The communications regulator Ofcome has said that BT’s Openreach should become a distinct company with its own board as part of reforms aimed at improving work to expand broadband coverage in the UK.

BT has said it will create a separate board and ensure greater autonomy for Openreach – Photo credit: PA

Openreach is part of the BT Group and develops and maintains the UK’s telecoms network that is used by phone and broadband providers such as Sky, TalkTalk and Vodafone, and should provide the same products, on the same terms, to all customers.

However, providers have been disappointed with Openreach’s operating models, and BT has come under fire for retaining too much control and influence over significant Openreach decisions.

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Last week, the House of Commons Culture, Media and Sport Committee published a damning report into the relationship, which said the two should be split up unless BT successfully undertook major reforms.

The MPs added that a lack of transparency in the cost and deployment plans for the Broadband Delivery UK programme was stifling local competition and that BT needed to give Openreach much more autonomy over what it invests and where.

In today’s ruling, Ofcom stopped short of ordering the company to sell off Openreach, but instead said that it must become a distinct company with its own board with non-executive members that are not affiliated with BT in any way.

In addition, the regulator said that it had to have a separate strategy and control over budget allocation, as well as independent branding.

In a statement published on the same day as the regulator’s decision, BT said that it had “volunteered significant governance changes to further increase the independence and transparency of its local network business Openreach”.

They include establishing an Openreach board would be established with a majority of independent members, along with greater autonomy, budgetary control and decision-making powers.

BT Group chief executive Gavin Patterson said: “We have listened to Ofcom and industry and are introducing significant changes to meet their concerns. These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested.”

However, a spokesman from the Department for Culture, Media and Sport said that it was “concerned that BT’s proposals do not go far enough and think it is right that full structural separation remains an option”.

He added: “Swift and clear action is needed to give certainty to consumers, industry and investors in the UK’s broadband infrastructure, and which delivers rapid improvements in the level of investment and service.”