Ofcom agrees future governance of Openreach

16 May 2017

BT and Ofcom have reached agreement on a long-term settlement that will see Openreach become a distinct, legally separate firm with its own board within the BT Group. The move follows the regulator ordering the two companies to split late last year (see News, Dec 2016 issue).

The agreement is based upon voluntary commitments submitted by BT that meet Ofcom’s previously stated competition concerns. Once it is implemented, around 32,000 employees will move to the new Openreach Limited following Transfer of Undertakings (Protection of Employment) consultation and after pension arrangements are in place. Openreach will have its own branding which will not feature the BT logo.

The deal builds on changes that BT has already made to the governance of Openreach in recent months. These include the creation of an Openreach board with a majority of independent members. 

The board will set the company’s medium term and annual plans, and determine which technologies are used. This will be done within a strategic and financial framework defined by BT. Openreach will be free to explore alternative co-investment models in private with third parties. Ofcom adds that hundreds of telecoms companies already use Openreach and its national network on an equivalent basis, and many others are competing with them. It says this will continue with “enhanced safeguards” to ensure all customers are treated equally. 

Openreach’s CEO will report to the Openreach chairman with accountability to the BT Group chief executive with regards to certain legal and fiduciary duties that are consistent with BT’s responsibilities as a listed company.