Openreach to separate from BT in deal to improve services for broadband users

Published by Helen Knapman on 10 March 2017.
Last updated on 10 March 2017

Ofcom has announced that Openreach will separate from BT in a deal that aims to improve services for all home phone and broadband users.

Openreach builds and maintains the copper and fibre lines that run from telephone exchanges to homes and businesses across the UK.

Currently it operates as a division of the BT Group, although the UK’s main telecoms providers, such as Sky, TalkTalk, and Vodafone, use its lines to deliver broadband and home phone services to their users.

However, following concerns that Openreach isn’t working in the interest of all providers due to its ownership by telecoms provider BT, it’s going to be spun off into a separate company in a move that’s expected to begin this year.

Telecoms regulator Ofcom says Openreach will still remain part of the BT Group but the firm will operate as a legally separate company with a board of directors where the majority are independent to BT.

The new Openreach will also be obliged to consult formally with customers such as Sky, TalkTalk and Vodafone on large-scale investments. In addition, there will be a ‘confidential’ phase during which customers can discuss ideas without this being disclosed to BT Group.

It’s hoped a more independent Openreach will improve broadband and telephone services, as working in the interests of all providers, not just BT, should encourage greater investment in the service. However, Ofcom hasn’t gone as far as to recommend a complete sell-off of Openreach from the BT Group.  

Sharon White, Ofcom chief executive, says: “This is a significant day for phone and broadband users. The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry – not just BT.” 

‘Good day for broadband, TV and phone users’

Dan Howdle, consumer telecoms expert at telecoms comparison site Cable.co.uk, believes the move is a positive one for consumers. He says: “This is a good day for the average broadband, TV and phone customer, who will enjoy all the benefits the stoking of competition in a fairer marketplace is likely to bring, without suffering the costs and delays to infrastructural rollout a full separation would have incurred. We should not, however, rule out a full separation happening at some point in the future."

A Sky spokesperson comments: "This is a welcome step that we have long called for on behalf of our customers. A more independent Openreach is a step towards delivering better service to customers and the investment that the UK needs.”

Dido Harding, chief executive of TalkTalk, adds: “We welcome the agreement to create a legally separate Openreach. The new company will be better placed to deliver the improved investment and service that consumers and businesses deserve. This deal will require robust Ofcom monitoring and enforcement to ensure it delivers the improvements the regulator expects. We hope this is the start of a new deal for Britain’s broadband customers, who will be keen to see a clear timetable from Openreach setting out when their services will improve.”

What’s happening to the Openreach staff?

Openreach will directly employ all its 32,000 staff, who will be transferred across from BT.

The existing Crown Guarantee - a piece of legislation that ensures the Government would meet BT’s obligations to the BT pension scheme in the event that the company should be wound up – will be maintained for Openreach staff who are members of BT’s pension scheme.

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