The initial proposal is a result of the regulator’s strategic review of digital communications – its first significant review of the telecoms sector for a decade – aimed at increasing competition in the country’s market.
"Openreach must open up its network of telegraph poles and underground tunnels to allow others to build their own, advanced fibre networks, connected directly to homes and offices,” said Sharon White, CEO of Ofcom.
Ofcom said that the unit will need to be reformed in order to provide consumers and businesses with more choices and better quality of service.
"In future, Openreach needs to take its own decisions on budget, investment and strategy - such as the deployment of new networks," said the regulator. "Openreach management should be required to serve all wholesale customers equally, and consult them on its investment plans. There will also be greater transparency over how costs and assets are allocated between Openreach and the rest of BT."
In addition Ofcom found that evidence showed Openreach "still has an incentive to make decisions in the interests of BT, rather than BT's competitors", adding that this "can lead to competition problems". As such, the regulator noted that it reserves the right to require BT to spin off Openreach "as an entirely separate legal entity, with its own shareholders”.
In response to the announcement from Ofcom, BT’s CEO Gavin Patterson, said: “We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done. Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes.”
Patterson added: “Ofcom have today explained why breaking up BT would not lead to better service or more investment and that structural separation would be a last resort. We welcome those comments. The focus now needs to be on a strengthened but proportionate form of the current model and we have put forward a positive proposal that we believe can form the basis for further discussions with both Ofcom and the wider industry.”
The proposal includes a revamped governance structure for Openreach as well as a commitment on investment. Ofcom is expected to introduce more detailed proposals later this year.
