Regulator Ofcom has stopped short of enforcing the sell-off of Openreach but said BT's infrastructure division should become a legally distinct company within the group that owns its own network, and has its own branding, culture and board of directors not affiliated to BT Group.
The new board will have a majority of non-executive directors, including the chair, and be appointed and removed by BT in consultation with Ofcom.
In Ofcom's proposed model Openreach should develop its own strategy and annual operating plans within an overall budget set by BT Group.
According to Ofcom's CEO Sharon White (pictured) these measures provide the benefits of independence and structural separation but without the time delays, complexities and costs of a sell-off.
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.
"Openreach will become a distinct company, legally separate from BT and obliged by law to act on behalf of all customers and the whole industry. Not just BT.
"The new Openreach board will have to take investment decisions as a matter of law and the decisions must work for the whole of the UK, not just BT.
"I understand why people see the attraction of selling off Openreach. It seems straightforward, but, for example, pension issues could take years to resolve. These new rules provide all the benefits of separating Openreach and can happen straight away, without delay.
"Ofcom will monitor the new Openreach and the flow of decisions and judge whether they are being taken in the interest of customers. If this does not deliver independence, faster broadband and better service we reserve the right to revisit a sell off.
"There needs to be more investment in fibre to the doorstep, with engineers arriving on time and doing the job first time."
In February Ofcom made it easier for telecoms providers to invest in competing infrastructure by improving access to Openreach's network of telegraph poles and its ducts.
On 31st July new rules come into force that will give telecoms providers further rights to access physical infrastructure. These measures are designed to reduce the cost of deploying broadband networks by sharing access to infrastructure across different sectors.
In February Ofcom also announced a range of measures to ensure that all phone and broadband companies provide service quality that customers expect. Since then the regulator has taken more steps to improve services, as well as boosting coverage, such as automatic compensation and easier switching.
Ofcom has also set out stricter minimum requirements for Openreach to repair faults and install new lines more quickly. From next year, Ofcom will publish tables on communications providers' quality of service, showing the best and worst performers on a range of measures.
Ofcom will introduce coverage checkers by address, providing information on mobile and broadband coverage by individual address, not just postcode.
Ofcom's plans come after last week's CMS Select Committee report criticised Openreach for its poor the quality of service and BT's under investment into the UK's digital infrastructure.