BT's Openreach network should become a 'distinct company' - Ofcom


BT's Openreach network should become a "distinct company" within the BT Group as part of reform proposals put forward by telecoms regulator Ofcom which fall short of recommending a sell-off.

The telecoms giant has faced calls for Openreach to be split off from the rest of the company.

But in a report released on Tuesday, Ofcom instead proposes major reform of the division of BT responsible for rolling out super-fast broadband across the UK by using providers such as Sky, TalkTalk, Vodafone and BT Consumer.

BT Openreach.

The proposals include making Openreach a distinct company with its own board of non-executive directors not affiliated to BT Group.

It also proposes more consultation with customers on large-scale investments, having its own staff working for Openreach, taking ownership of assets it already controls, having control over budget allocation, and using independent branding.

The current structure of BT was introduced by Ofcom in 2005, but it allows BT to influence significant Openreach decisions, meaning they can be made in the interests of its own retail businesses, rather than competitors.

Ofcom, which is seeking views on the plans by October 4, said the new model "would provide Openreach with the greatest degree of independence from BT Group possible without the costs and disruption of separating the companies entirely".

Openreach van

The proposals come a week after MPs said that if BT does not ramp up investment in Openreach and address poor service, Ofcom should force it to split off the division.

BT - which now also owns mobile phone group EE - has pledged to spend £6 billion over the next three years and overhaul customer service to see off the threat of a forced split.

But a scathing report from the Culture, Media and Sport Select Committee last week claimed BT has made "significant" under-investments in Openreach, which could run to hundreds of millions of pounds each year.

And the MPs accused BT of making strategic decisions that put the group's interests ahead of customers and Openreach, saying BT "appears to be deliberately investing in higher-risk, higher-return assets such as media properties, and not investing in profitable lower-risk infrastructure and services through Openreach".

Openreach engineer works on problematic telephone line.

They said tougher penalties for poor service would encourage BT to invest more in Openreach.

Rival companies such as Sky, Vodafone and TalkTalk have long called for a split between BT and Openreach, complaining of poor service and urging the group to replace its ageing network of copper wire.

Ofcom chief executive Sharon White described the move as "the biggest shake-up of telecoms in a decade", adding that she would enforce the change if the company resists it.

She explained to the BBC Radio 4 Today programme: "Openreach will become a distinct company, legally separate from the rest of BT; it will have its own board, obliged by law to act in the interest of all customers; and it will have to consult on big investments that matter to the UK, like fast fibre to the doorstep."