Cityfibre Files UK Full Fibre Competition Complaint Against Openreach UPDATE2
Network builder Cityfibre has today announced that they’ve formally submitted a Competition Act complaint to the Competition and Markets Authority (CMA) and Ofcom against Openreach (BT), which accuses the operator of “undertaking an aggressive strategy to foreclose infrastructure competition in the UK fibre broadband market“.
At present Cityfibre is investing an estimated £2.4bn in equity and £4.9bn debt to reach up to 8 million premises – across more than 285 cities, towns and villages (c.30% of the UK) – with their new gigabit-capable Fibre-to-the-Premises (FTTP) broadband ISP network by the end of 2025 (here). The network has already covered 2 million UK premises and is continuing to grow.
Similarly, Openreach are investing up to £15bn to cover 25 million premises with FTTP by December 2026 (80%+ of the UK) and they’ve already completed 9 million premises. Both Cityfibre and Openreach are direct competitors and increasingly overbuild each other in the aggressively competitive urban areas where they both, at this stage of the build, tend to focus most of their energy.
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However, Cityfibre has previously made no secret of their frustration with Openreach’s approach to major price cuts (“Equinox“) on their wholesale FTTP products (here), which they and other alternative networks (AltNets) tend to view quite negatively (here) – this is seen by them as the dominant player using its market power to put the squeeze on smaller rivals.
Such AltNets, which carry a lot of risk due to still being in the earliest stages of investment and competitive infrastructure build, have previously enjoyed a market where Openreach was traditionally much more expensive. This made it easier for Cityfibre to grow take-up, attract investment and gain support from third-party ISPs to their equivalent wholesale options.
Despite this, Ofcom has so far taken the view that Openreach’s price discounts were “not anti-competitive” and there’s an expectation that the regulator may take a similar view in the future. This is relevant because we’re expecting Openreach to unveil another round of price discounts (“Equinox 2“) in the very near future.
Cityfibre’s New Complaint
Unlike last year’s complaint by Cityfibre to the Competition Appeal Tribunal (CAT), which tried and somewhat failed to poke holes in Ofcom’s review process for the first “Equinox” discount scheme (here). The new complaint to the CMA is a much more significant challenge.
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The complaint claims to detail how Openreach is “undertaking an aggressive strategy to foreclose infrastructure competition in the UK fibre broadband market“, which they view as a strategy that “exploits the dependency of its wholesale internet service provider customers (ISPs), deterring them from placing orders with alternative fibre providers, even though these providers offer faster, more reliable, and cheaper wholesale services.”
The Competition Act 1998 was designed to prevent abusive monopolistic behaviour, and Cityfibre believe Openreach’s strategy “risks causing irreversible harm to network competition” in the UK.
Greg Mesch, CityFibre CEO, said:
“We welcome fair competition, but BT Openreach’s behaviour is straight out of the playbook of a dominant operator using its market power and advantages to maintain its dominance.
If left unchecked, BT Openreach will strangle competition and threaten the pace of the UK’s full fibre roll out – all at the same time as BT Consumer is imposing broadband price rises on millions of households far above the rate of inflation.
Were this to happen, it would also send a clear signal to investors that this country is not a place where they can safely invest the billions of pounds needed to improve UK infrastructure.”
The complaint appears to be somewhat of a pre-emptive strike against Openreach’s plans to introduce even bigger discounts on their FTTP products in the near future, which could potentially delay the related announcement(s). But whether or not it will be successful is another matter, since this may well go to the very heart of how a competitive market is supposed to function, particularly in urban areas (it’s hard to say for sure as Cityfibre has not provided much detail on the complaint itself).
The flip side of this is that ISPs on Openreach’s network often feel as if they’re being left at a competitive disadvantage versus significantly cheaper AltNets. Such providers have thus put pressure on Openreach to adapt and stay competitive, hence the discounts, which in-turn also helps to boost take-up by consumers and aid the move away from older copper lines. Consumers are generally pleased to see fibre prices fall, especially in this climate.
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An Ofcom spokesperson said:
“We can confirm we have received CityFibre’s complaint.”
Clive Selley, CEO of Openreach, said:
“We’ve not seen the detail of this complaint yet, but we reject any suggestions that Openreach isn’t competing fairly and we’ll defend that position strongly. We take our legal and regulatory obligations extremely seriously and we’re confident that we comply with those obligations to enable fair competition and choice for UK consumers and businesses.
Meanwhile we’re building further and faster than any company we’re aware of in Europe, so suggestions of a threat to the pace of the UK’s roll out are very wide of the mark. We’re also in constant discussions with service providers – often at their request – about our pricing and ways to accelerate the adoption of full fibre broadband, so we’ll continue to work closely with them to support and upgrade their customers.”
The challenge is with figuring out where to draw the line on all this to balance the vested interest of both sides. Ofcom has allowed Openreach plenty of flexibility to stay competitive, as seems only fair in such an aggressively competitive market – this is part of the reason why the dominant player opted to invest so much money into a major FTTP build in the first place. But did the regulator allow too much flexibility? The CMA will have to decide.
UPDATE 4:16pm
We’ve added a comment from Ofcom and Openreach above.
UPDATE 7th Dec 2022 @ 11:06am
We’ve had a comment from INCA, which represents UK AltNets.
Malcolm Corbett, CEO of INCA, told ISPreview.co.uk:
“No one should be surprised by the announcement today that CityFibre have submitted a Competition Act complaint to the Competition and Markets Authority (CMA) and Ofcom against BT Openreach. The UK’s independent broadband providers are united in their concerns at the way the current monopoly provider is behaving and the threat it poses to consumers.
It is complete myth to suggest that consumers will receive a better service and lower prices if there is only one dominant player in the market. The quickest way to ensure networks are built and the best way for broadband bills to stay low is to ensure there is a healthy competitive market. Despite the price reductions Openreach have made previously (and are trying to do again) to their wholesale customers, prices to consumers have been going up above inflation and increasing far faster than those of the so-called ‘alt-nets’.
INCA continues to remind the regulator and the Government of their commitments to ensuring there is a fair and competitive market in the UK and while we would rather it was not necessary, we fully support CityFibre in taking this action.”
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, BlueSky, Threads.net and Linkedin.
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In this climate, could Ofcom or the CMA really tell Openreach to not make things cheaper?
The most they could do is ensure the discounts are passed on but to force the majority of the country to have higher bills for the sake of tiny AltNets won’t go over well with the public.
A comment on a previous Equinox article said the biggest problem with Equinox isn’t the pricing, it’s the tie in. Cityfibre hint at that here, as well.
It’d be perfectly reasonable for the CMA to object to volume commitments/disincentives for using other providers, without objecting to the prices per se.
The problem is only certain things are cheaper, not duct rental costs for example. It is quite literally a move against the competition in every sense
There are no volume commitments or tie-ins in the Equinox offer – as Ofcom found first time around.
@Iain there are no volume commitments or tie ins with Equinox. The only significant network I know of with tie ins and volume commitments in the contracts is CityFibre.
Given that even with the Equinox discounts the price is still significantly higher than CityFibre, its hard to see how Equinox 2 can be seen as anti-competitive.
What Cityfibre are worried about is that a fairly-priced FTTP service with national coverage is more attractive to ISPs than a slightly cheaper FTTP service with only patchy coverage.
But that is frankly their problem, not ours.
Don’t forget the advantage that Cityfibre have over Openreach: they cherry-pick the cheapest places to build, and are not aiming for national coverage. That’s their business model, and their choice.
This means they can in some places offer cheaper FTTP that undercuts Openreach’s regulated, nationwide pricing – but short of a merger with Virgin, they are never going to have the coverage that Openreach do.
Thanks for the correction, Alex and The Fibre Man. Looking at the terms, a certain percentage (80%? 90%) of orders need to be GEA-FTTP, but crucially that’s orders on an ISPs Openreach orders. It doesn’t include orders over other networks! So you’re right.
Alex you may have a good point about how duct access should also be made cheaper.
As much as I’m partial to Cityfibre, I think Openreach gigabit pricing is too high. It needs to come down to normalise multi gig connections. So whatever happens I hope it’s good for competition.
I once looked at getting openreach duct/pole access and their 10G/1G “ethernet” options, as well as usual options, madness pricing, no matter the contention ratio if you shared it. Far cheaper to install city fibre at cost if anywhere nearby.
I just want good upload like not under 50%, reliable dns(VM!) and ipv6 so I can access all the Internet, is that too much to ask. It feel a bit like a price fixing monopoly issue on the uploads, more VM than BT but both. Think ipv6 will take a court case…
The whole point of Equinox, is to encourage CP’s to move off copper and onto Fibre as it’s rolled out. PIA is a completely different beast and has nothing whatsoever to do with ISP’s utilising Openreach/BT copper/Fibre.
Openreach is run as a separate company to BT, so Alnets using Openreach PIA are treated the same as BT; Granted, BT own the ducts and poles and benefit from rental charges from Altnets, but the Altnets are getting discounted access, allowing them to offer a far cheaper service than would be the case if they had to build their own infrastructure.
CityFibre are unlikely to win this in my opinion, as OFCOM will have to take BT’s transformation costs into account and I’m not even sure BT would be contravening competition law. Something else to consider is that BT/Openreach will have carefully thought this through and been careful to ensure they remain within said competition law.
Are the Altnets so desperate they can’t survive without trying to hold BT/Openreach back? Even SMP regulation has its limits. Doesn’t this also make a mockery of the market/media narrative, implying that Altnets will wipe BT out due to their agility and lower cost of operations? Clearly there’s something wrong with this narrative.
The equinox commitment is that a high percentage of Openreach orders are FTTP (where available). You are free to use other networks as well as long as you use FTTP instead of copper when you use Openreach.
‘Openreach is run as a separate company to BT, so Alnets using Openreach PIA are treated the same as BT; Granted, BT own the ducts and poles and benefit from rental charges from Altnets, but the Altnets are getting discounted access’
Altnets consume PIA. Openreach don’t.
This is complicated but the assertion that altnets are treated in the same manner as BT Group is wrong and ‘discounted access’ is a really loaded phrase.
Neither you or I have any expertise in these matters only opinions for the most part but the facts that we’ve access to do not lead to the conclusions you’re making. Even with PIA the altnets and Openreach are most definitely not competing on a level playing field if regulation is entirely relaxed.
You’re certainly entitled to your opinion on whether this is acceptable or not, whether it’s a good or bad thing but not to your own set of facts.
I note your earlier posts on British companies, how you’ve no investments in foreign companies, etc, so your bias is very clear. Wrapping it up in convoluted posts neither conceals or changes that bias.
Surely OFCOM keeping BT’s pricing “artificially high” is anti-competitive in nature anyway?
I understand Cityfibre will be upset that BT can rollout quicker and will be closer on price, but building better (10g symmetrical for a wedge) and more resilient services would allow them to still scoop a good amount of customers you’d think.
Them ignoring the OR split from BT isn’t helpful, OR haven’t put their prices up by CPI, thats on the ISPs. Seems interesting they’re ignoring Vodafone do the same.
OR isn’t split from BT beyond on a superficial level. Openreach have no assets, they are the property of BT Group PLC. Openreach products that aren’t required by regulation are designed around the needs of their number one customer, BT Wholesale. Some quite interesting accounting goes on as far as the split between Openreach revenues and rest of BT Group revenues go.
If you think Openreach are independent of BT Group you’re kidding yourself. Paper walls made marginally thicker by the ‘separation’.
Openreach saying they are the fastest expanding company in Europe is a joke.
If they had moved with the times years ago instead of milking our shitty FTTC lines they wouldn’t be in this position.
Using that as a flex is a joke, most of Europe already have widespread fttp coverage.
“Most of Europe already have widespread FTTP coverage”
We are doing better than Germany and France is only a few years ahead.
“We are doing better than Germany and France is only a few years ahead.”
Spain is more like a decade ahead of the UK with regards to fibre coverage.
Well, we should be ahead of them. The UK is 243,610 sq km, while Germany is 357,022 sq km. France at 551,500 sq km is ~126% larger than United Kingdom. Meanwhile we have about the same population as France.
I’m not sure they were the countries being talked about, though, as some states have focused on fast Internet access as a strategic tool for national development. Many lacked a sophisticated telecoms solution beforehand, so there was less temptation to just “sweat the copper plant” as was the case here.
Open reach very slow rollout. I will shave half of my head if they complete rollout before 2026 or even 2030.
E.g my local exchange named for rollout 2 years ago and my they still rolling out fibre only half of town and one or two turned up for work and disappear for few weeks.
All you need to do is wait for CityFibre to start building in your area – we had nothing from Openreach for years, but as soon as CF started doing preliminary work OR came in two months later and enabled the whole street.
meanwhile in my area the altnet decided to set up shop months after openreach had already deployed. Still see them poking around in Openreach’s pits from time to time – apparently it’s real “competition” when you use your competitor’s infrastructure to avoid the hard work.
it’s almost as if different companies do things on different schedules
Seems like only a few years ago CF rolled up to many an industry event and proclaimed OR wouldn’t be around in 10 years time.
They poked the bear, they were too slow to build in the empty market and now they have competition from the largest provider. Sour grapes me thinks
seems like massive sour grapes, but then they’ve been whining about Openreach for years anyway.
You’d think Cityfibre are a local corner shop and Openreach are the big supermarket chain trying to take away their business, rather than both firms being big corporates and more than able to attempt to compete.
Won’t be able to compete on scale with Openreach, won’t meaningfully be able to compete on service or performance since they use the same technologies and probably the same vendors, in many cases they even use Openreach’s ducts and poles, so they appear to want to get them knobbled on price in the hopes that ISPs will come to them instead (and go through the financial/technical hurdles for a network that has a fraction of the coverage?)
I’d agree on scale, but not on anything else. I believe they are already winning customers with better products and service today.
Very few networks in the UK (and beyond) are equal despite all being able to purchase from the same equipment manufacturers.
Openreach are years ahead of Cityfibre in terms of infrastructure, with all the exchanges etc. So is it really surprising that there are issues… what Cityfibre also need to realise is that they will also be struggling to obtain customera after the experiences during their works. We had an absolutely horrendous time with them and their Subcontractor during the works in our area and has put me off even considering them even if they were cheaper… Customer Service doesn’t just start when you sign a contract…
I’d take a modern Cityfibre FEX (a.k.a. Micro data centre) over a non climate controlled and dusty BT Exchange any day.
Cue BT doing something similar in a few years time when all their exchange leases expire…