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Ofcom to go to European Commission to force change at BT’s Openreach

Britain’s telecoms regulator will go to the European Commission to try to force BT (BT.L) to legally separate Openreach, the network the delivers broadband to millions of homes and businesses, after the two sides failed to reach a voluntary deal.

Ofcom is stepping up pressure on Britain’s biggest telecoms group to improve the running of the BT Openreach network and incentivise it to invest in new infrastructure, including more gold standard fibre connections, to boost broadband coverage.

The regulator, which needs European Commission support to force through change at Openreach, said it was disappointed that BT had not done enough to separate Openreach from the rest of the group. It had ordered the former state monopoly to run the network arm as a separate companyin July.

“Some progress has been made, but this has not been enough, and action is required now to deliver better outcomes for phone and broadband users,” the regulator said on Tuesday.

BT is taking steps to make Openreach more independent and transparent, and on Monday it appointed former Ofcom board member Mike McTighe as the first chairman of a new independent Openreach board.

“(The board) will ensure that Openreach treats all customers equally whilst investing in better service, broader coverage and faster speed broadband,” BT said.

It said it believed its proposals were fair and sustainable and met Ofcom’s objectives without disproportionate costs.

It said two issues were outstanding: the reporting line of the Openreach CEO and the form of legal incorporation.

“We will continue to work with Ofcom to reach a voluntary settlement that is good for customers, shareholders, employees, pensioners and investment in the UK’s digital future,” the company said in a statement.

Ofcom said BT’s overhaul of Openreach still fell short in areas including the transfer of people and assets, and the level of influence that BT Group executives could exert over the management of Openreach.

It said it remained open to BT bridging the gap between its proposal and what is required to address its “strong competition concerns”.

Openreach is the division of BT Group that develops and maintains the UK’s main telecoms network used by providers such as Sky (SKYB.L), TalkTalk (TALK.L), Vodafone (VOD.L) and BT’s retail business.

Ofcom has stopped short of full separation – although it has left the option on the table – and is pursuing the maximum amount of independence for Openreach possible within BT Group.

The legal process could drag on for years, analysts have said, and BT has said the case in Europe is “a difficult one to make”.

Shares in BT were down 0.6 percent at 348 pence at 0841 GMT, slightly underperforming the market.

(Reporting by Paul Sandle; editing by Sarah Young and Louise Heavens)

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