Both firms will separate this year but BT will continue to set budgets for Openreach
BT has agreed to Ofcom’s conditions for a legal separation of it broadband division Openreach this year, after two years of negotiations.
The agreement will transform Openreach into a “distinct company” according to Ofcom in a statement, with its own staff, strategy and management “to serve all of it customers equally”. The regulator had threatened to force the separation after complaints of fairness from broadband rivals.
Under the agreement 32,000 staff will be transferred from BT to work directly for Openreach, “to develop its own distinct organisational culture.”
BT’s broadband rivals such as Sky, TalkTalk and Vodafone use Openreach’s infrastructure to provide broadband to its customers. These firms have in past complained on high charges, poor services and failure to invest in the sector. Under the new agreement Openreach will be obliged to report large-scale investments to its customers. Openreach will have control over budget allocation but budgets will still be set by BT.
The BT logo to be removed from all Openreach branding to reflect the separation.
Not just BT
Ofcom chief executive Sharon White said: “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.”
BT chief executive Gavin Patterson added: “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.”
Some hope the separation will bring more investments into Britain’s network infrastructure, CityFibre director of strategy and policy is concerned Ofcom did not address this in today’s statement.
“The real story here is the UK’s shocking ‘fibre gap’. Whilst it is welcome that these time-consuming negotiations seem to be at an end, there is nothing in this announcement to suggest Openreach will now start to build the fibre infrastructure this country needs. Ofcom’s focus needs to shift to encouraging alternative fibre builders to do the things Openreach can’t or won’t do – whatever its legal status”.
Talk Talk chief executive officer Dido Harding has hopes for improvement to broadband for UK customers. She said: “We hope this is the start of a new deal for Britain’s broadband customers, who will be keen to see a clear timetable from Openreach setting out when their services will improve.”