BT ordered to legally separate from Openreach

29 Nov 2016

Openreach roll-out in the UK. Image: Iain McDonald/BT (CC BY 3.0)

UK telecoms regulator Ofcom has triggered formal proceedings to enforce a legal split between BT and its wholesale broadband unit, Openreach.

Ofcom has ruled that BT failed to come up with voluntary reforms that would make Openreach sufficiently independent enough to deliver improvements to the UK’s broadband infrastructure.

While BT will continue to retain ownership of Openreach, the latter stopped short of being made a separate company because of potential ramifications for the BT Pension Scheme, which currently has a £14bn deficit.

“We are disappointed that BT has not yet come forward with proposals that meet our competition concerns,” Ofcom stated.

“Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users,” Ofcom added.

Competitors claim delays

Ofcom said that it was preparing a formal notification to the European Commission to begin the separation process.

Openreach is BT’s wholesale arm that was established to facilitate access for other operators – including Sky, TalkTalk and Vodafone – to the BT network.

However, now Ofcom wants Openreach to become a distinct company with its own board.

On Monday, BT appointed Mike McTighe to be the first chair of Openreach. McTighe was on the board of Ofcom for eight years between 2007 and 2015, and has enjoyed a long career in the telecoms business.

BT rivals have claimed that they have endured delays to repairs and under-investment in upgrades, preventing them from providing consumers with super-fast broadband.

“We will continue to work with Ofcom to reach a voluntary settlement that is good for customers, shareholders, employees, pensioners and investment in the UK’s digital future,” BT said.

Openreach roll-out in the UK. Image: Iain McDonald/BT (CC BY 3.0)

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years