Openreach offers more wholesale fiber discounts, rivals call foul

CityFibre seethes that move comes straight out of 'dominant operator ... playbook'

Openreach has revealed new wholesale pricing for fiber-to-the-premises (FTTP), offering more discounts for internet service providers (ISPs) to encourage a migration of consumers to fiber broadband connections.

However, it has already met with criticism from other network operators, who believe the company is using its position as a dominant player to undercut them.

Openreach said it has submitted its new FTTP wholesale offer, Equinox 2, for review by UK telco regulator Ofcom. The original proposal came into effect in October last year and offered ISPs incentives over the next 10 years to encourage them to get new subscribers on fiber broadband rather than a legacy connection using copper cabling, as part of efforts to get more customers onto fast broadband.

As the infrastructure arm of UK telco giant BT, Openreach provides a nationwide network platform for ISPs such as Sky, TalkTalk, Vodafone and BT itself. The company said it developed Equinox 2 in response to feedback from those clients, and describes it as an optional overlay to the original Equinox offer.

In its proposals, Openreach said it will provide further incentives to support ISPs in migrating their end customer base to FTTP. This will include a mix of incentives to encourage take-up of higher bandwidths, with the additional benefits conditional on the existing "fiber only" measure seen in the original Equinox. The new pricing is due to come into effect on April 1, 2023.

Openreach chief commercial officer Katie Milligan said in a statement that it is investing £15 billion to upgrade more UK users to full fiber broadband, and that Equinox 2 is part of achieving this.

"To that end, we’ve responded to our customers' desire for lower prices and long-term certainty. These offers don't commit them to Openreach exclusively, but alongside our new, faster speed tiers, we're confident they'll help them continue to support and delight their own customers in a highly competitive market," she said.

However, one alternative network provider (altnet) challenged the original Equinox offer. CityFibre claimed that it would give Openreach an unfair advantage in winning new customers as the discounts would dissuade ISPs from using altnets when signing up new subscribers to fiber connections.

It lost an appeal with the Competition Appeal Tribunal (CAT) earlier this year against Ofcom’s decision to allow Equinox to proceed, with the ruling finding that CityFibre had not been able to demonstrate that it had suffered any prejudice.

The company is equally critical of the updated offer, with CEO Greg Mesch saying in a statement that "BT Openreach is exhibiting a series of behaviours straight out of the playbook of a dominant operator using its market power and advantages to maintain its dominance."

Equinox is just one of those levers, he claimed describing it as a pricing policy designed to lock in customers and prevent them switching to cheaper and more reliable competitors.

This is because to qualify for a discount, an ISP must get a certain proportion of their new sign-ups on Openreach fiber, which could dissuade ISPs from considering fiber from altnets operating in the same area.

Lutz Schüler, CEO of Virgin Media O2, said in a statement sent to The Register that it was vital the new wholesale pricing proposals are given thorough scrutiny to ensure Openreach does not use its market power to lock in providers and deter them from switching to other networks.

"We will be making our views clear to Ofcom and Government, who have both made repeated calls for more fiber investment and competition in the UK, and we ask that Ofcom delivers on its own strategy for a healthy broadband market as set out two years ago in its Wholesale Fixed Telecoms Market Review," Schüler said.

Telecoms analyst Paolo Pescatore at PP Foresight agreed there are concerns among rival infrastructure providers such as Virgin Media O2 that the discounted Equinix 2 prices are too low, potentially squeezing them out of the market.

"Rivals will feel that Openreach is trying to use its market dominance by locking in providers for longer. If so this will squeeze their own margins, making it harder to rollout their own networks and compete at scale," he said.

Ofcom now has a tough challenge of assessing the impact of these new prices and whether it will negatively impact market choice, Pescatore added. He warned there are "too many players chasing too few pounds" in the broadband market, and that consolidation is inevitable given the amount of build-out that is taking place.

"A more sensible approach should be adopted to ensure UK plc benefits from fiber broadband," he said.

Last month, Openreach announced it was going to prioritize investment in areas where it had already started fiber network build-out rather than on starting builds in new areas, as the company looks to hold down costs amid surging inflation and other pressures. ®