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Rivals Sigh as Ofcom Clear Openreach FTTP Broadband Price Cut UPDATE3

Thursday, September 30th, 2021 (10:35 am) - Score 9,888
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Ofcom looks set to stoke anger among alternative UK network (AltNets) builders after the regulator today flatly rejected their concerns over Openreach’s “Equinox” offer, which will introduce a “major” price cut (details) to the incumbents wholesale Fibre-to-the-Premises (FTTP) broadband products for ISPs.

The offer itself could make Openreach’s full fibre products cheaper for retail ISPs to take (i.e. cheaper services for consumers, if they pass the savings on), while also giving those same providers long-term pricing certainty – lasting for 10 years. Naturally, ISPs that are much more reliant on these products, and which have only limited interest in building their own fibre (e.g. TalkTalk, Sky Broadband and Vodafone), have been generally supportive.

NOTE: The offer could, for example, drop the monthly wholesale rental of a 115Mbps or 1000Mbps consumer FTTP tier from £17.44 and £31.57, respectively, to just £15.50 and just £22. This excludes all the extras that an ISP must add in order to make the retail price you pay (e.g. 20% VAT, profit margin, service features, capacity etc.).

In essence, the Equinox Offer gives ISPs cheaper prices for Openreach FTTP products, so long as they largely stop making new sales of legacy broadband products where Openreach FTTP is available, and switch to selling mainly FTTP products instead. To qualify for rental discounts ISPs must achieve at least 80% of new sales orders on FTTP after the first year.

However, the “Equinox” offer generated a furious response from AltNets and Virgin Media (VMO2), many of which are currently busy investing billions (collectively) to deploy rival FTTP networks (e.g. CityFibre, Zzoomm, KCOM, Truespeed, Fern Trading and many more). Some of those networks will deploy in the same areas as Openreach, or be overbuilt by them in the future, and sell their own rival wholesale products to ISPs.

Such AltNets, many of which are in the early stages of their investment and carrying a lot of risk, have previously warned that Openreach’s new discount might ultimately result in a reduction in competitive fibre infrastructure investment and deployment. Further down the road, they fear, this could also reduce choice and innovation, and potentially result in higher prices for consumers.

Part of this concern stemmed from Openreach’s FTTP products becoming more price competitive – previously they’ve tended to be more expensive and so AltNets could grow take-up by being aggressive on price. The other aspect centres around how the new pricing could make it harder for AltNets with wholesale solutions of their own to attract third-party ISPs on to their networks, since they’d have less reason to choose them over Openreach.

The Equinox Decision

Ofcom, which has once again found itself conducting a very difficult balancing act between the vested interests of opposing sides, had previously given Openreach’s offer provisional approval (here). As part of that they recognised that “altnets are likely to face stronger competition” as a result of the offer, yet they did not believe that this would “create a potential barrier to using altnets” and predicted “better consumer outcomes.”

The regulator has also previously highlighted how their “analytical framework is concerned with the promotion of competition rather than the protection of competition as under competition law.” But the bad news for AltNets is that, despite some very public protests, Ofcom’s thinking hasn’t changed.

Ofcom’s Statement on the Equinox Offer

Our view is that we should take no action at this time.

In reaching our view, we have considered the impact on competition. For the reasons set out above, we do not consider that the Equinox Offer will have a material adverse impact on competition. We have also considered the impact on different stakeholders:

a) Citizens and consumers: Our conclusion is that the Equinox Offer is consistent with promoting investment in gigabit-capable networks by Openreach and other operators and promoting network-based competition, ultimately delivering better consumer outcomes.

b) Altnets: As a result of the Equinox Offer, altnets are likely to face stronger competition from Openreach. However, we conclude that the Order Mix Targets and forecasting requirements do not create a potential barrier to using altnets and that the New-to-network Discounts do not raise concerns in terms of targeting or their impact on altnet build. As a result, our conclusion is that the Equinox Offer is consistent with network-based competition.

c) ISPs: We consider that ISPs are likely to benefit from network-based competition. As explained above, we conclude that ISPs will continue to be free to use altnets where they wish to do so.

d) Openreach: We consider that not preventing Openreach from introducing the Equinox Offer allows it to engage in network-based competition, without compromising our objective of promoting investment in gigabit-capable networks.

In reaching our view, we have had regard to our duties under sections 3 and 4 of the Communications Act 2003. As discussed in more detail above, we have also had regard to the UK Government’s SSP.

Mark Shurmer, MD for Regulation at Openreach, said:

“This is a positive step as we continue to invest in upgrading the UK’s digital infrastructure. Our new pricing gives ISPs more long term certainty, enables them to compete in a highly competitive market, and makes ultrafast Full Fibre technology the default choice wherever it’s available – it’s great news for homes and businesses all over the UK.”

Initially, we suspect that consumers will be happy to see FTTP getting cheaper from Openreach, which will in turn boost the take-up of related products and help to move away from the legacy of copper lines. But on the flip side, AltNets will face greater pressure on their investment models and may need to build even faster, not least because growing market share among consumers will now become more of a challenge.

Ofcom will also be mindful that this partly reflects their decision earlier this year (here) to give Openreach a “fair bet” on FTTP (i.e. softer regulation to help foster deployment), which was promptly followed by an accelerated £15bn commitment to cover 25 million premises by December 2026 (c.80% of the UK) – including c.6.2 million premises in rural and semi-rural areas. So far they’ve already built to 5.2 million premises and rising, fast.

However, today’s decision does leave a sizeable question mark over the impact this will have on AltNet projects, particularly whether Openreach’s soon-to-be-cheaper FTTP products will put too much pressure on their economic models, investment and related take-up forecasts. Ofcom says not to worry, but only time will truly tell.

The operators that have already been able to establish some scale should be able to weather this, albeit while potentially needing to further cut or subsidise their existing pricing. But smaller AltNets, particularly those that are attempting to overbuild Openreach’s FTTP (whether intentionally or not), may struggle the most and could end up seeking consolidation sooner than expected.

Equally, where discounts are applied by Openreach in already aggressively competitive urban areas (Ofcom Area 1), then AltNets take a big risk in assuming that the incumbent wouldn’t adapt or be allowed to adapt. In those areas, Ofcom’s market review had already decided that Openreach shouldn’t face much regulation.

UPDATE 11:42am

Added a comment from Openreach above.

UPDATE 12:21pm

The first AltNet reactions are coming in.

Gareth Williams, CEO Gigaclear, said:

“We at Gigaclear are extremely disappointed by Ofcom’s decision. Whilst we will need time to review the detail, Ofcom’s statement appears to contradict both its obligations to support competition and its duties under the Statement of Strategic Priorities. We are now digesting the statement in full and will consider further action.”

UPDATE 1:55pm

Now a comment from CityFibre.

Greg Mesch, CEO at CityFibre, said:

“Ofcom’s decision to approve the Equinox offer is contrary to its own policy of promoting competition to BT Openreach by encouraging alternative network investment in the interest of consumers.

Infrastructure competition from CityFibre and other builders will ensure consumers benefit from better products at better prices – for the long term. The Equinox offer is an attempt by BT Openreach to limit that competition, ultimately denying consumers these real benefits.

We are now examining Ofcom’s decision and considering appropriate next steps.”

INCA Statement

INCA is not surprised but is still disappointed with Ofcom’s decision today. Our members are committed to meeting and surpassing the government’s targets for gigabit capable networks – so much so that £14bn of new investment has been brought into the sector to support this aim. Ofcom’s decision today puts that at risk and operators will now be seriously considering what steps to take next.

Superficially, BT’s ‘Project Equinox’ is all about reducing costs to encourage ISPs to move customers to BT Openreach’s fibre networks. Yet the impact will actually be a reduction in wholesale competition which will inevitably result in higher prices and lower standards of service in the long run for consumers.

BT is using its market power to reinforce its dominant position. It wants to deter the competitive investment that has done so much to accelerate the pace of new fibre deployment. To meet the government’s gigabit targets – and more importantly to reach those beyond the 85% stated in Boris Johnson’s ambition – we need to bring to the table all the investment available. The altnets are doing that and this competitive investment is spurring more investment from BT. Players like CityFibre are becoming increasingly significant alongside the growing range of regional and specialist providers that have entered the market based on supportive Government policy and a fair regulatory landscape.

Ofcom’s decision is in direct contradiction to its stated policy of promoting competitive investment and maintaining that regulatory certainty.

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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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50 Responses
  1. chris conder says:

    If ofcom did their job and regulated the fibre tax it would level the field better for altnets. Openreach should be compelled to pay the same taxes. Our regulator lets them get away with murder. They will do anything to protect the monopoly. Altnets are the only real competition. We would still be on dial up if it wasn’t for Virgin.

    1. Mark Jackson says:

      If by “Fibre Tax” you mean business rates, then that’s not within Ofcom’s domain to regulate. Business rates are very much for the Government’s Valuation Office Agency (VOA) to decide.

    2. Alex says:

      Openreach/BT pay more tax than all of the altnets put together

    3. wirelesspacman says:

      Overall, I’m sure they do Alex. But Chris’s point was about rates where BT/Openreach are not assessed on the same basis as the altnets.

    4. occasionally factual says:

      Openreach are the biggest and fastest growing FTTP provider in the UK. Look at the figures on TTB to see that their growth is far in excess of any other commpnay. Indeed their monthly install figure is larger than some individual alt-nets have managed to pass in years.
      So it is only fair that the vast majority of the UK consumers can benefit from lower Openreach pricing which is reflected in ISP prices and on the extremely competitive ISP market place that is provided by the Openreach platform.
      To make Openreach charge ISPs more would punish the majority of consumers.

    5. New_Londoner says:

      Quote “But Chris’s point was about rates where BT/Openreach are not assessed on the same basis as the altnets.”

      This has been assessed by both the UK (Court of Appeal IIRC) and the European Commission; they both concluded that neither Openreach nor Virgin Media gained any advantage by the different assessment method. The difference in approach was, as I recall, due to the significant difference in scale of their operations versus any of the altnets.

      In other words, the facts do not support the assertion. This won’t dissuade conspiracy theorists but it was ever thus!

  2. A says:

    Glad to see Openreach going ahead with the lower pricing. Keeping it high to make other companies profitable is stupid unless Openreach aren’t making a profit.

    1. kuro68k says:

      I wish they would offer decent speeds though. It’s only 100 up on the top tier.

      The others can compete by offering higher speeds.

    2. Vince says:

      @kuro68k

      The top upload on Openreach FTTP is 220 – but very few providers offer it.

  3. Peter says:

    Hopefully ISPs pass on the savings, this is really only way to encourage take up.

  4. Chris says:

    Openreach can’t win can they

    Either they keep prices up so altnets and vomit can gouge us while openreach gets bad press for not rolling out fibre fast enough or they drop prices to drive demand from their customers and their customers customers and they get attacked by the minnows and vomit.

    Bring in the cheaper prices.

    Toob are promising £25 symmetrical 1gig which is still cheaper than openreach plus vat plus isp profits so there is margin for altnets.

    The reality is that most households with 1gig broadband won’t take advantage of gig as most of their equipment, starting with the Wi-Fi access point won’t be able to deliver that speed to the customer devices. Yes some customers would use that speed but not 24/7.

  5. NE555 says:

    Openreach was in the untenable position that under their regulated pricing, FTTC is still cheaper than FTTP. Only marginally so, but even 50p a month is enough to stop consumers and ISPs switching, thereby forcing Openreach to maintain the copper indefinitely.

    Having lower pricing *if* ISPs commit to switching away from copper is in the long-term interests of everyone.

    1. Anthony Goodman says:

      I don’t believe that is true, as remember people switched from Dialup to DSL and then from DSL to FTTC and each time it was cheaper to remain on the slower/poorer connection type.

    2. Chris says:

      How do you define cheaper?

      I remember dial up being 56kbs max yet my first Broad band was NTL at 512kbs so 9 times the speed and always on. It wasn’t cheap especially as I had to buy a modem but wasn’t 9 times more than dial up. Later adsl wasn’t 9 times as expensive as dial up either, connection and bandwidth was far more useful than dial up.

      ISDN was far more expensive than dial up but provided more bandwidth & quicker connection times.

      in terms of price per kb xdsl was far cheaper than dial up.

    3. Mike says:

      Can anyone remember how much ISDN 128Kbps cost back in the late 90s?

    4. Mark Jackson says:

      Not sure about 128Kbps, but the 64Kbps BT Home Highway package cost £175 to install (conversion of existing line), around £50 for the adapters, and then I think it was £27 per month (this might have later been reduced, but I can’t recall). I still have one of those units in my loft somewhere 🙂

    5. Mike says:

      There was some posts on the forum from ~2001 that indicated it may be £63 for 64Kbps and £83 for 128Kbps with Demon Internet per month although the 128Kbps was apparently single channel.

      Adjusted for todays inflation I think it would be double.

    6. Vince says:

      The reason consumers aren’t switching isn’t about the price.

      It’s about the lack of need or reason to care.

      This is bourne out by having to make FTTP cheaper to get traction. If consumers wanted the speeds, “even if 50p more” they’d pay for it. The reality is that outside of geeks, tech people and those who want to download the entire internet and/or bragg about speeds, there is a point where a connection is “good enough”.

      For many consumers the 30-40 meg broadband they have is more than good enough. If they’ve got a reliable connection, it can stream and do what they want, why would they want to make any changes or buy anything else. The only real incentive left is “you can have higher speeds for less money” – but you know what, also “you could have the same speed for less money” would win too – simply because speed isn’t the thing.

      I’ve customers today using ADSL who get 20 meg download, aren’t fussed about upload and have no interest in switching to anything else even when FTTP is available to them. What’s the incentive?

      This nonsense that everyone wants FTTP, or that it’s just price stopping them is absolute rubbish.

    7. NE555 says:

      That’s more or less the point I was making.

      The vast majority of people are quite happy with 40/10, and they don’t care whether it’s on FTTP or FTTC. So if FTTP is 50p more expensive, the ISPs will continue to sell copper. Conversely, if Openreach want to retire copper, they need to be allowed to sell FTTP at the same or lower price than FTTC. The other option, of jacking up the price of FTTC, would be very unpopular.

      The altnets know this too. Where Cityfibre operates, apart from the vocal minority of users who want high speed services, the main way they get users on is via lower prices.

      The altnets need not worry though: there is still plenty of fat in there to go around. Openreach is still required to provide service to the whole country, whether that be via ageing copper or FTTP – the areas that the altnets would not touch.

    8. AnotherTim says:

      I just checked my old company records from 1998 – 128kb ISDN was costing me £50-80pm+VAT, but that included phone calls, so I’d guess ~50pm+VAT for the ISDN part of the bill. Adjusting for inflation that would be £90pm+VAT today – about the same price as 100Mb FTTP from Gigaclear, which shows how the technology has moved on (at least for those that can get FTTP)

    9. Mike says:

      @Vince

      FTTC is great if the speed is enough, otherwise you’re stuffed, at least with FTTP you can choose how much you want and you get it.

      I know quite a few people who due to aluminium line/distance from the FTTC cabinet struggle to get 20mbps and also suffer line instability.

    10. FibreFred says:

      @vince

      I’ve been saying this for ages. You are right a lot of people would and still are happy with ADSL. Same goes for FTTC.

      But if you listen to some on here it must be 1gig symmetrical nothing else will do!

  6. AndyC says:

    This has all the hallmarks of the last fibre screw-up when they stopped openreach from doing fibre completely because they wanted the cable companies to get a foothold except now it’s the fibre “altnets” they want in and look at how well that worked out the first time round……

    Fact is almost all these “altnets” are on borrowed time as they will be either bought out by someone bigger or have their network overbuilt by the big boys (which with both openreach, virgin and some other people saying they want high % coverage means it WILL happen), my view as well is that virgin have no right to complain as its safe to say they are the number 2 player with how many people they serve (often badly as their network often can’t cope) even when they do actually roll out to a area (yes, i’m still salty as i live in the ONE area of our city they did not roll out to and the last time i asked someone on the team who dealt with it said there was no plans to come finish the job).

    If the altnets have a good service on a reliable network they have nothing to fear as a lot of people consider that to be important also worth mentioning that the vast majority of them supply something very few if any of the big boys do…. a symmetrical service which is something i’m seeing more and more people ask for (I personally have a ip based home cctv system backing up to a cloud storage server and have online backups of what to me is important pictures/videos/files for which 160/30 (G.Fast) is great but a symmetrical 200/200 FTTP or better would be a god send for me)

    1. adslmax says:

      symmetrical 160/160 FTTP would be nice! I would take it!

    2. Fastman says:

      Adsl max

      really only you could want a product that the communication market does not think its a viable product at a sensible cost (hence the reason its not offered)

  7. Anthony Goodman says:

    Obviously lower prices are good, but I do think this is one of the worst possible decisions that will stifle competition, future FTTP building and possibly cause Altnets to go out of business.

  8. Darc says:

    Why should millions of people be forced to pay higher prices just because some other companies and shareholders want to make more profit.

    I think there is lots of room for alnets, they just need to find ways to provide innovative products for other to buy. e.g. symmetrical speeds, child protection products, higher quality routers etc.

    1. AnotherTim says:

      Because building networks in the remaining areas is very expensive, and the AltNets need a way to earn a return that pays for the cost of the build over a number of years (10-20). At the lower OR prices it will be impossible to match the price without going bust – if they don’t match the price they’ll get no customers and go bust anyway. The only sensible approach is to not build to the remaining areas.
      Great for those that already have FTTP, not so good for those of us that don’t even have superfast broadband.

    2. Ivor says:

      Tim – the reality is that the alt nets won’t touch areas like yours anyway. They want to cherry pick for maximum return, just as the LLU operators did, just as cable did. OR are probably going to be the only one who bothers.

      IIRC BT had to keep its own ADSL prices high in order to make LLU work – so people like me (whose exchange never got LLU until TT did so long into the FTTC/FTTP era) had to pay far more than I otherwise would have done.

      OR are already “knobbled” by being forced to open up pole and duct access to make it easier for the alt nets. Why should their pricing be artificially restricted to force competition into a sector that might not actually justify it in practice? Shouldn’t competition be allowed to work both ways?

  9. Brian says:

    It seems to be good news for consumers, particularly those that the altnets have shown no interest in serving. Openreach have been very slow to either provide or even plan FTTP in many areas so there has been an opportunity for many years for other operators to come in and grab market share.
    Competition will remain as the altnets with a good offering will survive, and some of the mobile operators seem willing to offer a competitive product.

  10. John Nolan says:

    Just a quick note on the “bit tax” (my parlance). The Ministry of Housing, Communities and Local Government are carrying out a major review on this – see https://www.gov.uk/government/consultations/business-rates-revaluation-2023-the-central-rating-list/business-rates-revaluation-2023-the-central-rating-list.

    From an initial skim, local authorities are the biggest losers.

  11. Buggerlugz says:

    “In reaching our view, we have considered the impact on competition”

    ROFLOL! like for real??? First for everything from OFCOM……

  12. FibreBubble says:

    My heart bleeds for the colossal investment banks that own CityFibre and Gigaclear.

    1. Fastman says:

      agreed

      the pluckly little gigaclear vs the big nasty Openreach has long gone (Gigaclear prob has same financial backing as openreach) problem is gigaclear has not covered itself in deliverable glory recent in areas where it has government funding (BDUK) is H & G and CDS

  13. FibreBubble says:

    Cityfibre and Gigaclear owners dwarf BT Group.

  14. Josh Windsor says:

    Just rumours, but I heard whispers that when city fibre have laid their network. Bt/openreach Will buy it off them.

    1. Anthony Goodman says:

      More likely paying Cityfibre to use their already laid ducting. If I was openreach I would do this. They’d be insane to pull up all these pavements again just to put a second ducting down right next to theirs

    2. NE555 says:

      Except that CityFibre don’t lay ducting to reach individual properties.

      They either lay bundles of microducts (tiny tubes with enough space for one fibre each) directly in the ground, with one tube to each property.

      Or else they use Openreach’s existing poles and ducts.

  15. I'm no expert but here's my 2p says:

    As a consumer I am pleased because it finally means that prices for a decent line for a busy family can be on another provider other than Virgin. However it remains to be seen when and by how much ISPs pass on the cost.

    Anyone any views on how long that will take?

    I am no industry expert but I can see some of the potential issues of this for the altnets. The size of their parent owner is potentially irrelevant. Any sensible owner will have a limit on how much money they can pour in to prop up a loss making business if it proved that the altnets can’t compete on wholesale price. For me the endgame will be one of the larger operators swallowing up the smaller operators when they are at risk or via some VC backed growth investment it might be the strategy anyway (let someone else build it, buy it, worry about integrating it later). Does anyone remember what happened to all the local cable companies….. Funnily enough all that local investment in infrastructure is now owned by a large multinational… In 10 years time I reckon there will be 3 main wholesale operators and a few minnows who only cover small specific yet profitable areas: VM02, OR and one other TBC (they might be called GigaCity or something?)

    1. AnotherTim says:

      In a few years the history of broadband will look very like the history of the canals, the railways, and cable TV. A number of entrepreneurial companies will have raised money to build the network, which will be patchy, with promises of rich returns to investors. The returns won’t appear, the costs will rise, the investors will pull out, and the companies will collapse. The assets will be bought up by larger companies for pennies in the pound, and the big companies will make a profit from it.
      However, the network coverage will remain patchy, as there is profit in running networks, but not in building networks. We can just hope that coverage gets as far as possible before too many go under.

    2. Bob says:

      Thi is going to go the same way that cable TV went. It started off with the UK being divided up into seeprate areas all with there local TV cxcompany. This was expensive and inefficent and what happened is they all slowy merged untill we ended up with one company

      It would be far more sensible for Openreach to be a totally seperate company possibly a not for profit company. It would only supply the local loop.

      Having mutiple companies install the last mile make no sense

    3. Lexx says:

      Yep openreach tried the adsl exchanges where isp installs there own equipment, ended up costing more then just doing it virtually as they do with vdsl (FTTC) now

    4. The Facts says:

      @LEXX – there are many exchanges unbundled by Sky and TalkTalk.

  16. Meadmodj says:

    For OR FTTP to be successful when an area is covered OR needs to encourage ISPs to stop offering DSL as quickly as possible and migrate to a FTTP based product. This achieves that.

    In the report it summarises “Sky, TalkTalk and Vodafone submitted that lower FTTP prices will benefit consumers and encourage take-up of FTTP. Vodafone submitted that the ten-year duration of the Equinox Offer allows ISPs to provide price certainty to consumers”. I agree as I think it also helps the large number of smaller ISPs who can plan ahead. It’s alright INCA not liking it but what’s the overall ISPA view?

    The reality it that OR are rolling out a primarily Ultrafast network, are confident of their design (lower price differential between speed), buying in bulk current cheaper GPON technology knowing they can simply overlay later when XGS-PON costs reduce. Yes asymmetric, but so is VM, it is what 90% of residential customers need for now, it lowers the overall investment burden and reduces the connectivity cost to ISPs.

    OR will continue to be regulated and is an open wholesale provider. If Altnet’s can’t compete with OR with its historic and current overheads then they really do need to look at their business cases and perhaps avoid going where OR have already proposed locations, avoid creating a trio with VM and simply stop overbuilding against other Altnets in a patch. There are plenty of locations not currently on OR’s 2026 plans and the BDUK new procurement is open to them.

    1. Alex says:

      This comment is far too sensible.

    2. Lexx says:

      The plan is to Have no copper by the end of the FTTP install (doesn’t just end on 2026)

    3. Meadmodj says:

      Correct we may have copper possibly past 2030. However areas where OR FTTP is rolled out OR will wish to remove the copper broadband and telephony. The 2026 date is simply the current published plan by OR. If the Altnets were to proceed in areas outside this plan they would have time to install and build market share.

      The assumption OR will proceed in all areas after 2026 may be misplaced. They may or not.
      Like all companies they will all be constantly monitoring the market during the next few years and all plans are likely to change.

      In heavily competitive areas post 2026 Openreach may for instance adopt a different network design that allows them to continue to provide the BT obligations, ISPs they have retained and business by full fibre (XGS-PON or higher cheaper by then). In addition by 2026 we will be in a far different place with mobile 5G and it’s backhaul which will be fierce competition for all fixed providers in a personalised rather than premise broadband world.

      Altnets have a window of opportunity which may not be open for long.

  17. JamesP says:

    How long before these price cuts start filtering through? I’m due to have FTTP available to me around January 2022 and hoping for a 1Gbps package for around the £40 mark (fingers crossed)!

  18. Bob says:

    It would make more sense if Openreach become totally independent of BT. It could beecome a not for proifite compsny confined to providing last mile connections and it would have to supply anyone that wantedto use it. Having rival local loops is expensive and not sensible in my view

  19. Another Jim says:

    How is this news? BT / Openreach cannot win? Regulated pricing maintains a point where the incumbent cannot dominate by undercutting and also incentivises others to ‘build and sell’.

    BT / Openreach is criticised if pricing falls – it undercuts network investment. It is criticised when high as resellers cannot drive enough profit to incentivise investment. It’s a no-win situation for BT and Openreach?

    Here’s the thing. While good for consumers it is not the incumbents interest to allow market entrants. Entrants present a ‘big buy’ in later years or they grow into serious competition? Acquisitions and their alignment are also rarely the opportunity they first suggest. Meantime you are driven to your own investment by that competition?

    You play ‘a long card’. You present your new network investment as ‘always having been in the running’. You seek pricing that draws neither unnecessary regulation nor thriving competition. Competitive investment and profit is driven down. You wait and buy your competition.

    It was a good strategy for the nineties and noughties. And good enough now, I imagine.

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