Ofcom calls for legal split of BT, Openreach

Ofcom, the UK's telecommunications regulatory authority, says that it will begin steps to force the legal separation of BT and its current local access infrastructure business unit, Openreach. The agency says that it will take these steps after BT failed to provide a satisfactory alternative that would address concerns that the current relationship hindered competition among broadband services providers.

Ofcom, the UK's telecommunications regulatory authority, says that it will begin steps to force the legal separation of BT and its current local access infrastructure business unit, Openreach. The agency says that it will take these steps after BT failed to provide a satisfactory alternative that would address concerns that the current relationship hindered competition among broadband services providers.

Legal separation would see Openreach become a subsidiary of BT with its own board. The board would comprise a majority of non-executive directors, including the chair, who cannot be affiliated with BT. Ofcom said it considered structural separation but concluded this more drastic division would be too complicated and expensive.

The announcement came shortly after BT named former Ofcom board member Mike McTighe chairman of Openreach as part of what now appears a failed effort to address Ofcom's displeasure.

"We are disappointed that BT has not yet come forward with proposals that meet our competition concerns. Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users," Ofcom said in a statement.

However, the agency left the door open for BT to offer further alternatives as Ofcom begins the process of notifying the European Commission of its intensions. "Throughout this process, we remain open to BT bridging the gap between its proposal and what is required to address our strong competition concerns," Ofcom wrote. Ofcom says it will open a public consultation on submitting its proposal to the European Commission early in 2017.

BT is required to share its subscriber access infrastructure with potential competitors; Openreach is in charge of installing this infrastructure and enacting the infrastructure sharing. BT competitors have long decried what they view as a conflict of interest on the part of Openreach as direct unit of BT.

Ofcom investigated the matter as part of a Strategic Review of Digital Communications launched last year and stated this past February that while it would not order a full separation of BT and Openreach, changes in the relationship were needed (see "Ofcom: BT can keep Openreach for now, but changes needed"). In July Ofcom reiterated its concerns and asked for comments on a variety of matters, including how legal separation of BT and Openreach might best proceed. As part of that commentary process, BT proposed a plan to address Ofcom's concerns that would not require either legal or structural separation. Ofcom said in July the BT proposal did not go far enough, but negotiated with BT to see if the plan could become workable.

Apparently, Ofcom has decided that effort is not bearing suitable fruit.

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