptic.co.uk/ [2]https://www.talktalk.co.uk/shop/ufo/broadband
They didn't role it out because first of all they were barred from selling TV over fibre in the late 80s early 90s in favour of foreign cable companies. Those cable companies eventually merged to form Virgin Media.
Later BT opted for cheaper VDSL technology because it wasn't clear they would be allow to profit (due to wholesale price regulation) from FTTH investment. The expensive bit of deploying FTTH is in "holes and poles". i.e. digging up roads.
None of the other UK players want to invest in FTTH outside of major cities and only BT is legally compelled to provide any form of broadband nationally at all. Firms like CityFibre just want to cream off the most profitable areas of the country and kill off cross-subsidising the rest.