Will become standalone business, but remain part of wider BT Group
Major changes for UK broadband infrastructure market
BT has agreed to turn its Openreach division into a separate business after ongoing pressure from Ofcom and industry rivals. However, BT will still legally be the owner of the company and set the budget Openreach is given each year.
The move marks the end of years of debate and disagreement over how Openreach should be managed, with rivals to BT such as Sky, TalkTalk and Vodafone saying it should be an independent company.
Once the split is completed, Openreach will be a fully independent entity within the wider BT Group that will have sole focus on managing the fibre and copper broadband infrastructure that all broadband providers, including BT Retail, use to deliver services.
Some 32,000 staff from Openreach are expected to move from BT to the independent Openreach and it will be run by a CEO and report to the board that oversees Openreach, separate to BT. It will also have its own logo without any BT branding.
However, as noted, BT will still set the budget for Openreach each year. But it will have no say in how Openreach uses this budget while Openreach must consult with those that it serves such as Sky and TalkTalk before beginning any major infrastructure projects.
Sharon White, Ofcom chief executive, said the deal was a significant moment for the UK telecoms sector and should led to improved services for all.
"The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry - not just BT," she said.
"We welcome BT's decision to make these reforms, which means they can be implemented much more quickly. We will carefully monitor how the new Openreach performs, while continuing our work to improve the quality of service offered by all telecoms companies."
Gavin Patterson, BT Chief Executive, said the time was right to make the change as the firm recognised the UK would benefit from a more independent network infrastructure business.
"I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. It will also end a period of uncertainty for our people and support further investment in the UK's digital infrastructure," he said.
"This has been a long and challenging review where we have been balancing a number of competing interests. 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."
One of the big hopes of an independent Openreach is that it will be able to put more money into improving customer services, as Alex Neill, Managing Director of Home Services at Which? noted.
"Millions of people have suffered woeful levels of service from Openreach, so these reforms must lead to significant improvements for customers who have been let down for too long," he said.
"Telecoms are now an essential part of our daily lives, so it's vital that consumers now really do see better phone and broadband services."
Kester Mann, principle analyst for operators at CCS Insight, said the deal was a real win for Ofcom under Sharon White's leadership and BT's rivals should be pleased with the outcome too.
"Its determination in negotiations with BT under the increasingly impressive stewardship of Sharon White, should be applauded," he said.
"BT's rivals, notably Sky and TalkTalk, will publically claim that the regulator should have gone further by enforcing a full structural separation.
"However, this option was always the most radical and controversial the regulator could have taken. In private they should be more than satisfied with the changes Ofcom has pushed through."