{"id":28124,"date":"2021-08-16T08:41:30","date_gmt":"2021-08-16T07:41:30","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=28124"},"modified":"2021-08-16T08:48:15","modified_gmt":"2021-08-16T07:48:15","slug":"openreach-rivals-warn-ofcom-not-to-allow-big-fibre-price-cut","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2021\/08\/openreach-rivals-warn-ofcom-not-to-allow-big-fibre-price-cut.html","title":{"rendered":"Openreach Rivals Warn Ofcom NOT to Allow Big Fibre Price Cut"},"content":{"rendered":"

Alternative UK network providers have heavily criticised Ofcom<\/a>’s provisional decision not to oppose Openreach<\/a>’s (BT<\/a>) proposal for a “major<\/em>” price cut to their wholesale Fibre-to-the-Premises (FTTP<\/a>) broadband products, which they warn could impact competition by discouraging ISPs from adopting rival networks.<\/p>\n

The discount scheme, which is now better known across the industry as the “Equinox<\/em>” offer, was officially unveiled last month (details<\/a>) and looks set to make Openreach<\/a>’s FTTP<\/a> products significantly cheaper for retail ISPs to adopt (i.e. resulting in cheaper services for consumers), while also giving those same providers some long-term pricing certainty – lasting for 10 years. Needless to say, this approach has divided the industry.<\/p>\n

NOTE:<\/strong> Pending regulatory approval, the discounts will go live from 1st October 2021.<\/div>\n

Ofcom<\/a> requires 90 days’ notice to assess such major changes, partly so they and the market have time to assess the impact on competition and other factors. Despite this, the regulator’s provisional view, as issued earlier this month (here<\/a>), is that Openreach<\/a>’s proposed discount would NOT have a “material adverse impact on competition<\/em>.”<\/p>\n

Naturally, ISPs that are much more reliant on Openreach’s services and which have only limited interest in building their own fibre (e.g. TalkTalk<\/a>, Sky Broadband<\/a> and Vodafone<\/a>), were found to be “generally supportive of the Equinox Offer.<\/em>” But the same cannot be said for alternative network (AltNet) builders. A mass of AltNets have now responded to Ofcom<\/a>’s new consultation<\/a><\/strong> on the proposed change (due to close on 6th September) and they’re almost universally opposed.<\/p>\n

Many of those AltNets are acting as both the network builder and retail ISP for their respective deployments, although some of them (e.g. CityFibre<\/a>) are merely acting as the network builder and aiming to attract third-party ISPs at wholesale to sell their broadband products on to consumers. But all fear a negative impact from Openreach’s products becoming cheaper, particularly while they’re still vulnerable, due to being in the early stages of trying to grow competitive network coverage and investment.<\/p>\n

Summary of INCA’s Response<\/strong><\/p>\n

NOTE:<\/strong> INCA’s view is supported by Zzoomm<\/a>, County Broadband, Full Fibre Ltd, Truespeed<\/a>, Fern Trading, CommunityFibre<\/a>, ITS Technology<\/a>, WightFibre<\/a>, Persimmons, Digital Infrastructure, and Airband<\/a>.<\/em><\/p>\n

Equinox will almost certainly lead to medium- to long-term consumer harm, due to it having caused a reduction in competitive fibre infrastructure investment and deployment, reducing choice and innovation and likely resulting in higher prices for end consumers.<\/p>\n

The Equinox Offer (Equinox) is a complex, long term discount scheme with several elements that separately and collectively result in strong loyalty-inducing effects on CPs purchasing wholesale fibre broadband connections across the UK.<\/p>\n

The consequence of the strong loyalty inducing elements of Equinox is that CPs will be disincentivised from purchasing fibre broadband connection from altnets at the wholesale level and make it significantly harder for altnets to compete against the CPs in the retail market due to the very low wholesale prices resulting from the various Equinox elements.<\/p><\/blockquote>\n

Summary of KCOM<\/a>’s Response<\/strong><\/p>\n

KCOM<\/a> has significant concerns in relation to the Equinox Offer. We consider it raises sufficient competition concerns to warrant further consideration by Ofcom with a view to determining whether to issue a direction to prevent the offer.<\/p>\n

Openreach\u2019s Equinox Offer strongly disincentivises CPs from using alternative FTTP<\/a> networks. In turn, this reduces the incentive for alternative FTTP network operators to make additional investments in FTTP.<\/p><\/blockquote>\n

Summary of Virgin Media<\/a>’s (VMO2) Response<\/strong><\/p>\n

Openreach\u2019s new price plan (\u201cEquinox\u201d) is likely to harm competition and undermine Ofcom\u2019s strategic objective.<\/p>\n

Applying the logic of Ofcom\u2019s Existing Openreach FTTP offers consultation, it is clear that Equinox is geographically specific in its impact, and on that basis, must not be introduced by Openreach without Ofcom\u2019s express consent. The effect of the discounts between new to BT<\/a> network \u201c(NTN)\u201d and other customers (\u201cnon-NTN\u201d) is discriminatory \u2013 both in the sense of being geographically targeted and because it prices the same processes at different charges, with the clear object of lessening competition. The overall effect is that an already-dominant provider will be able to exert even more pressure to narrow the scope for alt-nets to enter and expand.<\/p>\n

Given those effects, it is vital that Ofcom undertakes a thorough review of the Equinox pricing proposal. That review should focus on assessing the effect that Equinox will have on competition in the market.<\/p>\n

The stakes are high in this first consultation under the new WFTMR pricing regime. All stakeholders will be looking to Ofcom to clarify its approach, both procedurally and analytically. Openreach\u2019s competitors, and their investors, will be seeking confirmation that Ofcom will enforce the safeguards it established in the WFTMR. Openreach will be looking to understand where the boundaries of the regime lie. Many years of experience should lead Ofcom to expect that Openreach will be as aggressive as Ofcom permits it to be.<\/p><\/blockquote>\n

Summary of CityFibre<\/a>’s Response<\/strong><\/p>\n

CityFibre<\/a> has serious concerns about the process under which Ofcom is carrying out its assessment of the Equinox offer. It appears that Ofcom is proposing to reach a provisional view on the basis of responses to a 10-working-day Call for Inputs. That Call for Inputs contains no analysis or evidence from either Openreach or Ofcom. Ofcom must carefully consider the signalling effects of any provisional decision to approve the terms, including the potential for undermining its stated policy objectives.<\/p>\n

It is striking that while Ofcom\u2019s stated framework requires Openreach to have provided its views on the potential impact of the offer on alternative networks, the Call for Inputs provides no reference to this analysis. Plainly, Ofcom must consider not only Openreach\u2019s analysis of the potential impact on alternative network providers, but the views of the alternative providers themselves. This requires putting the analysis and evidence gathered from Openreach to alternative providers before forming any view, provisional or otherwise, on the compatibility of the proposed commercial terms with the strategic objectives set out in the WFTMR Statement.<\/p><\/blockquote>\n

For its part, Ofcom, which once again finds itself having to conduct a very difficult balancing act between the vested interests of opposing sides within the industry, has recognised that “altnets are likely to face stronger competition<\/em>” as a result of Openreach’s offer. But at the same time, they do NOT believe that it will “create a potential barrier to using altnets<\/em>” and should result in “better consumer outcomes<\/em>.”<\/p>\n

Ofcom will also be mindful that the outcome of giving Openreach a “fair bet<\/em>” on FTTP (i.e. softer regulation to help foster deployment) is that the operator, which already covers 5.16 million UK premises with their gigabit-capable network, has now committed to invest \u00a315bn<\/strong> in order to reach 25 million premises<\/strong> by December 2026 (c.80% of the UK) – including c.6.2 million premises in rural and semi-rural areas.<\/p>\n

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.<\/em>” Nevertheless, Openreach’s discount looks set to make their FTTP broadband products much more price competitive with rival networks, and that will clearly have its pros and cons.<\/p>\n

Consumers will no doubt be happy to see FTTP getting cheaper, which will in turn boost the take-up of related products and help to move away from legacy (copper line) infrastructure. 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 become more of a challenge. One tactic AltNets often deploy is to be very aggressive on pricing, but that’s a tougher sell when the dominant operator is able to play at a similar level (assuming retail ISPs pass all those savings on).<\/p>\n

Naturally, Openreach itself “conside<\/span>r there are no grounds for competition concerns and <\/span>that the offer does not <\/span>create a barrier <\/span>or disincentive<\/span> to CPs placing orders with or moving existing customers to <\/span>alternative networks should they wish to do so. <\/span>Our Off<\/span><\/em>er allows for fair competition on the merits<\/em>.<\/span><\/span>”<\/p>\n

Time will tell how this all plays out, but for now Ofcom seems to be happy with what has been proposed, even if a growing chunk of the AltNet market clearly feels the opposite way.<\/p>\n","protected":false},"excerpt":{"rendered":"

Alternative UK network providers have heavily criticised Ofcom’s provisional decision not to oppose Openreach’s (BT) proposal for a “major” price cut to their wholesale Fibre-to-the-Premises (FTTP) broadband products, which they warn could impact competition by discouraging ISPs from adopting rival networks.<\/p>\n","protected":false},"author":1,"featured_media":28125,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[474,418,56,414,32,36,69,38,89,66,74,475,96,71],"class_list":["post-28124","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-bt","tag-cityfibre","tag-fttp","tag-northern-ireland","tag-o2","tag-ofcom-regulation","tag-bt-openreach","tag-politics","tag-scotland","tag-sky-broadband","tag-talktalk","tag-virgin-media","tag-vodafone","tag-wales"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"\nOpenreach Rivals Warn Ofcom NOT to Allow Big Fibre Price Cut - 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