Ofcom has ordered BT to legally separate from its network division Openreach, which controls the UK’s broadband infrastructure.
The telecoms regulator said on Tuesday that BT had “failed to offer voluntary proposals that address our competition concerns”. As a result, it will go to the European Commission to try to force BT to legally separate the business.
In July, Ofcom expressed concern that BT has the “incentive and ability” to favour its own retail business when making strategic decisions about new network investments by Openreach.
Although the regulator stopped short of requiring BT to sell off Openreach, it said that it should become a distinct company within BT Group, with an independent board of directors. Under this setup the business and its directors would be required to make decisions in the interests of all Openreach customers.
Some progress has been made, said Ofcom, but BT had not gone far enough in certain areas including the transfer of people and assets, and the level of influence that BT Group executives could exert over the management of Openreach.
The regulator is now preparing a formal notification to the European Commission to require the legal separation of Openreach from BT.
“Throughout this process, we remain open to BT bridging the gap between its proposal and what is required to address our strong competition concerns,” Ofcom said.
A statement from BT in response to Ofcom’s announcement said:
“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.”