The UK phone and broadband communications provider, British Telecom (BT), has agreed to separate its broadband branch, Openreach into a separate company, following pressure from communications regulator, Ofcom. The regulator has said that Openreach will become a stand-alone company with its own identity, employing its own staff, management and corporate strategy.
The change comes after Ofcom had threatened to force BT to legally separate Openreach after complaints from customers and companies including TalkTalk and Sky over the way BT had been running the company; particularly how it implemented the use of its infrastructure by other companies which, according to them, caused significant issues with speed, costs and service across a wide range of competitor’s broadband services.
For years now, British Telecom has had a virtual monopoly on the UK’s broadband infrastructure. With most of the cabling used to carry broadband data having been laid and subsequently owned by the company. Only Virgin Media offers a competitive broadband service without the need to use BT’s cabling and exchanges, so currently, if UK customers sign up for a broadband service provider other than BT, they are very likely to still be using the company’s infrastructure.
As a result of the deal, the newly separated Openreach will have to consult with customers such as Sky and TalkTalk on major investments. Sharon White, Ofcom’s boss told BBC Radio 4’s Today programme that, “We can now expect better service from Openreach”. Ofcom also said that BT had agreed to all of the proposed changes needed to address its competition concerns and therefore there was no longer any need to force BT to legally separate from Openreach. An Ofcom spokesperson also stated that: “The reforms have been designed to begin this year.”
Culture Secretary Karen Brady also weighed in saying: “Now we need to see this deal implemented, along with significant improvements to Openreach’s service standards, and increased investment by Openreach in the country’s digital infrastructure.”
BT chief executive Gavin Patterson told BBC Radio 4’s Today programme: “The BT board will set the annual budget. As the 100% shareholder, the owner of the company that’s not unreasonable.”
Under the new agreement, Openreach chief executive Clive Selley will report directly to its chairman, Mike McTighe.
In other corporate changes, BT’s chief executive could still veto the appointment of Openreach’s boss, but only after notifying Ofcom.
Openreach’s 32,000 staff will also transfer from BT to allow the new business to “develop its own distinct organisational culture”.
With the changes imminent, it looks like it could mean a better service for UK broadband customers and an end to what many people considered to be BT’s monopoly over the UK’s broadband infrastructure.