Openreach should become a ‘distinct company’, says Ofcom

29 July 2016

BT's infrastructure division Openreach should become a distinct company with its own board, Ofcom has proposed.

Following measures outlined in February aimed at making the UK a world-leading digital economy over the next 10 years, Ofcom has announced plans including a major reform of Openreach, the network division of BT.

Ofcom said that Openreach, which maintains the UK’s mains telecoms network used by telephone and broadband providers, should become a distinct company.

Ofcom has proposed that Openreach should be a legally separate company within BT Group, with its own board with a majority of non-executive directors that are not affiliated to the BT Group, and a CEO accountable to Openreach not BT Group.

Openreach would be obliged to consult with customers such as Sky and TalkTalk on large-scale investments, including confidential discussions, under the model. It would have its own staff, not employed by BT Group, enabling it to develop its own organisational culture, Ofcom said.

Openreach should also own its physical network and assets it already controls. It should develop its own strategy and annual operating plans, within an overall budget set by BT Group, and have independent branding.

Ofcom said: “This model would provide Openreach with the greatest degree of independence from BT Group that is possible without incurring the costs and disruption – to industry and consumers – associated with separating the companies entirely.”

It added that it would reconsider whether BT and Openreach should be split into two completely separate companies with different ownership, if this could not be achieved.

Ofcom said it would seek views on the plans until October 4.

Ofcom acknowledged BT had proposed changes to make Openreach’s governance more independent and accountable, but said that these did not fully address its concerns.

New rules under the Communications (Access to Infrastructure) Regulations 2016 come into force on Sunday to give telecoms providers further rights to access physical infrastructure. Ofcom said the measures were designed to cut the cost of deploying broadband networks, by sharing access to infrastructure across different sectors.

BT Group CEO Gavin Patterson, said the group was ready to invest six billion pounds into its UK networks over the next three years.

“We have listened to Ofcom and industry and are introducing significant changes to meet their concerns,” Patterson said. “These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested.”

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