Ofcom says Openreach must become “legally separate” from BT

Ofcom has announced major organisational changes for Openreach, ordering that the infrastructure wing of the telecom firm must become legally independent from BT.

Openreach is the part of BT responsible for the lines used to provide telephone and broadband services. Under rules introduced in 2005 Openreach is obligated to offer the same services to all customers, allowing other ISPs to compete against BT itself. However, there has been growing controversy over the past few years as BT has significant influence over Openreach, allowing it to make decisions which benefit its own operations at the expense of the competition.

While Ofcom has stopped short of recommending that Openreach and BT should be completely split, this is a huge shake up.

Under the proposal Openreach will become a distinct company, legally separate from BT with new branding and its own board of directors that will not be affiliated with BT, though the board will be appointed by BT in conjunction with Ofcom. The new and improved Openreach will make decisions which are in the best interest of all customers, with staff employed by Openreach rather than the BT group. It must also formally consult with customers such as Sky and TalkTalk when it comes to large investments, including a period of confidentially which will allow ISPs to discuss ideas without disclosing them to BT.

It’s hoped that this - alongside other changes such as easier access to the ducts containing telecom lines - will encourage greater investment in next gen broadband, particularly ultrafast Fibre To The Home (FTTH). However there’s disappointment from some in the industry that Ofcom has not pushed for full separation from BT.

Dido Harding, CEO of TalkTalk said “Legal separation still means that a highly complex web of regulation, and BT has proven itself expert at gaming this system. There is nothing to suggest they will not continue to do so in the new system. Structural separation is cleaner, with less red tape. In taking one cautious step forward, I fear Ofcom may in practice have taken five steps back.” And Mark Collins of fibre network operator CityFibre is skeptical it will do much to improve broadband services, saying "today’s proposals do not address Ofcom’s key objectives of reducing the country’s dependence on Openreach and encouraging essential investment in fibre."

There is an opportunity for BT’s competitors such as Sky and TalkTalk (which have together been trialling FTTH in York) to begin deploying fibre on a wider scale and bring world class broadband to millions of homes and businesses, but it still requires significant investment. And there is still the problem of access in rural areas, something that is unlikely to improve any time soon without incentives to encourage ISPs to expand into areas which are viewed as less economically viable than densely populated towns and cities.