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Ofcom Orders Legal Seperation of Openreach and BT

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Ofcom has decided that the legal separation of Openreach and BT will best serve the UK market after the telecoms giant failed to offer any voluntary proposals that addressed concerns about competition.

After avoiding a complete structural separation earlier this year Ofcom has now said a legal separation, whereby Openreach has its own independent board, would help the broadband body act more in the interests of the market and less in those of BT.

“Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users,” it said.

Under the legal separation, Openreach will become a distinct company with its own board, with a majority of non-executive directors, including the chair not affiliated with BT. Openreach would be guaranteed greater independence to make decisions on strategic investments, with a duty to treat all of its customers equally.

Ofcom will now notify the European Commission of its intention to implement these plans, requiring the legal separation of Openreach to make it more independent.

BT responded, “We put forward proposals in July that we believe are fair and sustainable, and that meet Ofcom’s objectives without disproportionate costs. We are implementing these proposals, and have just appointed Mike McTighe to be the first chairman of Openreach. We are in discussions with Ofcom on two outstanding issues, the reporting line of the Openreach CEO and the form of legal incorporation.

“We will continue to work with Ofcom to reach a voluntary settlement that is good for customers, shareholders, employees, pensioners and investment in the UK’s digital future.”

Toople CEO Andy Hollingworth today said in response to Ofcoms decision this morning to separate Openreach from the BT Group was “long overdue” but “can only be good news for UK small Business”.

The former Director of Wholesale at TalkTalk Plc said, “Going forward it will give transparency for infrastructure investment, R&D and a cost base equitable to all service providers. Sadly the U.K. broadband speeds lag behind the majority of Europe.

Furthermore the superfast fibre rollout only delivers to the local cabinet, which is often more than a mile away from the customer premise, and therefore speed declines when arriving at the customer premise – unlike countries like Spain and Japan that deliver over 60% super-fast fibre right to the door. We at Toople welcome Ofcom’s decision and watch with interest BT Group’s timely embracement of the decision?”