Ofcom: ‘Openreach separation broadly satisfactory’

UK communications regulator Ofcom has published its first progress report on the legal separation of Openreach from its parent company BT.

BT agreed in March 2017 to Ofcom’s requirements to make Openreach – which runs the UK’s main phone and broadband network – a distinct company. This means Openreach having its own staff, management and strategy, and a legal purpose to serve all of its customers equally.

Since then, the companies have been implementing these changes, which represent the biggest reform of Openreach in its history.

Ofcom’s Openreach Monitoring Unit has been assessing work by BT and Openreach to implement the new arrangements, measuring their performance against a set of agreed commitments.

The report finds that, while progress towards legal separation has been broadly satisfactory, with many of the governance changes now implemented, some remaining steps have yet to be completed.

Findings from the report:

• Progress broadly satisfactory. Openreach is now a separate legal entity from BT, with its own independent board. There has been progress in other areas, such as removing ‘BT’ from branding, putting in place compliance procedures, and carrying out staff training on the changes. BT and Openreach have both worked openly and constructively with Ofcom throughout the implementation phase.
• But legal separation not finalised. Because of complexities with BT’s pension scheme, the company has yet to transfer Openreach employees to the new Openreach Ltd. These pension challenges have been resolved, and BT has confirmed it will start the transfer process in the coming months, completing a consultation with staff by the end of this year.
• Positive signs on investment. Openreach has committed to invest in faster, better broadband networks, through a new ‘Fibre First’ strategy. The company has extended its planned roll-out of full-fibre broadband by 1 million premises, to 3 million by the end of 2020. However, we expect to see bolder commitments over time.
• Industry is cautiously optimistic. Many telecoms companies who rely on Openreach have stressed the importance of the new arrangements leading to tangible, positive change – such as greater transparency in Openreach’s decision making. However, some remain uncertain whether the new arrangements will allow Openreach to act with greater independence and treat all its customers equally in practice.

Ofcom has also been monitoring progress in Northern Ireland, where BT’s Northern Ireland Networks delivers the services provided by Openreach in the rest of the UK. Improved governance measures and additional staff training in Northern Ireland have been put in place.

Next steps

Ofcom is closely monitoring the outstanding implementation steps, to ensure they are completed without further delay.

It will continue to monitor progress on implementation through regular reports. These will also assess, using a range of measures, how far Openreach’s behaviour and performance is delivering positive changes for the industry.