BT Agrees To Legally Separate Openreach

BT has agreed to make its Openreach division a legally separate company, satisfying regulator Ofcom’s demands that the unit become more independent and transparent.

Openreach will have its own strategy and budget allocation, which will be determined by its own independent board, while all 32,000 staff will become legal employees of the new company in what is being described as one of the biggest transfers in corporate history.

Furthermore, Openreach will have its own distinct brand and will have to consult with customers including Sky, TalkTalk and Vodafone before it makes large investments. The new Openreach will have a legal purpose to serve all customers equally, not just BT, of whom it has been accused of favouring.

BT Openreach

“This is a significant day for phone and broadband users,” said Ofcom CEO Sharon White, who said the new Openreach would continue to be monitored. “The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT.

“We welcome BT’s decision to make these reforms, which means they can be implemented much more quickly. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies.”

The separation marks the end of a once-in-a-decade review of the UK communications market started by Ofcom in 2015.

Competitors had argued BT’s ownership of Openreach gave it an unfair advantage and that the current model gave little incentive for BT or rivals to invest in fibre infrastructure. BT refuted this, arguing that Openreach benefits from BT’s capital and R&D capabilities and that any disruption would impact its investments in G.Fast and fibre to the premise (FTTP).

Industry verdict

Ofcom seems to have agreed that a full separation would cause uncertainty in the market and is pleased with the outcome of negotiations. BTis also happy at having avoided the prospect of having to sell-off its prized network assets.

“I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure,” added BT CEO Gavin Patterson. “It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.

“This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.”

Sky, along with TalkTalk and Vodafone, had been one of the most vocal opponents of the previous structure and had pushed for full separation. However it said it too was pleased with the plans.

“This is a welcome step that we have long called for on behalf of our customers,” said a spokesperson. “A more independent Openreach is a step towards delivering better service to customers and the investment that the UK needs. It’s important that today’s agreement is now implemented by BT in good faith and without delay.”

Experts have also welcomed the development but warned it might not be the end of the matter.

“This is a good day for the average broadband, TV and phone customer too, who will enjoy all the benefits the stoking of competition in a fairer marketplace is likely to bring, without suffering the costs and delays to infrastructural rollout a full separation would have incurred,” suggested Dan Howdle, telecoms expert at cable.co.uk. “We should not, however, rule out a full separation happening at some point in the future.”

Quiz: What do you know about fibre broadband?