Ofcom approves landmark BT restructuring

BT is creating a new division called Openreach to run its local network, as part of major reforms prompted by Ofcom

Communications regulator Ofcom has accepted BT's offer of widespread changes to the way it operates its local network and deals with its rivals. As predicted yesterday, the move spares the telco from the threat of break-up.

In an announcement on Thursday morning, Ofcom said it had accepted more than 230 separate undertakings made by BT, including the creation of a division to run its local network.

"Ofcom is hopeful that this new approach to competition regulation will stimulate investment, innovation and sustainable growth in this critical industrial sector,” said Ofcom chief executive Stephen Carter.

In a separate announcement at the same time, BT revealed that its new access services division would be called "Openreach". It will be operational by January 2006, and will have the role of giving all service providers transparent and equal access to the nationwide local BT network.

"This settlement is a defining moment for the industry and BT is totally committed to it," said BT chief executive Ben Verwaayen.

"It offers a fresh start and means that companies will be able to focus entirely on their customers without being distracted by micro-regulation. It provides everyone with greater certainty and clarity. That, in turn, will release investment and innovation from which everyone will benefit," Verwaayen added.

Ofcom's strategic review of the telecommunications market set the conditions for BT's organisational changes. In the report last November, the regulator said it was unhappy that BT wasn’t giving its retail rivals fair and equal access to its telecommunications network. At the time, Ofcom warned BT it would launch an investigation under the Enterprise Act, which could lead to the company’s closure, unless it mended its ways.