The three leading critics of Openreach have welcomed the news that the UK’s broadband infrastructure business will be legally separated from BT.
Ofcom and BT said they had reached “a long-term regulatory settlement” that will see Openreach become a “distinct, legally separate company”.
The UK regulator announced its intention to force through a legal separation last November.
Ofcom said voluntary commitments that BT has made since – notably the appointment of Mike McTighe as Chairman of Openreach and the creation of an independent board – meant its competition concerns had been met and it would not involve the European Commission, which had been threatened.
Around 32,000 staff will move to the “new” Openreach Limited company and BT branding will disappear.
“Enhanced safeguards” – such as Openreach being obliged to consult formally with customers on large-scale investments – will ensure the likes of Sky, TalkTalk are Vodafone are treated equally, BT said.
The reforms have been designed to begin this year, according to Ofcom, although a definitive date has not been confirmed.
BT Chief Executive Gavin Patterson 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.”
Ofcom CEO Sharon White said: “We will carefully monitor how the new Openreach performs.”
Sky, TalkTalk and Vodafone, Openreach’s biggest customers, all welcomed the news but remained circumspect.
TalkTalk CEO Dido Harding said: “This deal will require robust Ofcom monitoring and enforcement to ensure it delivers the improvements the regulator expects.”
A Vodafone spokesperson described it as “an encouraging start”.
“Ofcom has acted decisively to improve the market for Openreach customers and the UK as a whole,” the spokesperson added.
“We look forward to reviewing the detail of how Ofcom will properly enforce Openreach’s new structure to ensure the UK gets the ultrafast fibre networks it will need to compete effectively in the global gigabit economy.”
A Sky spokesperson added: “It's important that today's agreement is now implemented by BT in good faith and without delay."
Analysts also reacted positively.
CCS Insight’s Kester Mann said: “Today’s news provides welcome certainty after a long-running and bitter dispute over the future of the UK broadband network.
“Resolving it now, without having to go to Brussels to enforce a new structure, will bring much-needed stability to a UK market still reeling from the Brexit referendum.”
Ovum’s Matthew Howett said: “The expectation is that this agreement will provide BT with the regulatory certainty and clarity required to look at its investment program, particularly in terms of extending the fibre footprint.”
However, he said that “questions remain” around how Ofcom proposes to monitor and enforce the change.