BT escapes forced Openreach spin-off but Ofcom tightens regulation

BT has escaped a forced spin-off of its telecoms network infrastructure company Openreach, but communications regulator Ofcom announced tighter regulation for the business. Ofcom ruled against forcing BT to spin off the fixed-line internet business, but said it reserves the right to require a break up in the future.

As an alternative, the watchdog said the company should open up Openreach for use by the wider industry. "Openreach will be required to open up its telegraph poles and 'ducts' – the small, underground tunnels that carry telecoms lines," Ofcom explained. "Using these, rival providers will be able to build their own fibre networks, connected directly to homes and offices."

The bottom line of Ofcom's review was that BT should contribute to faster broadband across the UK. The broadband company already pledged £1bn in investment in the country's internet quality.

Openreach should also have more independence from BT and self governance, Ofcom ruled. Regulators also urged for more financial transparency between the telecom business and Openreach.

Ofcom announced on 16 July 2015 that it was launching an investigation into BT and its cable network. It argued that Openreach performance was often poor when offered by third party providers. Competitors Vodafone and TalkTalk had high hopes for a forced break up, but Ofcom decided against a spin-off for the time being.

"We are keen to understand and address Ofcom's concerns so we will review their paper in detail," chief executive Gavin Patterson said in a response. "A great deal of what they are proposing is already in place and we are open to discussions about how the current rules can be amended and updated"

Patterson also said that BT was willing to cooperate further to improve British broadband.

"We are happy to let other companies use our ducts and poles if they are genuinely keen to invest very large sums as we have done," he said. "Our ducts and poles have been open to competitors since 2009 but there has been little very interest to date. We will see if that now changes."

BT signed the takeover of rival EE in late January, creating the biggest Telecom firm in the UK. The companies unexpectedly jumped the regulatory hurdles needed to sign a deal and all eyes were on the Openreach decision by Ofcom.

The regulator's decision against a forced spin off clears the way for BT to focus on the recent takeover and integrate the EE business into its own.