BT and TalkTalk Row Over FTTP Discounts and Competition Rules

The CEO of low-cost broadband ISP TalkTalk, Tristia Harrison, has criticised BT (Openreach) for not signing long-term discount deals (wholesale) to help boost access to their Fibre-to-the-Premises (FTTP) broadband network. On the flip side BT is reportedly concerned that being too generous could breach UK competition rules.

Naturally major Openreach based ISPs like Sky Broadband and TalkTalk have a vested interest in being able to offer consumers the most affordable FTTP broadband packages possible, which is necessary to tackle rising competition from a new generation of alternative network (AltNet) providers. At the same time TalkTalk have also somewhat hedged their bets by reaching a wholesale agreement to access Cityfibre’s network (here).

Openreach has already tried to facilitate some of this by offering special discounts, which have enabled ISPs to benefit from price reductions when they help to drive take-up of FTTP packages (example). Earlier this year we also reported that the operator was exploring a potentially even bigger discount scheme by the end of this year (here), but that has yet to materialise.

According to the FT (paywall), Tristia said that “the next 3 to 6 months are critical” and described BT Group’s stance as a “red herring.” However, Ofcom’s rules do require Openreach to treat all of their customers equally, which may limit what they can do.

A Spokesperson for Openreach told ISPreview.co.uk:

“We’ve launched a number of recent offers for our new, ultra-reliable, full fibre broadband network – and we’re encouraged to see those generating strong demand from major ISPs across the market.

We intend to build the highest quality network, with the biggest footprint in the UK and we’ll continue to work closely with our customers to develop propositions that work for them whilst safeguarding competition in the market.

We have a legal obligation to treat all of our customers equally and we take that obligation very seriously. That means our full fibre products will always be available to every ISP in the UK under the same prices terms and conditions.”

We should point out that Cityfibre and other altnets have previously also raised concerns about Openreach using their weight to undermine their own investments in alternative full fibre infrastructure (here), such as by aggressively discounting prices and overbuilding their own networks. Admittedly a lot of this is to be expected in dense urban areas, which is the traditional home of aggressive competition between rivals.

The debate is only now heating up because Ofcom is currently examining how best to handle the migration path from legacy copper networks and on to FTTP. On this we suspect that TalkTalk might be able to use their deal with Cityfibre as somewhat of a bargaining chip, such as by threatening to migrate more customers away from Openreach’s network in areas where both they and Cityfibre deploy FTTP.

Lest we forget that Openreach can’t price FTTP too cheaply as they too need to get a return on their planned investment of £12bn, which will push their full fibre network to cover 20 million UK premises by around the mid to late 2020s.