BT made a deal with Ofcom to avoid being broken-up, initiating a multibillion-pound spin-off that will be responsible for opening up the "last-mile" of its network to competitors.

Openreach, a new division within BT Group, will contain BT's field force of 25,000 engineers, largely from BT Retail and BT Wholesale. It will have its own headquarters and a fleet of 22,000 vans - all to be re-sprayed with multicoloured waves stretching the length of the vehicle.

The unit will have assets of £8 billion and revenues of £4 billion, and will be up and running by January 2006, BT said. Steve Robertson has been appointed as CEO.

Is your loop local?

The unit is designed to focus BT's local-loop unbundling, which competitors have said are far from adequate. The company will be legally accountable for the unbundling operations, and will be overseen by the newly created Equality of Access Board (EAB). (The board will also keep an eye on Ofcom to ensure it is delivering on its promise of lighter regulation for other parts of BT's business.)

The board will be chaired by a BT insider, Carl Symon, one of the telco's nonexecutive directors, but will have a majority of independent external members.

Unbundling is designed to address a central contradiction of the current telecoms environment - instead of BT facing competitors on a level playing field, it effectively owns the playing field, in the form of the last-mile wiring linking homes and businesses to local exchanges.

Efforts to give competitors access to exchanges in order to offer their own telecoms and Internet services have so far fallen flat. In June, BT agreed to the current plan in order to avoid the break-up of its retail and wholesale units.

No more lip service, competitors demand

Cable & Wireless, which owns broadband provider Bulldog and is BT's largest telecoms competitor, said the creation of Openreach was a step forward, but won't necessarily make a significant difference. The company noted the Telecom Adjudicator's finding that "right first time delivery" has gone backwards for two months in a row.

"That means that one in four customers do not get a service that works on the agreed date," Cable & Wireless chief executive Francesco Caio said in a statement.

"Openreach must improve dramatically on BT’s performance in consistent and reliable, right first time, delivery of local loop unbundling. It is that, not the name on the vans, that customers and Ofcom will watch."

BT achieved a major concession in exchange for its move, obtaining legally-binding undertakings from Ofcom that require the regulator to lighten its regulation in some areas.