Ofcom recommends reforms but stops short of forcing BT to sell Openreach

Ofcom stated that these proposals are designed to ensure Openreach "serves all of its customers equally". Ofcom also said Openreach must be operationally independent of BT but stopped short of requiring the telecoms giant to sell off Openreach to new owners. Openreach provides network connection and maintenance services to BT and many of its rivals.

Under the plans (77-page / 634KB PDF), which are open to consultation until 4 October, Openreach would become legally separate from BT and one of its stated purposes would have to be "to act in the interests of all downstream customers equally".

BT would have control over the appointment of non-executive directors to Openreach's board, though all but one of the non-executive directors should have no affiliation to BT. Ofcom would need to be consulted and approve each appointment of a board member. The Openreach board would appoint a chief executive to run the business as well as another executive to sit on the board.

Openreach would have "greater independent financial control" and its own brand, distinct from BT's. The company would also "be obliged to consult formally with all downstream customers on large-scale investments", and be obliged to keep ideas shared with it by its customers confidential from BT, Ofcom said.

The regulator said that its "strong preference" is for people who work for Openreach to be employees of the company rather than of BT to "prevent any real or perceived conflict of interest, and allow Openreach to develop its own distinct organisational culture".

Ofcom said it also favours Openreach owning "assets it already controls", such as underground ducts and telegraph poles and other telecoms infrastructure, but said it is open to proposals that would help reduce the costs involved in transferring assets from BT to Openreach.

The proposals "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 statement.

The regulator said it would look into forcing BT to sell off Openreach if the measures do not "ensure that Openreach acts more independently from BT Group, and takes decisions for the good of the wider telecoms industry and its customers".

Many of the changes Ofcom has proposed to Openreach's business are based on suggestions made by BT. In a statement BT said the changes would enable it to "focus on its plans to further improve the UK’s digital infrastructure".

BT Group chief executive Gavin Patterson said: "These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested. Openreach is committed to delivering better service, broader coverage and faster speeds and these changes will enable it to do just that."

BT's rivals in the UK telecoms market gave a mixed reaction to Ofcom's plans.

Jeremy Darroch, group chief executive at Sky, said the proposals are "a step in the right direction" but said greater changes "would have guaranteed the world-class broadband network customers expect and the UK will need".

Darroch said it is important that Ofcom's proposals are "implemented rapidly, fully and without dilution" and that Sky is "encouraged by Ofcom’s stated commitment and willingness to use its powers to hold BT’s feet to the fire".

Dido Harding, chief executive of TalkTalk, said the "structural separation" of BT and Openreach would have been "cleaner" and come with less complex regulation.

CityFibre, a company that has invested in ultrafast broadband services, said the debate over the way BT should be structured has created "a period of uncertainty at a time when the industry needs clarity, direction and competitive investment".