Britain's biggest telecoms group BT has reached an agreement with the regulator to finally resolve a two-year row over how the UK broadband network is run.

BT has agreed to a legal separation of the business. 

BT has come under fire after rivals including Sky, TalkTalk and Vodafone accused Openreach, the division that supplies broadband to millions of homes and businesses in the UK, of delivering a poor service. 

BT's rivals say Openreach does not invest enough in the network, particularly in fibre optics which currently connect only 2% of premises.

They say the service is run to serve BT's bottom line rather than the interests of the UK's broadband needs. 

BT said it had agreed to legally separate its broadband unit, Openreach, moving 32,000 staff into the new company, which will have its own brand without the BT logo. 

The Openreach chief executive will report to the Openreach chairman, while keeping accountability to the BT CEO with certain legal and fiduciary duties. 

"This has been a long and challenging review where we have been balancing a number of competing interests," BT's chief executive Gavin Patterson said.

"We have listened to criticism of our business and as a result are willing to make fundamental changes to the way Openreach will work in the future," he added. 

Ofcom, which wants BT Openreach to plough more money into upgrading its copper networks to fibre to catch up some European rivals and the likes of South Korea and Japan, had threatened to go to the European Commission to try to force its case. 

It said today that the proposals put forward by BT meant it would no longer need to impose these changes through regulation.

"The reforms have been designed to begin this year," it added.