BT and Ofcom have agreed that Openreach will become a legally separate company, resolving one of the longest-running disputes over the UK’s broadband infrastructure.
BT said about 32,000 employees will transfer to the newly formed Openreach Limited, which will operate under its own branding distinct from the BT logo. Ofcom, the sector regulator, confirmed that BT has addressed the competition concerns it raised.
As previously reported, Ofcom had pushed for greater separation between BT and its Openreach subsidiary to encourage innovation and fairer competition in the market. The regulator had warned that while some progress had been made, it was insufficient and decisive action was needed to secure better outcomes for phone and broadband customers.
“This has been a long and challenging review where we have been balancing a number of competing interests,” said BT chief executive Gavin Patterson. “We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.”
Matthew Howett, practice leader of Ovum’s regulation and policy advisory service, said the deal was “tough but fair,” while acknowledging that not every stakeholder would be completely satisfied. Some of BT’s biggest competitors had hoped for a full structural separation of Openreach from the BT Group, but Ofcom maintained throughout the process that structural separation was not on the table.
The outcome leaves BT as the owner of Openreach but with significantly reduced control, a configuration that carries potential concerns for shareholders. At the same time, the agreement brings important benefits and greater clarity for the industry.
Howett noted that the settlement should give BT the regulatory certainty needed to plan and accelerate investment, particularly in expanding its fiber network. In addition, BT has indicated it is prepared to support the government’s universal service obligation for broadband, provided an appropriate settlement is reached with Ofcom.
With the regulatory issues now addressed, BT and Openreach can develop concrete plans for future investment and service improvements. The new legal separation aims to foster a fairer competitive environment while allowing BT to pursue infrastructure upgrades with a clearer regulatory framework in place.