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BT must make Openreach independent, says Ofcom, but stops short of total sell-off

The watchdog's order follows criticism that BT hasn't invested enough in its broadband infrastructure division, whose tech is used by rival ISPs.

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BT must invest more in its broadband business, Ofcom says -- though the regulator stopped short of forcing the telecoms giant to sell off the Openreach subsidiary completely.

Openreach, which is the part of BT that handles almost all of the UK's broadband infrastructure, has been criticised by rival internet service providers and MPs alike. They claim the subsidiary isn't doing enough to deliver speedy broadband to Brits, and has been "significantly underinvesting" in Openreach.

Today Ofcom says that Openreach must become a distinct company from BT, with its own board of directors that have no affiliation with the BT Group mothership. Ofcom's directive also says that Openreach would be obliged to consult with its customers -- which would include public-facing internet service providers such as Sky and TalkTalk -- on major investments, without the content of those chats being disclosed to the BT Group.

bt-ceo-gavin-patterson.jpg

BT Group CEO Gavin Patterson.

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"We have listened to Ofcom and industry and are introducing significant changes to meet their concerns," said BT Group Chief Executive Gavin Patterson. "These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested."

Rival ISP Sky is less enthusiastic. "Today's proposal to create a legally separate Openreach is a step in the right direction," said Sky's Group Chief Executive Jeremy Darroch in a statement, "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," Sky's statement continues, "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."

No sell-off

Ofcom's ruling stops short of making BT sell off its Openreach business entirely.

"Separating BT and Openreach would mean significant disruption and costs, not just to BT but also the wider industry -- and potentially consumers," Ofcom said in statement. "We have not ruled out separation in the longer term, but we think we can achieve the necessary improvements more quickly by making sure Openreach becomes more independent, and serves its customers equally."

Customers 'want and deserve a better service'

"The regulator has given [BT Group] the chance to make improvements to avoid potentially losing Openreach forever," said Richard Neudegg, head of regulation at uSwitch.com. "Quite frankly, consumers -- too many of whom are familiar with delays incurred by Openreach even when BT isn't their retail provider -- don't care how it's done. They just want and deserve a better service."

"BT's reorganisation of Openreach," Patterson said, "will provide all the benefits that Ofcom is seeking while avoiding the extensive, disproportionate costs that would be incurred if assets had to be transferred into a newly incorporated subsidiary company."

Update 12:45 p.m. UK: Added comment from Ofcom.