House of Commons Library

BT and Openreach

Published Friday, January 11, 2019

A short House of Commons Library briefing paper providing an explanation and background to the legal separation of BT and Openreach.

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What is Openreach?

Openreach Ltd is a fixed-line telecoms infrastructure company. It is owned by BT Group plc. Openreach is responsible for installing and maintaining the UK’s main telecoms network infrastructure used by many telecoms providers, including BT. Openreach does not sell phone, broadband or TV services directly to consumers. Instead, it works on behalf of service providers (such as Sky, TalkTalk and BT) to maintain the local access network that covers retail customers.

Openreach was established in 2006 as a business division of BT. Following a series of reviews by Ofcom, in 2017 Openreach underwent a process of reform to be incorporated as a separate company within the BT Group, rather than a business division. The change was required for competition reasons by Ofcom. Ofcom was concerned that the previous model of 'functional separation' employed by BT allowed BT to retain too much control of Openreach's decisions and did not allow for sufficient consultation with other industry stakeholders affected by Openreach’s investment plans.

BT Openreach separation

Ofcom announced it would require BT and Openreach to “legally separate” in November 2016. In March 2017, BT agreed to Ofcom's requirements, making a series of commitments for reform. Those commitments included establishing Openreach as a distinct company with its own staff, management and strategy (although remaining wholly-owned by BT).

In October 2018, Ofcom confirmed that the formal requirements for separation had been completed. Ofcom however continues to monitor Openreach’s strategic independence to ensure separation is operating in practice, for example, that Openreach board decisions are made independently without undue influence from BT and that Openreach is treating all customers equally. Should Ofcom not be satisfied that the new structure is delivering the necessary independence, a further option would be what Ofcom calls “structural separation”, which would mean separating Openreach completely from the BT Group.

Ofcom established an Openreach Monitoring Unit in July 2017 to monitor the progress of Openreach’s independence. In November 2018 Ofcom reported that it was “broadly satisfied” with the progress however “continued commitment from BT and Openreach is crucial”.

Updates from Ofcom regarding compliance can be found on Ofcom’s webpage: Monitoring of compliance with the new governance arrangements relating to Openreach.

Commons Briefing papers CBP-7888

Authors: Georgina Hutton; Sara Priestley

Topic: Telecommunications

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