Telecoms regulator Ofcom is prepared to go to the European Commission in its quest to put distance between BT and its networks division Openreach.
BT has dragged its heels on proposed reforms that would aimed at increasing the roll-out of its fibre networks, better customer service and easier access to its boxes from rival suppliers.
BT , through Openreach, mostly owns the network infrastructure of internet cabling across the country and has come under repeated fire for its under-performance.
Ofcom put forward its plan to legally separate the two in July, and said on Tuesday (November 29) it was disappointed by the response of the telecoms giant.
In a statement it said: “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.”
Openreach maintains the telecoms network for other providers such as Sky and TalkTalk which have been open critical of Openreach with MPs telling BT to “get its house in order”. Rivals have said that BT is unresponsive and charged too much for access.
Ofcom has stopped short of ordering full separation but wants to ensure the maximum independence for the division with the BT Group.
BT has put forward its own proposal for a more independent Openreach, but Ofcom said it fell short in areas including the level of influence that BT Group executives could exert over the management of Openreach.
Ofcom said it was preparing a formal notification to the European Commission to start the process.
BT has announced that the first Openreach chairman would be Mike McTighe, who was on the board of Ofcom between 2007 and 2015.
Announcing the appointment, BT chairman Sir Michael Rake said: “We promised in July to create an Openreach Board and we are delivering on that promise.
“I remain hopeful this significant move by BT can help to underpin a sustainable, proportionate and fair regulatory settlement that is in the interests of the whole country.”
Shot across the bows
Richard Neudegg, head of regulation at uSwitch.com, said: "This is a last-minute warning shot to BT to improve its offer on how legal separation would work. It would appear Ofcom is still open to BT proposing a better voluntary deal.
"Ofcom isn't changing its position at all. The regulator is still gunning for legal separation rather than full structural separation and is using a potential notification to Brussels in an attempt to ensure it can get this over the line.
"Those calling for structural separation – including Sky and TalkTalk – will be disappointed this option still isn't being considered more closely.
"But this is one step closer towards finding a version of Openreach that maximises investment in new digital infrastructure while still allowing effective competition. Many agree that is what's needed, but disagree on how to do it. Ofcom is seeking to strike a balance."
Dave Millett of independent telecoms brokerage Equinox said: “In my view this does not go far enough because BT will still presumably supply the money for the investment into Openreach – so who holds the purse strings?
"If it’s still BT, which is what it appears to be, then they still hold the power. So, this new ‘legal entity’ means very little and will produce very little change.
“This is against a backdrop of the UK lagging Europe in terms of availability of fibre to the home and the fact that many small businesses have no access to fast broadband."