UPDATE BT Openreach Setup New “Independent Board” with Key Appointments

The lack of a final agreement with Ofcom over Openreach’s future structure and position in the broadband market hasn’t stopped BT from progressing with their own plan for governance change. This has today resulted in the appointment of the network operator’s first “independent” board members.

Last year the telecoms regulator called for Openreach, BT’s UK network access division, to become a “ring-fenced, ‘wholly-owned subsidiary’ of BT Group, with its own purpose and board members” and to also introduce various other changes in order to boost competition and fairness in the market (here, here and here).

Ofcom made the decision after finding that Openreach still had an “incentive to make decisions in the interests of BT, rather than BT’s competitors, which can lead to competition problems.” Since then both sides have managed to reach agreement on the majority of areas, but several major stumbling blocks are continuing to hamper a final voluntary deal and as a result Ofcom are preparing to force through the changes.

In particular BT has been bitterly opposed to Openreach becoming a “legally separate company” (no CEO wants to lose full control over part of their business, even if the BT board will still have a say). Furthermore BT also complained about the related risks and costs of moving staff and pension liabilities to the “new” company, which now appears to be the biggest roadblock to a deal.

However in the meantime BT has continued to develop many of the changes that were proposed as part of Ofcom’s related Strategic Review and yesterday the first Openreach Board meeting was held. In keeping with that Openreach has appointed Sir Brendan Barber and Edward Astle as independent members of a newly formed Board to oversee strategy, investment and service delivery.

Sir Brendan is the former General Secretary of the Trades Union Congress (TUC) and current chair of Acas, while Edward is a former Board member of National Grid. Both men attended yesterday’s meeting, which was chaired by Mike McTighe (Openreach’s Chairman). BT claims that a fourth independent non-executive is due to be announced imminently with a “specific focus on customer service“.

Mike McTighe, Chairman of Openreach, said:

“Openreach’s network and connectivity underpins Britain’s digital economy and we know that our customers have very high expectations of us. I understand that customers sometimes feel let down by Openreach because we haven’t always delivered the service they expect or that we hope to provide.

We have made a lot of progress since Clive Selley joined as CEO a year ago – for example on halving the number of missed appointments, making our fibre network available to millions more people and accelerating our plan to introduce a new generation of ultrafast technology. But we need to do more to re-build trust and credibility. This will be the Board’s focus and we are currently in consultation with BT Group about agreeing the plan to deliver better service, broader coverage and faster speeds for consumers and businesses across the country.

We are determined to meet our customers’ expectations and to strengthen the autonomy, governance and transparency of Openreach to facilitate the delivery of better outcomes for everyone who has a stake in our business.”

The new board, which will have an independent majority whose appointments have been discussed with Ofcom, intends to take responsibility for “setting Openreach’s strategy and overseeing its performance, making sure it treats all customers equally whilst investing in better service, broader coverage and faster broadband speeds for the entire UK.”

Clive Selley, Openreach CEO; Clare Sadlier, Openreach CFO; and Simon Lowth, BT Group Finance Director will also join the Openreach Board. Clive will report to the Openreach Chairman, with accountability to the BT CEO on issues relating to BT’s responsibilities as a publicly listed company.

Openreach also plans to establish several committees, which the operator claims will be “needed to operate to the highest standards of corporate governance.” For example, a new Openreach Board Audit, Risk and Compliance Committee (OBARCC) will be established. The OBARCC will hold the business to account and regularly hear representations from customers, as well as conducting an annual review of Openreach compliance and publish its findings.

UPDATE 10th Feb 2017

A leaked BT briefing to Communication Providers’ (here) has confirmed that BT’s Group Strategy Director, Richard Allwood, is set to become Openreach’s Chief Strategy Officer. In addition, BT’s current Group Director of Regulatory Affairs, Mark Shurmer, has been appointed to the same regulator role at Openreach.

Elsewhere Openreach will also be losing its COO, Roddy Thomson, and their current MD of Customer, Commercial and Propositions, Jon Hurry. No replacement has been lined up for Thomson, although Jon Hurry will be replaced in the role by Openreach’s current Commercial Director, Katie Milligan.