Ofcom recommends Openreach be made ‘legally separate’ from BT

Image credit: Press Association

Telecoms provider Openreach should become a “distinct” company from BT, network regulator Ofcom has announced.

Ofcom said in February that Openreach had to become more independent of BT, and today it published its proposals for how that should work.

The communications regulator stopped short of requiring the BT Group to sell off its network division.

However, it said Openreach should be legally separate from BT’s consumer division, with its own board of directors, the majority of whom would have no affiliation to BT.

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Staff would be accountable to the independent board rather than to the BT Group and it would have its own business strategy, budget and independent branding.

There would also be an obligation for it to consult formally with Openreach customers such as Sky and TalkTalk on large-scale investments and a confidential phase during which customers could discuss ideas without this being disclosed to the BT Group.

Ofcom said its proposed model would give Openreach the greatest possible independence from BT Group without incurring the costs and disruption of separating the companies entirely.

Openreach is the part of BT that develops and maintains the UK’s main telecoms network, which is used by other telephone and broadband providers such as Sky, TalkTalk, Vodafone as well as by BT itself.

It is obliged to offer the same products to all companies on the same terms, but Ofcom is concerned that BT currently has too much influence over Openreach decisions.

“BT has an incentive to make these decisions in the interests of its own retail businesses, rather than BT’s competitors, which can lead to competition problems,” it said.

The proposals put forward by Ofcom are designed to ensure that Openreach acts more independently from the BT group and takes decisions for the good of the wider telecoms industry and its customers.

However, the regulator has not ruled out splitting BT and Openreach into two entirely separate companies under different ownership if the necessary degree of independence not achieved.

Gavin Patterson, BT Group Chief Executive, said: “We have listened to Ofcom and industry and are introducing significant changes to meet their concerns.

“These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested.”

Sharon White, Ofcom Chief Executive, said: “We’re pressing ahead with the biggest shake-up of telecoms in a decade, to make sure the market is delivering the best possible services for people and business across the UK.”

Ofcom is seeking views on the proposals for Openreach by 4 October.