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BT has agreed to Ofcom's demand for infrastructure subsidiary Openreach to become a distinct and legally separate company.

Ofcom had sought changes to Openreach's governance as it was concerned BT still had control over its decisions, while other telecoms firms felt they were not adequately consulted on investment plans that would affect them.

Openreach will therefore be separated from BT and operate with its own staff, management, strategy and a legal purpose to serve all of its customers equally.

The company will be run by its newly-established board, the majority of which consists of directors independent of BT.

Openreach will also offer its own unique branding, with any traces of BT's branding removed to reflect its greater independence.

BT's decision to agree to the changes means they no longer need to be forced upon the company through regulatory intervention.

The process of carrying out the reforms will take place in the coming months.

Sharon White, Chief Executive of Ofcom, said: "This is a significant day for phone and broadband users.

"The new Openreach will be built to serve all its customers equally, working truly independently and taking investment decisions on behalf of the whole industry - not just BT."

Ms White said BT's decision to agree to the reforms means they can be put in place much more quickly.

She went on to stress that Ofcom will carefully monitor how the new Openreach performs, as well as continue working to "improve the quality of service offered by all telecoms companies".

Gavin Patterson, Chief Executive of BT, added that the agreement will serve the long-term interests of "millions of UK households, businesses and service providers that rely on our infrastructure".

"It will also end a period of uncertainty for our people and support further investment in the UK’s digital infrastructure," he stated.

Mr Patterson went on to stress that it has listened to criticism of its business and is therefore willing to make "fundamental changes to the way Openreach will work in the future".

Industry reaction

The move has been widely hailed by rival broadband providers, many of whom had been strong critics of BT and its relationship with Openreach for some time.

Sky described the creation of a more independent Openreach as a "welcome step that we have long called for on behalf of our customers".

A spokesperson for the company said this represents "a step towards delivering better service to customers and the investment that the UK needs". 

However, Sky insisted that today's agreement must be implemented by BT "in good faith and without delay".

TalkTalk, another longstanding critic of BT, has also welcomed today's announcement, as it believes the reformed Openreach will be "better placed to deliver the improved investment and service that consumers and businesses deserve".

Dido Harding, Chief Executive of TalkTalk, commented: "We hope this is the start of a new deal for Britain’s broadband customers, who will be keen to see a clear timetable from Openreach setting out when their services will improve."

She added that Ofcom must robustly monitor and enforce the deal to make sure it delivers the improvements it expects.

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