Progress 'satisfactory' on arms-length separation of BT and Openreach

The FTSE 100 telecoms giant had agreed to the regulator’s requirements to make Openreach a distinct company in March last year.

At the time, Ofcom said that meant Openreach - which operates almost all of the UK’s legacy telephone and broadband network - having its own staff, management and strategy, and a legal purpose to serve all of its customers equally.

Since then, the companies had been implementing the changes, which Ofcom said represented the biggest reform of Openreach in its history.

Ofcom’s ‘Openreach Monitoring Unit’ had been assessing work by BT and Openreach to implement the new arrangements, measuring their performance against a set of agreed commitments.

“Today’s report finds that, while progress towards legal separation has been broadly satisfactory, with many of the governance changes now implemented, some remaining steps have yet to be completed,” it said in its statement on Thursday.

Ofcom confirmed that Openreach was now a separate legal entity from BT, with its own independent board.

It said there had been progress in other areas, such as removing ‘BT’ from branding, putting in place compliance procedures, and carrying out staff training on the changes.

“BT and Openreach have both worked openly and constructively with Ofcom throughout the implementation phase.”

However, it did note that legal separation was still not finalised.

“Due to complexities with BT’s pension scheme, the company has yet to transfer Openreach employees to the new Openreach Ltd.

“These pension challenges have been resolved, and BT has confirmed it will start the transfer process in the coming months, completing a consultation with staff by the end of this year.”

Ofcom also said there were positive signs on investment, with Openreach committing to invest in faster, better broadband networks, through a new ‘Fibre First’ strategy.

It said the company had extended its planned roll-out of full-fibre broadband by one million premises, to three million by the end of 2020.

“However, we expect to see bolder commitments over time.”

The industry was said to be “cautiously optimistic”, with Ofcom saying a number of telecoms companies who relied on Openreach had stressed the importance of the new arrangements leading to tangible, positive change, such as greater transparency in Openreach’s decision making.

“However, some remain uncertain whether the new arrangements will allow Openreach to act with greater independence and treat all its customers equally in practice.”

Ofcom said it had also been monitoring progress in Northern Ireland, where BT’s ‘Northern Ireland Networks’ delivers the services provided by Openreach in the rest of the UK.

It said improved governance measures and additional staff training in Northern Ireland had been put in place.

“Ofcom is closely monitoring the outstanding implementation steps, to ensure they are completed without further delay,” the regulator said of the next steps.

“We will continue to monitor progress on implementation through regular reports.

“These will also assess, using a range of measures, how far Openreach’s behaviour and performance is delivering positive changes for the industry.”