Ofcom has ordered BT to split its Openreach division, which runs the fixed-line phone and broadband infrastructure used by most UK telecoms providers, into a legally separate business.
In July the regulator published a list of competition concerns which it asked BT to address by agreeing to new governance arrangements for Openreach.
Firms such as Sky and TalkTalk, which compete with BT for domestic and business customers but use the Openreach network to supply services, have repeatedly claimed the division under-invests in its assets while others say it favours BT’s retail business when making decisions about new products.
BT has always denied such charges, and insists that all ISPs using the network are treated equally. It’s also denied claims of under-investment, pointing to its extensive roll-out of Fibre to the Cabinet which provides superfast broadband speeds to homes and businesses.
On Monday the firm announced the appointment of Mike McTighe as Chairman of a new Openreach board which would be dominated by members from outside the BT Group.
However Ofcom says BT’s response fails to fully address its concerns and that it will now order the group to reform Openreach as a legally distinct subsidiary within the BT Group.
The decision, which must be approved by the European Commission, falls short of force sale of Openreach called for by Sky and TalkTalk.
Commenting on today’s announcement, a Sky spokesperson said: “Let’s not forget why we are here – BT Openreach has continued to fail consumers.
“This is why we have always said that we want a solution that is clear and executable and in the best interests of consumers and industry. We will now watch closely as to how Ofcom executes its proposals.”
TalkTalk CEO, Dido Harding, said: “Openreach has been letting consumers down for far too long, unable to meet promises of even minor improvements and becoming a household name for all the wrong reasons.
“However, we welcome the fact that the regulator has finally made a decision, and while we do not think legal separation goes far enough to deliver the broadband consumers deserve, it is at least a step in the right direction.
“Consumers will be keen to understand how these changes will improve their service and by when.
“We will continue to push Ofcom to ensure the plans deliver real, meaningful improvements quickly, and if major changes cannot be delivered, then they should move to structurally separate Openreach once and for all.”