Ofcom has said BT must open up its network to competitors and reform Openreach "to better serve UK customers and businesses", but it stopped short of insisting it would have to carve up the company - for now.
BT's share price rose 3.3 per cent in early trading as a result.
The regulator said it wanted Openreach, the division of BT that maintains the UK’s largest phone and broadband network on behalf of competing providers, to open up its telegraph poles and ‘ducts’ to enable rival providers will be able to build their own fibre networks, connected directly to homes and offices.
Ofcom kept the door open to Openreach being hived off as a separate entity, with its own shareholders, although it could still remain as a wholly-owned subsidiary of BT, with its own board. The regulator said it would put forward more detailed proposals later this year.
"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 said this morning.
"This new ‘digital map’ of the UK will allow competing operators to invest, plan and lay advanced networks, giving people more choice over how they receive their phone and broadband services."
Its review found that Openreach "still has an incentive to make decisions in the interests of BT, rather than BT's competitors", admitting this "can lead to competition problems".
As a result, Ofcom will overhaul Openreach's governance and make it more independent from its parent group.
"In future, Openreach needs to take its own decisions on budget, investment and strategy - such as the deployment of new networks," Ofcom said. "Openreach management should be required to serve all wholesale customers equally, and consult them on its investment plans. There will also be greater transparency over how costs and assets are allocated between Openreach and the rest of BT."
But the recommendation was not as strong as some - particularly BT's competitors - had hoped.
Dan Howdle, telecoms expert at advice site Cable.co.uk, said: “Ofcom's decision to open up Openreach's poles and tunnelling to competitors and to give them more say in future strategic and budgetary decision-making goes halfway to alleviating competitor complaints, but stops short of addressing the prime concern... The decision should be seen as one of least disruption. It is, perhaps, a case of poor timing winning out over common sense.
"A recommendation to split would have absolutely been the right decision for the UK broadband industry, but, in the short term at least, perhaps not for the 2.5m UK homes that do not currently have access to superfast broadband."