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CityFibre Find Positives in its Failed FTTP Prices Appeal vs Ofcom

Sunday, Jul 24th, 2022 (12:01 am) - Score 3,120
cityfibre Toby Box photo

The Competition Appeal Tribunal‘s (CAT) decision last week to reject CityFibre’s appeal against Ofcom’s approval process for Openreach’s “Equinox” price cut (here), which slashed the cost of the incumbent’s wholesale FTTP broadband products for UK ISPs, may not have been a total loss for the alternative network operator.

Alternative network providers, like CityFibre, are concerned about such discount schemes because they’re in the early stages of investment to deploy rival networks and thus carry a lot of risk, particularly when facing a dominant market player.

The fear among some players is that Openreach’s discounts might eventually result in a reduction in competitive fibre infrastructure investment and deployment, which could reduce choice and innovation, and potentially even result in higher prices for consumers; though for now the extra competition is more likely to result in lower prices.

On the flip side, AltNets have taken a big risk in assuming that Openreach’s wholesale prices would always remain high (i.e. making altnet’s services appear more attractive for consumers and investors) and that they wouldn’t be allowed to adapt, particularly in aggressively competitive urban areas.

We recommend reading the prior article(s) for the full context. But to cut a long story short, CityFibre’s appeal focused more on how Ofcom arrived at their decision to approve Openreach’s discounts, rather than the price reductions themselves. Nevertheless, the tribunal ended up “unanimously rejecting” all of CityFibre’s grounds for appeal and “dismissed the appeal in its entirety,” which sounds fairly definitive.

Finding the Positives in Rejection

However, it’s somewhat customary for the losing party to find any positives they can in such an outcome, and CityFibre are no exception. At the time, the operator noted that the tribunal had made some “significant criticisms of Ofcom” as part of its ruling, although they didn’t initially go into a lot of detail.

Put another way, the CAT did find flaws in Ofcom’s consultation process, but it ruled that they were “not so flawed as to be unlawful“. After spending some time reading through the ruling, while also speaking to CityFibre and Ofcom, we now have a better idea of what the operator meant and have summarised the key points below.

CityFibre’s Perspective on the Judgement

1. The CAT found it surprising that Ofcom did not understand the altnet business model:

Tribunal Quote: “Given the apparent significance of the Overlap Conclusion, we find it surprising that Ofcom did not ask CityFibre if it had information about its short term network build plans and the anticipated overlap with Openreach. It seems obvious that CityFibre would, at least to some extent, have had such information available, if only because it was important information for the purposes of securing investment.”

2. Whilst the CAT acknowledge the high hurdle required for a successful judicial review, and that it was not for the CAT to substitute its views for those of an expert regulator, it considered that Ofcom could have asked further questions for the purposes of its assessment:

Tribunal Quote: “CityFibre has not met the high hurdle required to establish that Ofcom has failed in its duty to make sufficient enquiry. We consider that there were further questions which Ofcom could have asked, and which it may indeed have been desirable to ask. However, it is not for this Tribunal to substitute our views on that subject for those of an expert regulator with deep knowledge of the subject.”

3. The CAT considered that regulators like Ofcom are afforded discretion to make expert judgments in the expectation that they will provide clear and consistent guidance to investors:

Tribunal Quote: “very significant investment commitments and resource allocation decisions are made on the basis of [Ofcom’s] policy statements. Put another way, a lack of clarity and consistency in implementation has significant consequences and is therefore to be avoided. Regulators like Ofcom are afforded the discretion to make expert judgments in the expectation that they will provide clear and consistent guidance to those that they are regulating.”

4. The CAT expects Ofcom to maintain careful scrutiny of the market at this important time to ensure its conclusions are validated by evidence of actual competitive conditions:

Tribunal Quote: “Ofcom has reserved to itself the power to review its decision and to intervene if it considers that the Equinox offer is affecting competition in a way which Ofcom had not previously appreciated. We would encourage Ofcom to maintain careful scrutiny of the market at this important time, to ensure that the judgements it has made in the Statement continue to be validated by the emerging evidence of actual competitive conditions.”

CityFibre hopes this means that Ofcom will now be more effective, and even proactive, in scrutinising any future Openreach offers for their FTTP products at wholesale, to ensure that all operators are given a “fair bet“. But it remains to be seen whether any of the above points, if properly reflected by the regulator, would fundamentally change the outcome of future reviews.

Naturally, we raised these points with Ofcom, and a spokesperson told us this: “We carefully considered this offer and rivals’ views, and concluded that it does not raise concerns requiring intervention. We’re pleased that the Tribunal unanimously rejected CityFibre’s appeal on all grounds, and we will consider the comments in the judgment carefully.”

As for CityFibre itself, they clearly haven’t given up the fight and may, should it be deemed necessary, be considering another bash at litigation – assuming Openreach introduce further discounts in the future (this is a distinct possibility). Time will tell, although it would currently still seem to be an uphill struggle.

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Mark-Jackson
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 X (Twitter), Mastodon, Facebook and .
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Comments
24 Responses
  1. Avatar photo tech3475 says:

    The problem for myself is that none of the alt-nets seem to have any interest/plans for where I live as of now (VM literally stopped about 5 minutes down the road), this means that I only have OR as a choice and subsequently pay a higher price because of a service I may never get.

    1. Avatar photo Matt says:

      I feel for you as I’m much the same. You start to really detest all these providers and take them ignoring you as personal.

      I’m sure one day you and I will go from having no hope to having them all turn up at the same time and not knowing who to go with!

    2. Avatar photo Dan says:

      I hear what you are saying, how would it be fair to stop potential savings for customers just to help the altnets who only cover a small percentage of the country while others are left with no choice

    3. Avatar photo Alex says:

      I wouldn’t lose hope. VM also stopped about 200m from my house but once Openreach started rolling out FTTP here they have started expanding again.

      That said, I’d rather have Openreach FTTP any day over VM.

    4. Avatar photo Matt says:

      Which makes you laugh. If VM can cover you at a later date when another provider starts building then why not in the first place.

      If they had been the first to turn up, several addresses would be locked into contracts so it wouldn’t matter if OR or anyone else showed up afterwards.

    5. Avatar photo tech3475 says:

      @Alex

      I’ve had OR FTTP for about 2 years now with no sign of expansion, so I have my doubts.

  2. Avatar photo Ex Telecom Engineer says:

    The area I live in is within a VMO2 franchise area, with CityFibre overbuilding the CATV served roads. The Openreach FTTP map doesn’t show the area as having any planned future Fibre rollout, but the area is covered by FTTC, and also accessible via Openreach Duct judging by the number of BT manhole covers along the roads. Some of the less populous surrounding areas are showing on the map for planned FTTP rollout, so I assume Openreach are purposely avoiding overbuilding VM02 CATV served areas; Is it possible that Openreach are allowing Altnets first mover advantage in various areas, as part of some agreement? This might go some way to explaining OFCOM’s reasoning for allowing Equinox.
    As far as pricing is concerned, once BT achieve their annual £2.5 Billion cost saving target, what’s to stop them cutting prices across the board, as long as they maintain a good profit margin? If a company remains profitable, and maintains good margins, I’m not so sure they can be accused of anti competitive pricing, providing they don’t significantly undercut the competition.

    1. Avatar photo Optimist says:

      @cdturri – I currently subscribe to VM (coax) but CF is being installed in my area. As OR still only offer FTTC, I expect many of its ISP customers will switch to the other networks rather than wait for OR’s FTTP. In that scenario it would make sense for BT to do the same and sell off OR as an independent business.

    2. Avatar photo RobC says:

      I can assure you that there are no agreements in place between OR and any Altnets. In reality OR detest Altnets and is doing everything it legally can to make life as difficult for us as possible (see FTTP aggregation surcharge on EAD circuits as an example).

  3. Avatar photo cdturri says:

    Such as waste of resources to have Altnets, OR and VM all trying to reach the same customers. We should have funded a national FTTP plan and let ISPs sell their service on top of that. Why is internet got to be different than any other utilities?

    1. Avatar photo Carl Conrad says:

      Leaving it to a monopoly infrastructure provider would, in all likelihood, have delayed the roll-out. In effect, this is what happened prior to the growth of the alt-nets when BT/Openreach largely had the market to themselves. Smaller operators are more focused and innovative and an raise money through private equity, prepared to take a risk on the investment. BT/Openreach have only themselves to blame for the competition they now face. However, the end result will be a faster roll-out than would otherwise have occurred. The downside is that some players will go bust: however, they in turn will be bought by larger operators when the market consolidates. In 10-15 years time we will have 3 to 4 very large players. The competitors to BT won’t have their horrendous pension costs to contend with so will be potentially more profitable.

    2. Avatar photo Jason says:

      Agree , Alt-nets are a waste of cash . Pointless having all these companies , it has created the wrong type of competition .

    3. Avatar photo An Engineer says:

      Why should taxpayers spend 11 figures on an NBN when the private sector is building to 85%+ of the population without that funding?

      Then there’s all the bureaucracy that a public sector project has to have increasing costs and delivery time.

      This ignoring the end product. Unless the NBN were to provide dark fibre to every home, highly unlikely, the options to over 60% of the nation would be reduced. Likely no symmetrical options. No multi-gig. It’d probably roughly follow the Openreach tiers.

      So billions of pounds, fewer options for the majority of the country on the off-chance this public sector infrastructure behemoth can deliver to 15% of the country marginally sooner than under current plans.

      I can’t say I’m convinced.

    4. Avatar photo An Engineer says:

      As a reminder in 2019 Labour wanted to roll out full fibre to every premises by 2030.

      Under existing plans Openreach alone will be at 85% by the end of 2026. This ignoring any public sector contracts. Then there’s the altnet coverage that won’t overlap, and there will be some.

      If people think that without competitive build they’d be getting full fibre sooner I can’t say I’ve seen anything to indicate that’s the case. These weren’t resources sitting idle they have been repurposed because of the money available from the private sector.

      The public sector would have had a plan and a budget and stuck to it with any underspend going elsewhere, not on getting it done faster at the expense of cost per premises.

    5. Avatar photo Optimist says:

      Ooops sorry, my reply went to the wrong thread.

    6. Avatar photo GNewton says:

      An NBN-style approach would have made sense a couple of decades ago, but it’s too late now. This country has become quite backwards, almost 2/3 is still without fibre broadband. Clearly, the approaches taken over the past 2 decades have been wrong.

    7. Avatar photo John says:

      The reason the UK was left behind is because of a govt protected monopoly. Having the taxpayer foot the bill and placing more power in the govt and giving it another tool to spy on citizens would be a terrible idea, Mr Stalin

  4. Avatar photo Jazzy says:

    November 2021 – City Link laid cables in existing BT Ducts
    December 2021 – Openreach laid fibre cables in existing BT Ducts

    Feb 2022 – Letter from BT Broadband to everyone in my street inviting you to upgrade or switch to BT Fibre

    March 2022 – Email from Sky as my contract was up – Inviting me to take Fibre based on my postcode

    April 2022 – Openreach installed outside box, new ONT and put it where I wanted – Connected same day to Sky 500mb service

    July 2022 – Cityfibre site still says “We’ve encountered challenges that delay us from connecting your property”

    My friend who lives 2 miles away haD Cityfibre laid in March 2021 – it was connected in April 2022 – they are too slow missing out on hundreds of customers who are due to renew their contracts and eager for faster internet

    1. Avatar photo Jazzy says:

      City Fibre not City Link lol

    2. Avatar photo Anon says:

      That’s to be expected. Cityfibre aren’t sat there intentionally delaying service from going live.

      The part down your street is a very small part of their build using Openreach ducts (with the majority in their own).

      They are building everything new end to end including their own exchanges.

      Openreach will be much quicker as they use their existing exchanges, ducts etc.

  5. Avatar photo Nicholas Roberts says:

    Staged regional firm-priced contracts costed/bid for on the basis that everyone in the region gets connected . . . Err . . . Err . Like the national North Sea Gas conversion of the 1960-70s.
    Surely, highl quality comms is just as essential to all households now as gas was then.

    The current lets are about the worst way you could transform the UK into having a fully networked system fit for the 21st century . . . Perhaps HMG had an alternative agenda . . . One which fitted Brexit

    1. Avatar photo An Engineer says:

      It’s the same way most EU member states have done it.

  6. Avatar photo Anthony says:

    You can see why Cityfibre would be so annoyed. I just hope ISPs in areas with both CitfyFibre and Openreach. They all default to offering FTTP over CityFibre to new customers who choose to sign up. I know Vodafone are doing this. I hope the rest do too.

  7. Avatar photo Martin says:

    With inflation now raging at about 10%, one way Openreach could, in real terms, reduce their price is just not to put them up next year!

Comments are closed

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