Ofcom has fallen short of recommending that Openreach should be spun out of BT as a fully independent company and said instead that rivals should be given access to the company's ducts and telegraph poles to install their own fibre alongside Openreach's own cables.
Rivals would be able to roll out their own networks alongside BT's, taking fibre direct to homes and offices themselves.
Ofcom also called for Openreach to be given more independence at BT to further reduce the influence of BT Retail. The regulator went as far as to suggest that Openreach should have its own board, making decisions that treat all operators equally.
"Openreach will be required to open up its telegraph poles and ducts, the small, underground tunnels that carry telecoms lines. Using these, rival providers will be able to build their own fibre networks, connected directly to homes and offices," said the Ofcom report entitled Making digital communications work for everyone.
"Openreach must make it much easier for competitors to access this network, and provide comprehensive data on the nature and location of its ducts and poles."
Ofcom shied away from recommending a formal split of Openreach from BT, calling instead for an industry structure that gives Ofcom itself more power to intervene and regulate.
The watchdog claimed that this approach would "promote large-scale rollout of new ultrafast broadband networks, based on cable and fibre lines, as an alternative to the partly copper-based technologies currently being planned by BT".
Ofcom described its proposals for deeper regulation instead of fundamental change as a "new model for Openreach", despite its admission that "the evidence from Ofcom's review shows Openreach still has an incentive to make decisions in the interests of BT, rather than BT's competitors, which can lead to competition problems".
It continued: "Openreach's governance lacks independence from BT Group. The wider company has retained control over Openreach's decision making and the budget that is spent on the network, and other telecoms companies have not been consulted sufficiently on investment plans that affect them.
"For these reasons, Ofcom has decided it is necessary to overhaul Openreach's governance and strengthen its independence from BT. In future, Openreach needs to take its own decisions on budget, investment and strategy, such as the deployment of new networks.
"Openreach management should be required to serve all wholesale customers equally, and consult them on its investment plans. There will also be greater transparency in how costs and assets are allocated between Openreach and the rest of BT."
Ofcom will prepare proposals later this year to outline how these changes will be implemented.
The new model might require Openreach to become a ring-fenced, wholly-owned subsidiary of BT Group, with its own board members, suggested Ofcom, which left the following threat dangling over the heads of the BT Group board: "If necessary, Ofcom reserves the right to require BT to spin off Openreach as an entirely separate legal entity, with its own shareholders."
Not surprisingly, BT responded quickly to the news, welcoming the alternatives proposed to spinning off Openreach.
"Ofcom has today explained why breaking up BT would not lead to better service or more investment, and that structural separation would be a last resort. We welcome those comments," the firm said in a statement.
"The focus now needs to be on a strengthened, but proportionate, form of the current model, and we have put forward a positive proposal that we believe can form the basis for further discussions with Ofcom and the wider industry."
Others in the industry weren't quite so effusive. Alastair Masson, a client partner at NTT Data UK, was unusually forthright in his response, describing it as "little more than a list of low-impact measures to stimulate high-cost competition, rather than tackling the issue of Openreach and BT's influence on the wider market".
He added: "Not only does it neglect to address the imminent competition decision on Three's takeover of O2, it misses a huge opportunity to move away from the stovepiped view of communications too often used in the UK. When it comes to analysing market movements, context is everything.
"High-speed broadband should not just be offered by industry giants BT and Virgin Media. Smaller operators should provide it too. They should also be able to do it without having to commit to unnecessary physical infrastructure rollouts. The whole point of unbundling was to avoid the need for competing infrastructure."
Dido Harding, CEO of TalkTalk Group, also criticised the report for failing to take more direct action.
“Ofcom has done well in identifying many of the worst problems, including recognising, finally, that BT's control of Openreach creates a fundamental conflict of interest which hurts customers," she said.
“But having accepted all this, Ofcom has produced 100 pages of consultation with little concrete action behind it. The risk is that we end up with 10 more years of debate and delays, rather than facing the problems and delivering improvements for frustrated customers now.”
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