{"id":33118,"date":"2022-12-14T07:37:58","date_gmt":"2022-12-14T07:37:58","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=33118"},"modified":"2022-12-14T16:17:55","modified_gmt":"2022-12-14T16:17:55","slug":"openreach-unveil-fttp-broadband-price-cuts-for-uk-isps-equinox-2","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2022\/12\/openreach-unveil-fttp-broadband-price-cuts-for-uk-isps-equinox-2.html","title":{"rendered":"Openreach Unveil FTTP Broadband Price Cuts for UK ISPs – Equinox 2 UPDATE3"},"content":{"rendered":"

Openreach<\/a> (BT<\/a>) has today responded to pressure from their ISP customers by unveiling a new round of major discounts (aka – “Equinox 2<\/em>“) to the wholesale price of their gigabit-capable Fibre-to-the-Premises (FTTP<\/a>) broadband products, which aims to keep the operator competitive and reduce prices on consumer packages.<\/p>\n

At present, Openreach<\/a> are investing up to \u00a315bn<\/strong> to cover 25 million premises (80%+ of the UK) with their full fibre network by December 2026, and they’ve already completed 9 million. The operator is currently building at a pace of 62,000 premises per week, although they continue to face competition from a rapidly growing pool of alternative networks (AltNets), many of which are still able to undercut them on price.<\/p>\n

NOTE:<\/strong> 6.2 million premises in their plan are in Ofcom<\/a>’s rural or semi-rural areas (here<\/a>) and they’ve already completed 2.8 million of that target.<\/div>\n

However, like most operators, Openreach<\/a> needs to deliver strong take-up by consumers to satisfy their investment model, which in turn requires that they stay competitive on price with the wider market. All of this also helps to encourage customers on their legacy copper line network (this is slowly being retired) to adopt full fibre.<\/p>\n

The first response to this came last year when Openreach unveiled their Equinox 1<\/strong> discounts (here<\/a>) and they’ve today followed that up with further reductions under Equinox 2<\/strong>.<\/p>\n

Katie Milligan, Chief Commercial Officer at Openreach, said:<\/strong><\/p>\n

“We\u2019re investing \u00a315bn to upgrade the UK to ultrafast, ultra-reliable Full Fibre broadband and we\u2019re keen to get more homes and businesses using this new network as soon as we’ve built. That way the whole country will benefit.<\/p>\n

To that end, we\u2019ve responded to our customers’ desire for lower prices and long-term certainty. These offers don’t commit them to Openreach exclusively but, alongside our new, faster speed tiers, we’re confident they’ll help them continue to support and delight their own customers in a highly competitive market.”<\/p><\/blockquote>\n

As per usual, Openreach are required to notify new pricing to Ofcom<\/a> 90 days before it launches, which means that the changes themselves won’t be introduced until April 2023<\/strong> (assuming the regulator’s review doesn’t turn up any problems, but we’ll come back to that).<\/p>\n

What\u2019s Changing in Equinox 2?<\/strong><\/span><\/h3>\n

The new Equinox 2 scheme builds on the original Equinox 1 and is described as an “optional overlay<\/em>” that further reduces – albeit only a little – the monthly rentals on Openreach’s FTTP<\/a> tiers and adds some other connection discounts (details here<\/a> and here<\/a>), while also continuing to give the same long-term pricing certainty (Equinox 1 runs for 10 years) as the original offer.<\/p>\n

Given the recent Cityfibre<\/a> complaint (see below for more on that), Openreach are at pains to point out that there are “no volume or exclusivity requirements to obtain discounts<\/em>” and they’ve introduced a so-called “failsafe mechanism to remove any theoretical possibility of distorting incentives to use alternative networks<\/em>” (more on that later).<\/p>\n

The discounts themselves are only for premises in Area 2 and 3. Using Ofcom<\/a>’s definitions, Area 3 tends to mean uncompetitive rural or semi-rural locations (final c.30% of premises), where Openreach is the only operator, while Area 2 are potentially competitive areas, where 1 or more ultrafast broadband operators have a plan to deploy (i.e. most of the rest of the country).<\/p>\n

The operator says that all of this is about the “industry making FTTP<\/a> the default technology for broadband<\/em>” on their network. But overall, the Equinox 2 discounts are, much as we predicted last week, not as dramatic as the Equinox 1 offer, with only small changes in rentals. At the same time, there will be prices rises on some of their older copper-based products, which will go up by an average of CPI (inflation) – encouraging the switch to FTTP (assuming that’s even an option for you yet).<\/p>\n

NOTE:<\/strong> The offer will be open to all ISPs, including those that have not previously signed up to Equinox 1.<\/div>\n

\"Equinox-2-Pricing-Openreach-Dec-2022\"<\/p>\n

Take note that at first glance the connection discounts above may be a little confusing because the relative price increase is due to the expected impact of inflation (+11%), rather than the changes being made. Deeper discounts can be found on migrations. As for the failsafe mechanism..<\/p>\n

Fibre Only measure and Failsafe Mechanism<\/strong><\/span><\/p>\n

The Equinox 2 offer will launch on 1 April 2023. CPs must achieve a target proportion (90%) of Openreach provision orders on Openreach GEA-FTTP, where GEA-FTTP is available, in order to be eligible for full connection and rental discounts.<\/p>\n

There are no volume targets or exclusivity requirements in the Equinox offer. Although Openreach does not believe that there is any possibility of the Fibre Only measure having the effect of distorting incentives to use alternative network suppliers in areas where CPs have a choice between Openreach GEA-FTTP and other potential network suppliers, Equinox 2 also introduces a new Failsafe Mechanism which eliminates even a theoretical possibility of such a distortion.<\/p><\/blockquote>\n

Regarding the Failsafe Mechanism, Openreach has uploaded an additional document<\/strong><\/a> on this that states: “In simple terms, the Failsafe Mechanism would allow a CP to define an \u201cOverbuild Area\u201d where it is able to place orders with an alternative network supplier. Any orders placed with Openreach in this area – whether on copper or fibre – would be excluded from the calculation of Fibre Only performance<\/em>.”<\/p>\n

The above assumes AltNets would want ISPs to inform Openreach about their overbuild areas, which for competitive reasons may not always be the case, and thus the failsafe mechanism will be managed by an independent 3rd party verifier to “ensure confidentiality<\/em>“.<\/p>\n

Openreach claims this means that “any decisions to use an alternative network supplier in the Overbuild Area for any level of order volumes could not in any way affect the Fibre Only measure and, therefore, the level of discounts the CP would receive<\/em>” and they “reserve the right to review and amend the Failsafe Mechanism if its use results in CPs placing a disproportionate level of orders on Openreach copper in the Overbuild Area<\/em>.”<\/p>\n

All of this sounds good for consumers, but if you’ve been reading ISPreview.co.uk recently, then you’ll already be aware that Openreach’s rivals in the AltNet space aren’t especially happy about it (here<\/a>). Such providers see this as Openreach allegedly abusing their dominant position to put the squeeze on their models, which in turn will make it harder for them to build take-up and grow into real competitors at scale.<\/p>\n

Hyperoptic<\/a> Policy Director, James Fredrickson, said:<\/strong><\/p>\n

“Given Openreach\u2019s significant market power, it is critical now to consider how these proposed changes may impact the competitive landscape of our industry. This must also be balanced against the need for Openreach to legitimately react to competition, which is something that any prudent network operator should factor in to their future plans \u2013 this new set of discounts should not come as a surprise to anyone.”<\/p><\/blockquote>\n

Lutz Sch\u00fcler, CEO of Virgin Media<\/a> O2<\/a>, said:<\/strong><\/p>\n

“BT<\/a> is facing the biggest competitive challenge in its history with billions of pounds of fibre investment pouring into the UK, creating the prospect of genuine broadband wholesale competition at scale for the first time. To avoid putting planned and future investment at risk, and to safeguard fair competition, it\u2019s vital that these wholesale pricing proposals are thoroughly scrutinised to ensure Openreach is not using its market power and dominance to lock in providers and deter them from switching to other networks.<\/p>\n

We will be making our views clear to Ofcom and Government, who have both made repeated calls for more fibre investment and competition in the UK, and we ask that Ofcom delivers on its own strategy for a healthy broadband market as set out two years ago in its Wholesale Fixed Telecoms Market Review.”<\/p><\/blockquote>\n

Cityfibre<\/a> has even gone so far as to submit a Competition Act complaint to the Competition and Markets Authority (CMA) and Ofcom against Openreach, which accuses the operator of “undertaking an aggressive strategy to foreclose infrastructure competition in the UK fibre broadband market<\/em>” (here<\/a>). The new Failsafe Mechanism may well provide some balance against that.<\/p>\n

Suffice to say that the regulator’s consultation on all this is expected to take a slightly deeper dive into the Equinox 2 offer than Equinox 1, although it remains unclear which way either the CMA or Ofcom will swing. The current market is aggressively competitive, which is only natural, and Openreach, in return for their big build commitment, have long since been allowed flexibility to compete. But Equinox 2 is more of a tweak than a big deal breaking change, at least on our first skim reading.<\/p>\n

Put another way, we think Cityfibre<\/a> may face more of an uphill struggle on this one than Openreach, but this is not to say that the regulator or CMA won’t yet raise concerns and potentially seek adjustments to Equinox 2. Figuring out where to draw the line on natural market competition, especially in urban areas, is rarely an easy task and the alternative, of forcing Openreach to maintain artificially high prices, has its downsides too.<\/p>\n

The other question mark over this is whether or not Openreach’s ISPs will even pass these savings on to consumers, given how many of them are suffering from hefty price increases in other areas (energy costs, lease costs etc.). Given the small profit margins involved, we wouldn’t be surprised if some simply opted to keep their prices at a similar level to what they are today.<\/p>\n

UPDATE 8:52am<\/strong><\/p>\n

We’ve added a comment above from Virgin Media<\/a> O2<\/a>. In addition, Openreach have made clear that the failsafe mechanism will be managed by an independent 3rd party verifier to ensure confidentiality.<\/p>\n

UPDATE 11:02am<\/strong><\/p>\n

Ofcom informs that they expect to publish a consultation on their provisional view of this offer by early February and stakeholders will then have 30 days to respond.<\/p>\n

UPDATE 1:26pm<\/strong><\/p>\n

Cityfibre has just given their response.<\/p>\n

Greg Mesch, CityFibre CEO, said:<\/strong><\/p>\n

“BT<\/a> Openreach is exhibiting a series of behaviours straight out of the playbook of a dominant operator using its market power and advantages to maintain its dominance. Equinox is just one of those levers – a pricing policy designed to lock in its near-totally dependent customers and prevent them switching to faster, cheaper and more reliable competitors.<\/p>\n

Ofcom helped create the competitive market which saw fibre Britain bloom. Long-range investors have answered its call, bringing billions of pounds into the country and they deserve long-range pricing confidence and a level playing field. BT Openreach must not be allowed to strangle competition before the fibre market reaches maturity.”<\/p><\/blockquote>\n

UPDATE 4:16pm<\/strong><\/p>\n

We’ve had a comment from INCA too, which represents AltNets.<\/p>\n

An INCA spokesperson said:<\/strong><\/p>\n

“INCA is pleased to see that details of the Equinox 2 scheme have finally been notified by Openreach to Ofcom. However, the protracted signalling of the offer has already had a disruptive impact of the market. INCA will be analysing the offer in detail and engaging with Ofcom’s consultation process. It is imperative that any new pricing allowed in the market allows for fair competition and does not have a negative impact on investment at a critical point in the rollout cycle.”<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Openreach (BT) has today responded to pressure from their ISP customers by unveiling a new round of major discounts (aka – “Equinox 2“) to the wholesale price of their gigabit-capable Fibre-to-the-Premises (FTTP) broadband products, which aims to keep the operator competitive and reduce prices on consumer packages.<\/p>\n","protected":false},"author":1,"featured_media":30712,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1,1645],"tags":[56,36,69],"class_list":["post-33118","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","category-key_uk_isp_industry_developments","tag-fttp","tag-ofcom-regulation","tag-bt-openreach"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"\nOpenreach Unveil FTTP Broadband Price Cuts for UK ISPs - Equinox 2 UPDATE3 - ISPreview UK<\/title>\n<meta name=\"description\" content=\"Openreach (BT) has today responded to pressure from their ISP customers by unveiling a new round of major discounts (aka - 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