Ofcom secures BT agreement over a separate Openreach
Openreach will become a distinct company with its own staff and management; 32000 employees will transfer over under TUPE regulations
Ofcom has announced that BT has agreed to the regulator’s requirements for the legal separation of its network division.
It means Openreach will become a distinct company with its own staff and management, together with its own strategy and in Ofcom’s words, “a legal purpose to serve all of its customers equally.”
According to Ofcom, BT has agreed to all of the changes needed to address Ofcom’s competition concerns. As a result, Ofcom will no longer need to impose these changes through regulation. The reforms have been designed to begin this year.
To ensure implementation, Ofcom said legislation will be needed to maintain the Government’s ‘Crown Guarantee’ for Openreach staff who are members of BT’s pension scheme.
Ofcom said, “The new Openreach will have the greatest degree of independence from BT Group without incurring the delays and disruption – to industry, consumers and investment plans – associated with separating the companies entirely.”.
BT’s commitments, combined with regulation imposed by Ofcom through its regular market reviews, will form a comprehensive solution to problems in the market that Ofcom had identified.
Gavin Patterson, BT chief executive, said, “I believe this agreement will serve the long-term interests of millions of UK households, businesses and service providers that rely on our infrastructure. It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure.
“This has been a long and challenging review where we have been balancing a number of competing interests. We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future.”
BT said the agreement, when in place, will provide it and other companies with greater regulatory clarity and certainty which is vital for investment. It added that this will help the UK retain its position as the leading digital economy in the G20 by share of GDP, with the largest superfast network among major European nations.
The transfer of around 32,000 employees, under TUPE regulations, will be one of the largest such transfers in UK corporate history. It will take place once the agreement has been implemented and pension arrangements are in place for these employees. Under the agreement, Openreach will manage and operate its assets and trading but ownership of those assets and trading will remain with BT.
Commenting on the agreement, Mark Collins, director strategy & policy at CityFibre said, “The real story here is the UK’s shocking ‘fibre gap’. Whilst it is welcome that these time-consuming negotiations seem to be at an end, there is nothing in this announcement to suggest Openreach will now start to build the fibre infrastructure this country needs. Ofcom’s focus needs to shift to encouraging alternative fibre builders to do the things Openreach can’t or won’t do – whatever its legal status.
“CityFibre is well placed to take on that challenge and to meet Ofcom’s strategic objective of reducing the UK’s reliance on Openreach to get the job done. The substantial government funding for fibre announced in the budget this week will help to accelerate our own full fibre rollout programme."