Broadband: BT and Ofcom reach deal on Openreach separation

An Openreach engineer surveying on the causeway to Holy Island as part of the iNorthumberland programme.
An Openreach engineer surveying on the causeway to Holy Island as part of the iNorthumberland programme.

Telecoms giant BT has agreed a deal with Ofcom which will see Openreach, which runs the UK’s broadband infrastructure, become a legally separate company.

It follows the regulator announcing in November that BT must split from Openreach as not enough progress had been made to tackle competition concerns.

BT and Ofcom have reached agreement on a long-term regulatory settlement that will see Openreach become a distinct, legally separate company with its own board, within the BT Group. The agreement is based upon voluntary commitments submitted by BT that the regulator has said meet its competition concerns.

Once the agreement is implemented, around 32,000 employees will transfer to the new Openreach Limited; Openreach Limited will have its own branding, which will not feature the BT logo; the Openreach CEO will report to the Openreach chairman with accountability to the BT Group chief executive with regards to certain duties that are consistent with BT’s responsibilities as a listed company.

Gavin Patterson, BT chief executive, said: “I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. 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.”

Sharon White, Ofcom’s chief executive, said: “This is a significant day for phone and broadband users. 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.”

In January last year, Berwick MP Anne-Marie Trevelyan called for an end to BT’s ‘broadband monopoly’. The Tory MP co-signed a report, BroadBad, from the cross-party British Infrastructure Group (BIG) of MPs, which called on the regulator Ofcom to take radical action over the ‘natural monopoly too long enjoyed by BT Openreach’.

However, the company hit back, citing its efforts to equip rural areas. At the time, a BT spokeswoman said: “In excess of 70 per cent of households in the Berwick-upon-Tweed constituency have already been upgraded and this will increase to more than 90 per cent by the end of the current plans.”

Then in July, a committee of MPs said that BT is ‘significantly under-investing’ in Openreach, warning that it should put its house in order or face a full split between Openreach and BT Group.

A statement from BT at the time read: ‘We’re disappointed to be criticised, having invested more than £1billion a year in infrastructure when the UK was emerging from recession and rival companies invested little. As the report acknowledges, BT’s investment has made the UK a broadband leader among the major economies in Europe.’

But then in November, Ofcom ordered the split must go ahead, saying it was ‘disappointed that BT has not yet come forward with proposals that meet our competition concerns’.