Ofcom releases BT from 2005 Openreach undertakings

Telecoms regulator Ofcom has formally released BT from the September 2005 Undertakings that established Openreach as a functionally separate line of business within the BT Group.

The 2005 Undertakings were laid down under Section 154 of the 2002 Enterprise Act following the 2004/5 Strategic Review of Communications (DCR).

This review found that there were grounds to suspect that competition for wholesale access and backhaul network services was being restricted by BT’s control of the national network, to the detriment of the ability of other service providers to offer broadband services to the public. The Openreach business was set up as a result of this.

However, the subsequent follow-up review in 2015/16 established that flaws in the governance model established a decade earlier had not removed BT’s ability to unfairly discriminate against its retail competitors, particularly in light of the growth in the importance of broadband to daily life, and the wider economy, in the UK.

During this review, Ofcom came under pressure from rivals to BT, such as Sky and TalkTalk, to force a full structural separation of the two businesses. Ultimately, this option was thought to be too extreme, and the regulator settled on requiring legal separation instead, with Openreach maintained as a fully independent organisation within the BT Group, with its own board of directors.

Since then, BT and Openreach have been hard at work unravelling the intricacies of their previous relationship, an often-controversial process that has involved a number of changes, some structural and some, such as repainting Openreach’s vast fleet of vans, more cosmetic.

The final step in the process was the ironing out of issues around the BT pension scheme as it relates to Openreach members, which opened the way to a one-off transfer of 31,000 employees – the largest in UK corporate history – under the Transfer of Undertakings (Protection of Employment), or Tupe, legislation, which went ahead at the beginning of October.

“On 1 October 2018, the Tupe transfer of relevant employees and representatives from BT to Openreach Limited took place, and BT entered into an Agency Services Agreement with Openreach Limited, in accordance with which Openreach Limited will manage and operate the Openreach line of business on behalf of BT,” said Ofcom.

“Openreach is a very different business from the beginning of last year. We now have our own board, greater strategic and operational independence, a separate brand and an independent workforce – and we’re ambitious for the future”

“BT has therefore now taken the steps to fully implement the arrangements set out in the March 2017 Notification. Therefore, as set out in Ofcom’s decision of 13 July 2017 …  Ofcom now gives notice of the release of BT from the Undertakings.”

An Openreach spokesperson said: “Openreach is a very different business from the beginning of last year.  We now have our own board, greater strategic and operational independence, a separate brand and an independent workforce – and we’re ambitious for the future.

“We’re tracking well against all the commitments BT made as a result of the DCR and we’re ahead on many, including our governance and our rebrand.

“We’re developing stronger relationships with our customers through our consultations on major strategic investments, and we’re forging closer ties with the industry, regulators and the government for the good of the UK,” they added.