BT's infrastructure wing Openreach should function as a "distinct company" with its own board, and take ownership of its physical network, the UK communications regulator has told the telecoms giant.

Ofcom—which added a little more meat to the bone on Tuesday, following its call in February for BT to open up its network to rival telcos in the UK—said that Openreach should be a "legally separate" firm.

A new board should be formed made up mostly of non-executive directors, the watchdog said. It added: "These non-executives should not be affiliated to BT Group in any way, but would be both appointed and removed by BT in consultation with Ofcom."

Openreach's chief, Ofcom said, should be appointed by that board with no meddling from BT. That boss would in turn be responsible for hiring top execs for the telecoms infrastructure business.

BT was forced to recently shuffle its pack of execs by promoting its top technology chief Clive Selley to head up Openreach. The BT veteran has worked at the company for 25 years, and just six months ago he replaced the former state monopoly's Openreach boss Joe Garner, who left BT late last year after a short tenure.

Selley may now face an uncertain future if a newly assembled Openreach board decides it needs a fresh start.

BT said that it would form a separate board for its Openreach business. Ofcom, however, said that the company was yet to address some of its other concerns.

Ofcom plans for Openreach to be obliged "to consult formally with customers such as Sky and TalkTalk on large-scale investments." The watchdog added: "There should be a ‘confidential’ phase during which customers can discuss ideas without this being disclosed to BT Group."

The proposed functional separation would also require that staff work for the new company rather than BT. Ofcom said it "would prevent any real or perceived conflict of interest, and allow Openreach to develop its own distinct organisational culture."

Ofcom is also calling on Openreach to own its physical network to allow the board to make investment decisions about the firm's assets. The watchdog noted that such a move could lead to "costs in transferring assets or people to Openreach, which would need to be mitigated."

Finally, Openreach should have a different branding from BT, Ofcom said, and it should have a separate strategy and control over budget allocation.

Ofcom said it had stopped short of splitting Openreach away from BT by claiming that its plans wouldn't incur huge costs and disruption to the business. The regulator warned:

It is designed to ensure that Openreach acts more independently from BT Group, and takes decisions for the good of the wider telecoms industry and its customers. If it cannot achieve this, Ofcom will reconsider whether BT and Openreach should be split into two entirely separate companies, under different ownership.

Separately, Ofcom said that new rules on telegraph poles and ducts that carry telecoms cables will come into force on July 31. The measures are expected to give telcos "further rights" to gain access to physical infrastructure. BT released a digital map of its ducts and poles last week, Ofcom noted.

Openreach has also come under fire about its woeful customer service record. Just last week, it was attacked by a committee of MPs. Selley said at the time that improving Openreach's customer service was his "number one priority."

Ofcom said that, over the next few months, it would bring in "tough performance rules" for Openreach.

BT boss Gavin Patterson said:

We have listened to Ofcom and industry and are introducing significant changes to meet their concerns. These changes will make Openreach more independent and transparent than it is today, something both Ofcom and industry have requested. Openreach is committed to delivering better service, broader coverage, and faster speeds and these changes will enable it to do just that. Our proposals can form the basis for a fair and sustainable regulatory settlement and we believe they can also enable Ofcom to bring its Review to a speedier conclusion.

He balked, however, at some of the plans. “Proportionality has to underpin any regulatory solution and we believe our proposals are a bold and appropriate response to the concerns outlined by Ofcom and others," Patterson said.

"We have considered the more extreme solutions proposed by others but they would be overly complex, disproportionately costly and time consuming to implement. They would also undermine Openreach’s ability to invest and create years of uncertainty.”

Ofcom's chief Sharon White said: “We’re pressing ahead with the biggest shake-up of telecoms in a decade, to make sure the market is delivering the best possible services for people and business across the UK.”

Interested parties can submit their views on the regulator's plans for the future of Openreach between now and October 4.