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Openreach Restart Big UK ISP Talks for Cheaper FTTP Broadband

Tuesday, April 6th, 2021 (8:22 am) - Score 10,800
openreach bt fibre optic cable hands

Openreach (BT) has reportedly restarted talks with a number of big UK broadband ISPs (e.g. TalkTalk, Vodafone) over the development of discounted long-term wholesale agreements for their gigabit-capable Fibre-to-the-Premises (FTTP) service, which were paused last year after rivals like Virgin Media raised competition concerns.

We’ve known that Openreach were planning new discounts to help boost take-up of their FTTP product since early 2020 (here). Major ISPs, like Sky Broadband and TalkTalk, also 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 affordable alternative network (AltNet) providers (e.g. Cityfibre, Hyperoptic).

NOTE: BT plan to invest £12bn to help Openreach rollout FTTP to 20 million UK premises by the mid to late 2020s (here) – 4.5 million have already been done. Virgin Media is also talking about adding 8 million more UK homes via FTTP (here).

The operator has done limited discounts before, but the new ones would have potentially been bigger, particularly for those that could drive take-up of the fastest tiers. But some rival operators (e.g. Virgin Media) were concerned that doing this might make it harder for alternative networks to compete against the established giant and could even be anti-competitive, given Ofcom’s prior rule set (here).

Toward the end of last year Openreach, as signalled via TalkTalk (here), appeared to shelve this plan pending the outcome of Ofcom’s latest market review. At the time a spokesperson for Openreach told ISPreview.co.uk they had 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.”

Since then Ofcom has finally published their latest Wholesale Fixed Telecoms Market Review 2021-26 (here), which extended an existing prohibited on offering certain “geographic discounts” to include full fibre services. But this doesn’t completely prevent all discounts (they have more freedom in competitive areas – Area 1), and it also gave Openreach some certainty about the different approaches they could potentially take.

The Telegraph (paywall) are now reporting that Openreach has restarted talks over the possible introduction of long-term wholesale discounts for FTTP with a number of ISPs, including TalkTalk and Vodafone etc. The CEO of TalkTalk, Tristia Harrison, said she was pleased to be “working constructively” with the operator on a “sensible pricing structure” again. Such a deal, if agreed, could also help to placate some of TalkTalk’s concerns about recent price increases on older copper based services (here).

Ofcom will no doubt seek to cast its eye over any future proposals and we hope that, if Openreach do introduce something, it will not to leave smaller ISPs on their platform at too much of a competitive disadvantage. Meanwhile, consumers in competitive areas (mostly dense cities and towns) will no doubt welcome the prospect of cheaper FTTP packages from providers.

At the same time, we must not forget that Openreach also have to balance all of this against the need to make a viable return on their investment. Finding the right balance between take-up and affordable pricing can be a difficult thing to get right. Pricing too cheaply can push the payback window on their investment even further into the future.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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17 Responses
  1. occasionally factual says:

    Given that some of the “alt” network builders have more cash than Openreach (so large market capitalisation), it is a bit rich to say that Openreach are harming competition by asking to charge ISPs amounts closer to that of the other builders.
    How can OFCOM square that circle of handicapping Openreach when it is up against larger financial entitles?

    1. Mark Jackson says:

      Regulation that varies by geography is one of the ways they balance such concerns, although I’m not sure if focusing on network builders just because they ‘might’ have more cash is the right one. Cash is not the only consideration here – Openreach have advantages in other areas, such as their huge engineering taskforce and established infrastructure etc. It’s a complex market.

    2. Fastman says:

      occasional factual really — not factual at all – Given that some of the “alt” network builders have more cash than Openreach (who told you that – is that the same person who once told me that Openreach brought all it network from Gigaclear and Openreach was 100% depedant on Gigaclear !!!!!

    3. FibreBubble says:

      Many of the altcos are owned by firms with far deeper pockets than BT. Such as Goldman Sachs and Prudential.

  2. Spencer says:

    The issue here with FTTP in the UK is how different the specification of it is.

    Virgin with there 1Gb/50Mbps
    Openreach with 1Gb/110Mbps (yet to find anyone who does 220 offering)
    Altnets doing 1Gbps/1Gbps

    You look at Virgin charging 62 quid and then alt nets charging 40. Where’s the value there for the consumer?

    It could and should have been consistent but its not due to mistakes of the past.

    Can lower Openreach’s cost to partners but it doesn’t hide the fact that both Openreach and Virgin/Liberty Global caught sleeping here with Altnets seemingly on paper providing better.

    1. 125us says:

      It’s a competitive market and different players have different products with different prices. Forcing everyone to sell the same thing would stifle innovation. Competition is what makes this better.

    2. Lexx says:

      Segmented market you can only get virgin 1000/50,, openreach fttp 1000/100 or alt net full 1000/1000 if you live there (or 1 to 80 broadband)

    3. Aled says:

      The elephant in the room is what the money is being used for.

      The smaller new companies are smaller, agile and can just get on with putting cable in the ground and putting the infrastructure in. They need good management, cash in the bank and technicians on the ground.

      BT and Virgin have more complicated situations, as they have to handle 20-30 years of legacy agreements, technologies, changeover, service changes etc. Not to mention the amount they both spend on advertising and the corporate executives. Then they start gouging the market with annoying deals to squeeze the final 10-15% out of their customers.

      BT shot themselves in the foot with their pensions liabilities and politically regulated wrangling. The original pensions were generous, but has left them with something like £40-50bn of pension liabilities to pay out. This is not coming from a “pension fund” where they stashed money away for a rainy day, this is funded by their ongoing revenue and customers! Can you imagine paying pensions for 80k people (ballpark £15-30kpa pensions), then having to hire 10,000s more to actually do the work!

  3. Johnnie says:

    We’re currently on FTTC with Vodafone, getting about 75/18 down/up for £23/month. Only two of us in the house, and we both work from home. Plenty of speed for us. We sometimes stream in 4K. Do we want to pay £50-£60 per month for FTTH? NO! For 6 months I’ve been trialling 8GB/month mobile broadband to check it’s robustness, and receiving 36-58/9-16 down/up at different times, which would also suit us if we went for unlimited broadband at £20/month and cancel our landline … we use it for unlimited landline/mobile calls in preference to our VoIP system. While I welcome the ramp-up of FTTP, I don’t want to be forced to receive it … and that is just what Ofcom has allowed Openreach to do. Shame on them.

    1. Johnnie says:

      I meant to add that I live in a small rural town in Norfolk. We have no cabinet on our street for FTTH. The line runs directly to the cabinet outside our local exchange in the town centre. For businesses with many employees FTTP is a must. Please don’t force those of us who are already happy to pay more for FTTH. Ofcom have already allowed a tax on copper lines. Hence I might move to 4G mobile broadband one day. Who know when we’ll get 5G here!

    2. Ferrocene Cloud says:

      Johnnie, at some point you’re going to have to accept you’re going to have to move off copper. It’s hard to see why you’re so adverse to doing so, given the benefits of fibre. Even if you don’t need more bandwidth, the reliability of fibre is superb, and performance is rock solid.

      Now maybe your VDSL is absolutely fine, but I can tell you for a fact that people complaining about a slow line or that their line isn’t giving them the speeds they pay for is a very common issue. It makes up a tremendous amount of fault complaints. Actual faults on the copper pairs are at least an order of magnitude higher than fibre as well.

      The cost of the package is based on the speed. If you have to pay 60 quid for a top tier 1Gbps package, why do you think something comparable to what you use now e.g. 100Mbps would also cost 60 quid? That makes no sense. You can see from what providers offer that they do much cheaper packages if you don’t need the bandwidth. You’re complaining about a problem that doesn’t even exist.

  4. Johnnie says:

    Whops, in my replay, I meant “no cabinet in our street for FTTC” but can’t edit it!

  5. Graham Smith says:

    I live in Surrey yet apparently have no chance of FTTP as there are only 2 houses down the off road track where I live. So I pay nearly £50 a month to BT and get about 12mbts down and 1.0 up on a good day delivered over the very old and long copper wire. No 4g reception here, so that isn’t an option. I would love to have decent broadband, so looking at Starlink.

    1. Ben says:

      Sounds like you’re getting ripped off by BT – even premium ISPs like Zen or IDNet charge substantially less for “slow” FTTC (I’m assuming you’re not using ADSL).

  6. Just a thought says:

    OR should be able to offer volume discounts as long as they don’t discriminate. So if TT want 100k customers on FTTP from OR, as long as BT and Sky are offered the same wholesale discount, all is fair.

    If you are a small niche ISP and only want 5k lines you’d pay the basic rate. Just the same as ASDA or Tesco asking Kellogg’s for volume discount, they will get a better price than the local corner shop.

    1. Ben says:

      But the corner shop can offer alternative brands of corn flakes. If Kellogg’s were £10 a packet at your local corner shop then you’d probably be happy with an alternative brand. In most places BT has a monopoly on providing the “last mile” broadband lines, so regulated pricing is important.

    2. JamesBand says:

      @Ben

      The analogy isn’t quite accurate. In this case, to buy a different brand of corn flakes, the regulator has set up a system that you have to build multiple supermarkets on the exact same spot that just sell their individual brand of corn flakes at different rates where the consumer is locked in for 24 months to buy at that supermarket.

      In addition, some supermarkets are offering the ability to fill your bowl at varying speeds from different sized boxes of corn flakes. But again, a whole new supermarket has to be built at the same site if you ever want to change brand/service. Instead of having a single shared shopping centre location where multiple supermarket brands can offer different brands of cornflakes, different sized boxes etc.

      In many cases, the small niche brands are offering a larger box with faster fill rate at a cheaper price than a major brand selling a smaller box with a slower fill rate. But for the consumer, there is no free market at a shopping centre. Instead, they have to wait for whomever directly builds a supermarket at each and every household.

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