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BT has been ordered by Ofcom to legally separate from its infrastructure subsidiary Openreach.

Earlier this year, the watchdog said BT must give more independence and investment powers to Openreach, with the broadband subsidiary being run as a distinct and legally separate company with its own board.

Ofcom said these proposals, which were unveiled in July, would provide Openreach with the greatest possible degree of independence without separating the companies entirely, and lead to decisions being taken for the good of its customers and the wider telecoms industry.

However, the regulator believes BT has not done enough to ease its concerns over competition, particularly its belief that BT has the "incentive and ability to favour its own retail business when making strategic decisions about new network investments by Openreach".

Ofcom acknowledged that some progress has been made, but said it has been insufficient and "action is required now to deliver better outcomes for phone and broadband users".

"Ofcom is pressing ahead with its plans to improve broadband and telephone services for people across the country, pursuing better service quality and encouraging greater investment in networks," the watchdog commented.

"Creating a more independent Openreach, which works in the interest of all providers, not just BT, is an important part of achieving this."

Under Ofcom's latest proposals, Openreach would be run as a distinct company with its own board, which would largely comprise of non-executive directors with no affiliation to BT.

Openreach would be guaranteed greater independence to make decisions on strategic investments, with a duty to treat all of its customers equally.

Ofcom added that if it decides legal separation is not delivering sufficient benefits to the industry and customers, the option of fully breaking up the companies will be placed back on the agenda.

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