BT is to be ordered to legally separate its Openreach network arm after failing to address competition concerns voluntarily.
Telecoms watchdog Ofcom said it was “disappointed” with BT’s proposals since it outlined plans in July to make Openreach a “distinct company” within the BT group.
The regulator will now prepare a formal notification to the European Commission to start the process of forcing a legal separation of Openreach, which develops and maintains the UK’s main telecoms network used by telephone and broadband providers such as Sky, TalkTalk, Vodafone and BT Consumer.
But it stopped short of forcing a full break-up and sale of Openreach and added it remains “open” to further proposals from BT for a voluntary separation of the division.
Rival firms have welcomed action many have been demanding, but said the plans do not go far enough.
TalkTalk CEO Dido Harding said: “While we do not think legal separation goes far enough to deliver the broadband consumers deserve, it is at least a step in the right direction.”
“We will continue to push Ofcom to ensure the plans deliver real, meaningful improvements quickly, and if major changes cannot be delivered, then they should move to structurally separate Openreach once and for all.”
A Sky spokesman said: “We have always said that we want a solution that is clear and executable and in the best interests of consumers and industry.
“We will now watch closely as to how Ofcom executes its proposals.”
Although the ruling does not immediately apply to Northern Ireland, Dominic Kearns of Belfast-based B4B Telecoms also welcomed the ruling.
Stating that he would be writing to OFCOM in Belfast seeking assurances that the impact of the ruling will ultimately be felt locally he said: “As independent providers of telecommunications services to Northern Ireland businesses we are simply looking for a level playing field, something we don’t have while BT and Openreach effectively operate as one entity in Northern Ireland.
“While the Northern Ireland situation remains stand alone from GB, we will be urging OFCOM to ensure that the effects of the decision are felt here by whatever means is required.”
Ofcom said it had been disappointed that BT had not come forward with proposals addressing its 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,” it added.