Openreach set for another price cut

UK fixed-line wholesaler Openreach is reportedly in discussions with customers to further tweak its Equinox long term package.

The first media to report on this was the FT, which reckons Openreach is seeking to offer more competitive rates to major customers, in a bid to lock them in to long-term, fixed price packages. The FT got the gossip from a couple of Openreach customers who had been involved in the discussions with them, who indicated the wholesaler is striving to be more competitive as the likes of VMO2 and CityFibre strive to increase their wholesale market shares.

We reached out to Openreach about the story and got the following comment from a spokesperson. “We’re in constant discussion with retail providers about potential offers and options,” they said. “Following on from our Equinox 1 offer – which has been really well received and driven record levels of demand for Full Fibre – Communications Providers naturally approach us to talk about what’s next.

“They want longer term certainty and we all want consumers and businesses to migrate even more quickly off copper based products onto ultrafast, ultra-reliable Full Fibre. So it’s true we’re in discussions to sharpen our FTTP pricing and drive faster migrations, and we continue to talk about a range of options with them.”

As the start of the comment stressed, there isn’t necessarily anything exceptional about Openreach having a chat about pricing with its customers. Heavily regulated as it is, Openreach can’t just muck about with its pricing without getting Ofcom approval. To be precise Ofcom needs at least 90 days to consider any proposed price changes and there’s no indication from the report or the comment that this process has commenced.

But that could change at any time and the juicy aspect of this report is that any significant Openreach price cut tend to be opposed by its direct competitors, for obvious reasons. A year ago Openreach signed a bunch of customers up to its Equinox FTTP package but CityFibre wasn’t happy about it and appealed to Ofcom, apparently to no avail. The formal unveiling of Equinox 2 will presumably be closely followed by Complaint to Ofcom 2.

Only Ofcom can say what special restrictions it attaches to the company born of the former state telecoms monopoly. How much of an innate advantage does Openreach have over its competitors that isn’t already compensated for by, say, mandating general access to its ducts and poles? Is Openreach in a position to try to drive its competitors out of business through excessive price-cutting and if so, what level is considered excessive?

On the flip side, reduced wholesale rates are potentially great news for broadband consumers, provided they’re passed on by the ISPs. Openreach wouldn’t be looking to lower its prices were it not for the healthy competition in the UK broadband infrastructure market and we imagine Ofcom isn’t too keen in being viewed as an obstacle to lower prices, especially in the current economic climate.

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