Openreach Slash Wholesale Fibre Broadband Prices for UK ISPs

Openreach (BT) is to cut the prices of their wholesale “fibre broadband” (FTTC and FTTP) products to ISPs by up to 40%, which they say is designed to encourage providers to switch more of their old copper line (ADSL) users on to faster internet connections and this in turn will help to improve coverage.

The discounted prices within the offer are available on all variants of Openreach’s Fibre-to-the-Cabinet (FTTC) products, which include both their estimated VDSL2 (up to 80Mbps) and latest G.fast (up to 330Mbps) hybrid fibre lines across the United Kingdom. Related services are available to the vast majority of the UK.

Sadly the price cut will only benefit some ultrafast up to 330-1000Mbps Fibre-to-the-Premises (FTTP) locations, mainly New Sites and Broadband Delivery UK areas (i.e. excluding their ‘Fibre First‘ cities), although all FTTP volumes will count toward the offer targets. Openreach currently aims to cover 3 million premises with FTTP by the end of 2020 and they hold an aspiration for 10 million by c.2025.

The idea is that this promotion will help to encourage consumers off older and slower ADSL (up to c.20Mbps) copper lines, which in turn will both assist in lifting the country’s average broadband ISP speeds and help to expand coverage by raising take-up in state aid supported (BDUK) areas.

The BDUK scheme requires Openreach to return part of the public investment as take-up rises beyond 20% (gainshare / clawback), which can then be reinvested to further improve coverage. As Openreach states: “As of March 2018, BT has made provision for £528m to be returned over the lifetime of the contracts and £80m of this has already been committed – earlier than required – to improve speeds and coverage in certain areas.”

The above reinvestment is what will help to lift “superfast broadband” (24Mbps+) network coverage from c.95% today to 98% of UK premises by 2020. Better take-up means more opportunity to go beyond 98%.

Clive Selley, CEO of Openreach, said:

“We’ve invested more than 11 billion pounds into our network over the last decade and whilst that’s helped the UK become a global digital leader, there are still millions more homes and businesses that could benefit from the better broadband infrastructure we’ve built.

This offer is a win/win for Communications Providers, their customers and Openreach. It will help Britain’s homes and businesses to experience the benefits of faster and more reliable broadband. And it will incentivise our wholesale customers to participate in our long-term investment in digital infrastructure by upgrading more of their customers to superfast and ultrafast services.”

Full details of the new wholesale offer pricing can be found here, although it’s worth remembering that this is NOT reflective of the price that ordinary consumers like you or I will pay at retail. As usual providers still have to add various costs on top, such as 20% VAT, network, features and a profit margin etc. We also note that the offer only goes to the 160Mbps tier, which suggests that there won’t be a discount on faster tiers (e.g. 330Mbps+).

The offer itself, which will be introduced from 21st August 2018, is sadly quite complicated and will be available to any ISP – including small providers – that grows its FTTC and FTTP customer base on Openreach’s superfast or ultrafast network by an agreed proportion over a 3 or 5 year period.

The offer term is broken into 6-month periods over which a provider’s performance against its target is measured and any discounts will be paid back as a rebate in the month following the end of the period.

The challenge in all this for ISPs won’t just be with respect to achieving the target growth but also with how they adjust their pricing for all consumers, given the price differences for different levels of growth and the availability of discounts in some FTTP areas but not others. On top of that it also makes it a darn sight harder for us to communicate the changes.

As an example, Openreach currently charges an annual rental of £69.59 +vat (after Ofcom’s recent wholesale charge control) for their 40Mbps (10Mbps upload) FTTC and FTTP tier, which works out as £5.80 per month. Under the discount system this could fall to just £4.99 (i.e. a 14% or 81p monthly saving) for ISPs delivering the strongest growth / take-up. Other products will see even bigger discounts up to 40%.

Just for reference, here are the normal standard charges for the different products (without any of the new discounts or ISP scale being applied).

UPDATE 9:56am

Added an example of the impact directly above.