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Ofcom forces broadband shake-up

BT escapes split but Openreach to have own board

OpenreachCompetition watchdog Ofcom has resisted calls for BT to offload its Openreach broadband division but said it must create a new relationship with rival firms.

In a move designed to improve network coverage,  BT will have to create a legally separate company within the group with its own board whose non-executives are not part of BT. They will be appointed in consultation with Ofcom.

There is a requirement for greater consultation with customers and an obligation to consult formally with customers such as Sky and TalkTalk on large-scale investments.

Openreach should have its own brand, not affiliated with BT Group, to “help embed the organisational culture of a distinct company”.

Rivals argued that competition would be best served by completely separating from BT the Openreach infrastructure network that links homes and offices around Britain.

Ofcom believed that would be too complex and take too long. It said its proposed solution represented the biggest shake-up in the sector for 10 years, though critics says BT will continue to hold the purse-strings have retain too much control over the network.

BT said: “We welcome Ofcom’s recognition that structural separation would be a disproportionate move. Our proposals provide Ofcom with every benefit they’re seeking but without any of the substantial and unavoidable costs associated with legal incorporation. We will continue to engage with them over the coming months.”

BT’s shares jumped 2.5%, reflecting relief from investors who had feared Ofcom might force it to split off Openreach entirely.

Jeremy Darroch, chief executive of Sky, said: “Today’s proposal to create a legally separate Openreach is a step in the right direction, although falls short of the full change that would have guaranteed the world-class broadband network customers expect and the UK will need.

“In particular, leaving Openreach’s budget in the hands of BT Group raises significant questions as to whether this will really lead to the fibre investment Britain requires. At the end of the day, Ofcom’s changes will only work if they deliver better outcomes for customers.

“It’s now important that the changes Ofcom have mandated today are implemented rapidly, fully and without dilution. We are encouraged by Ofcom’s stated commitment and willingness to use its powers to hold BT’s feet to the fire.”

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