Ofcom needs to make a strong call on new Openreach pricing

Openreach was never going to please everyone in the UK telecoms industry with its new pricing scheme for wholesale access to its fibre network, which presents a challenge for regulator Ofcom.

The incumbent on Wednesday submitted the widely-expected Equinox 2 pricing plan to Ofcom for review. In a nutshell, it means a cut in prices for retail ISPs wanting access to Openreach’s fibre-to-the-premises (FTTP) network, provided they are willing to sign up to long-term agreements, that is. It’s good news for the retailers, but less good news for those looking to compete on the wholesale level, and the latter are already starting to make their feelings clear on the subject.

“To avoid putting planned and future investment at risk, and to safeguard fair competition, it’s 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,” warned Lutz Schüler, CEO of Virgin Media O2, in an emailed statement.

As with the initial Equinox scheme, which arrived on the market in October 2021, and as Schüler makes clear, rival network operators are concerned about their own ability to sign up retail customers if Openreach is allowed to insist on long contracts. It’s not about price, it’s about lock-in. The industry has been expecting Openreach to tweak Equinox for the past couple of months, so its rivals are ready with their objections.

Chief among the objectors is CityFibre, which has been a vocal opponent of the first Equinox for the past year or more.

Just last week the fibre wholesaler filed a Competition Act complaint with the Communications and Markets Authority (CMA) and Ofcom against Openreach for its alleged attempts to squeeze competition out of the market with Equinox, having previously sought to persuade Ofcom – via the Competition Appeal Tribunal (CAT) – to launch an investigation. And funnily enough, it is not happy with Equinox 2 either.

“BT 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,” said CityFibre CEO Greg Mesch. 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.”

Mesch heralded the recent influx of investment into UK fibre, noting that investors 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,” he said.

For its part, Openreach is naturally keen to stress that it believes Equinox 2 is good for the UK market, highlighting its endeavours to get homes and businesses hooked up to fibre as quickly as possible.

“To that end, we’ve responded to our customers’ desire for lower prices and long-term certainty,” said Katie Milligan, Chief Commercial Officer at Openreach. “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.”

That the UK’s fibre builders have opposing views on Equinox 2 will surprise no one. All eyes are now on Ofcom to see what it decides to do about the new plan. But at this stage it’s difficult to gauge what the regulator’s reaction is likely to be. All we know is that the process will likely take some time.

“We will now consider whether the notified offer raises competition concerns requiring intervention and reach a provisional view,” the regulator confirmed on Wednesday. It expects to publish a consultation into the matter by February and will give stakeholders 30 days to respond.

Virgin Media O2 has already committed to sharing its views with both Ofcom and the government, highlighting the desire of both for investment into fibre in the UK and competition in the market.

“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,” said Schüler.

There are signs that the rapidly-expanding UK fibre market could be healthier.

“We are in a golden era of connectivity and moving people to fibre is in everyone’s interests as the merits of the technology outweigh copper,” notes Tech, Media & Telco Analyst Paolo Pescatore of PP Foresight.

“However, the market as things stand cannot support all players as there are too many chasing too few pounds. Consolidation is inevitable given the overbuild that is taking place. A more sensible approach should be adopted to ensure UK plc benefits from fibre broadband,” Pescatore says.

Against that backdrop, it’s clear why so many industry participants are up in arms about the incumbent’s pricing plan. Now it is up to Ofcom to make a strong call on Equinox 2. The regulator may have to be brave and do some actual regulating this time.

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