Ofcom said today that it will push ahead with plans to legally separate BT and its broadband network division Openreach.
The watchdog accused BT of failing to volunteer any actions that would address competition concerns. BT shares dropped 1.3 per cent at the open.
Openreach is the division of BT Group that develops and maintains the UK’s main telecoms network used by providers such as Sky, TalkTalk, Vodafone and BT’s retail business. BT's rivals have long been calling for Openreach to be spun off due to competition concerns.
In July, BT said it would appoint an independent board and chairman to run Openreach, in a bid to appease its rivals and the regulator – and yesterday, the company revealed that former Ofcom board member Mike McTighe had been given the chairman role.
However, Ofcom said BT's proposed reforms did not go far enough. And in September, Karen Bradley, the culture, media and sport secretary, warned that Openreach could be split into a separate company.
Today, the watchdog said: "We have continued to discuss with BT potential changes to its voluntary proposal.
"Although we have made some progress, BT has so far failed to offer proposals that would adequately address our concerns. BT’s proposals still fall short in important areas. These include the transfer of people and assets, and the level of influence that BT Group executives could exert over the management of Openreach."
BT said in response to Ofcom's announcement: "We put forward proposals in July that we believe are fair and sustainable, and that meet Ofcom’s objectives without disproportionate costs. We are implementing these proposals, and have just appointed Mike McTighe to be the first chairman of Openreach. We are in discussions with Ofcom on two outstanding issues, the reporting line of the Openreach CEO and the form of legal incorporation.
"We will continue to work with Ofcom to reach a voluntary settlement that is good for customers, shareholders, employees, pensioners and investment in the UK’s digital future."
Ofcom said it remains open to further voluntary proposals from BT, but is preparing a notification to the European Commission to require changes to increase Openreach's independence. The regulator has already discussed the matter with the Commission, and expects to consult publicly on a submission early next year. Ofcom said it intends to move quickly in pursuing a decision from the Commission.
"Creating a more independent Openreach – which works in the interest of all providers, not just BT – is an important part of achieving this," Ofcom said today.
"We are disappointed that BT has not yet come forward with proposals that meet our competition concerns. 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."
BT shares were down 0.7 per cent at 347.9p in early trading.