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BT has announced it will give its broadband business Openreach more independence in a bid to improve service and avoid being forced to split into two companies.
The announcement comes after telecoms regulator Ofcom told BT that the Openreach network should become a "distinct company" within the BT Group as part of major reform proposals.
Ofcom's request also involves Openreach being obliged to consult formally with customers such as Sky and TalkTalk on large-scale investments, with a 'confidential' phase during which customers can discuss ideas without this being disclosed to BT Group.
"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," Ofcom said in a report.
"If it cannot achieve this, Ofcom will reconsider whether BT and Openreach should be split into two entirely separate companies, under different ownership."
However, Ofcom didn't go as far to say Openreach – which provides the final mile of network connection into homes – should be split from BT. The regulator will now launch a short consultation, running until October 4, to get the opinions of those in the sector.
"Openreach must make it much easier for competitors to access this network, and provide comprehensive data on the nature and location of its ducts and poles," Ofcom argued. It continued to say that it should operate at "arms-length" from BT.
"The changes will enable BT to focus on its plans to further improve the UK's digital infrastructure," BT said in a statement.
The main governance changes will include the creation of an Openreach Board with an independent Chair and a majority of independent members; the greater delegation of strategic, operational and budgetary responsibilities; and an enhanced consultation process with industry on future investment plans.
BT believes the re-organisation of Openreach addresses the concerns relating to governance set out by the Culture, Media and Sport select committee which last week requested that BT "allows Openreach much more autonomy over what it invests, when and where".
The BT subsidiary will therefore be in charge of its own decisions on budget and investment strategy, rather than having them dictated by BT. Openreach will remain a heavily regulated business with Ofcom determining the prices for more than 90 per cent of its products, and it will continue to be overseen by Ofcom.
Kester Mann, principal analyst of operators at CCS Insight, said that Ofcom's proposals are about as radical and stringent as they could have been without taking the ultimate step to structurally separate Openreach from BT.
"They show clear focus to address flaws within the current model and a desire to bolster broadband infrastructure service and deployment in the UK," he said.
The analyst also saw the decision by Ofcom to not force BT to split completely as a bit of a surprise.
"It would have been the most controversial action the regulator could have taken and would still not have offered guaranteed improvements for customers," Mann added. "Although BT will breathe a sigh of relief that Openreach will remain a part of the group, Ofcom's strongly-worded statement should leave it under no illusions that it needs to up its game. Indeed, the threat to hive off Openreach still remains if it is unable to act more independently from the BT group."
Ofcom has long believed that a digital divide, between people who can and cannot access high-speed internet services, still exists. The company's latest actions count towards its fight for a "universal right to fast, affordable broadband for every household and business in the UK".
This article was originally published by WIRED UK
