UK Watchdog Won't Block Openreachs Discount Fiber Pricing

UK telecoms regulator Ofcom has given the go-ahead to Openreach’s Equinox 2 discount pricing scheme, despite earlier criticism from smaller network operators that it allows the dominant player to undercut them.

Openreach is the infrastructure division of Britain’s telecoms giant BT, and provides a nationwide network platform for BT’s own services plus other internet service providers (ISPs) such as Sky and TalkTalk.

In line with goals to boost wider uptake of fiber-to-the-premises (FTTP) or “full-fiber” broadband connections across the country, Openreach has offered incentives to ISPs to encourage new subscribers to opt for FTTP, including discounted wholesale pricing, of which Equinox 2 is the latest incarnation.

Announcing its decision, Ofcom said: “Having carefully assessed the range of evidence available to us – including responses to our public consultation – we have decided not to prevent Equinox 2 from being introduced.”

This is despite the admission that “this offer gives lower prices to retail providers – such as BT, Sky, TalkTalk and Vodafone – if they agree to use mainly Openreach’s full-fiber products for new orders instead of its legacy copper products.”

This was the bone of contention among smaller alternative network providers (“altnets”) – that ISPs would only qualify for discounts on wholesale pricing if they hit a certain proportion of new orders on Openreach fiber, thereby discouraging ISPs from considering other providers.

Ofcom, however, insisted its decision was “consistent with promoting investment in gigabit-capable networks by Openreach and other operators” and would promote network-based competition, ultimately delivering better consumer outcomes.

The regulator did concede that as a result of Equinox 2, “altnets are likely to face stronger competition from Openreach,” but claimed the conditional terms in the offer do not create a potential barrier to using altnets, and therefore its conclusion was that Equinox 2 is consistent with network-based competition.

Megabuyte chief analyst Philip Carse backed this up, saying that while Equinox 2 will result in lower wholesale prices for FTTP, “we understand that they are still pitched at a reasonable premium to some altnet wholesale prices". He said BT, in contrast to many altnets, does not offer a symmetric broadband service.

Openreach naturally welcomed the decision, with Chief Commercial Officer Katie Milligan hailing it as “good news for customers as it means lower prices and long-term certainty – encouraging the switch to faster, more reliable broadband connections.”

She added that it is also good news for the country, as it supports Openreach’s “continued multi-billion-pound investment in upgrading the country’s broadband infrastructure.”

But media and telecoms analyst Paolo Pescatore of PP Foresight told us the news will be “a bitter pill to swallow for rival infrastructure suppliers like Virgin Media O2 and altnets.”

“Rivals will feel that Openreach is trying to use its market dominance by locking in providers for longer,” he said. “If so this will squeeze their own margins, making it harder to roll out their own networks and compete at scale. However, Openreach wants to have long term certainty as it invests in building out a fibre broadband network in the UK.”

Kester Mann, director of Consumer and Connectivity at CCS Insight, largely agreed, saying that “it’s a big blow to the UK’s many aspiring fiber altnets which will fear the move could stifle efforts to challenge BT.”

Mann said that with the UK full-fiber market “firing on all cylinders”, it would have been a surprise if Ofcom had blocked Equinox 2, but added “the fact that the UK regulator delayed its initial decision on the controversial pricing mechanism for further assessment shows that it is not prepared to let BT have everything its own way.”

He also warned that with the discounts being applied equally throughout the UK, “we could see greater impact on locations where build costs are highest, and this could hinder connectivity in some of the more rural parts of the UK raising concerns about the digital divide.”

Equinox 2 was first disclosed in December, with Openreach submitting the new wholesale offer for review by Ofcom, as is required. It had intended for the new pricing scheme to come into effect from April 1, but Ofcom delayed making a decision following “a number of detailed responses” it received as part of its consultation.

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One altnet provider, CityFibre, claimed at the time that it would give Openreach an unfair advantage in winning new customers, with the CEO describing it as a pricing policy designed to lock in customers and prevent them from switching to cheaper and more reliable competitors.

In response to Ofcom’s decision to approve BT Openreach’s Equinox 2, CityFibre boss Greg Mesch expressed mixed emotions.

“We are disappointed Equinox 2 has been approved and will be undertaking a thorough review of Ofcom’s decision,” he told us. “We are, however, pleased to see Ofcom’s pressure has brought about the end of Equinox, with a commitment from Openreach to make no further changes to its wholesale pricing until April 2026,” he said.

Mesch also claimed that while introducing price discounts to lock in its wholesale customers, BT was at the same time “significantly increasing prices for millions of its retail consumers” and said “Ofcom must ensure that competition is effective and sustainable if consumers are to benefit.” ®