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Openreach will finally be spun off from BT after protracted talks

Openreach is to part from BT after the telecommunications firm reached a deal with Ofcom to legally separate its infrastructure arm.

BT has faced growing calls from rivals to hive off Openreach, and in November the communications regulator ordered a legal separation of the firm.

Other companies in the industry, including TalkTalk, Sky and Vodafone, have said that Openreach has consistently failed both consumers and businesses because some of its cashflow funds other parts of BT’s business, such as expensive sports TV rights. BT has always said that its content costs are more than covered by its retail business.

On Friday, the pair said they have reached agreement on a “long-term regulatory settlement that will see Openreach become a distinct, legally separate company with its own board, within the BT Group”.

Around 32,000 employees will transfer to the newly formed Openreach Limited following TUPE consultation and after pension arrangements are in place.

Openreach Limited will have its own branding that will not feature the BT logo.

Ofcom said, since BT has agreed to all of the changes needed to address its competition concerns, it will no longer need to impose these changes through regulation.

Openreach builds and maintains the tens of millions of copper and fibre lines that run from telephone exchanges to homes and businesses across the UK.

But, in December, BT said that the separation of the two companies will not result in improved internet infrastructure and is unlikely to increase web speeds for users.

Ofcom boss Sharon White called it a “significant day” for phone and broadband users and pledged to “carefully monitor” how the new Openreach performs.

Under the agreement, the Openreach chief executive will report to the Openreach chairman, with accountability to the BT Group chief executive.

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.

“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.”

Andrew Ferguson, editor of thinkbroadband.com, said: “The reaching of this final agreement between Ofcom and BT over the fate of Openreach will hopefully mean that Digital Britain can emerge from the stasis it has sat in for what seems a long time.

“The full fibre revolution in the UK has been something that has been going on for a long time, but the mass behind it is growing and we are seeing evidence for some of the two million promised full fibre premises passed by 2020 with lots of city centre areas that have missed out on superfast services before now in line for Fibre to the Premises.

“I am hopeful that with the certainty that today brings that Openreach will look at expanding this significantly beyond 2020 and while the current belief is that G.fast will be the dominant technology in a decade’s time, there is a real chance full fibre may beat it with the right investment decisions.

“The message is clear, 2017 is the time to start the hard work and push on with delivering full fibre. What many don’t realise is the Fibre to the Cabinet service that started to deploy in 2009 was always built with the fibre network ready to support fibre to the premises at a future date.

“So rather than having fibre in just 5,500 exchanges, Openreach today has fibre ready to some 81,000 locations and just needs the workers, budget and ambition to start pushing this out from those points to millions of homes.”

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