Ofcom to consult on Openreach price cut but the verdict seems set

UK regulator Ofcom has announced it will consult on Openreach’s latest pricing offer, but its statement suggests the regulator is not inclined to act against the proposal.

Back in December last year, UK fixed-line wholesaler Openreach submitted its latest pricing plan called ‘Equinox 2’ which sets out a new pricing model for its fibre-to-the-premise (FTTP) services. Today, the UK telecoms regulator Ofcom published a consultation timeline as customary. In its statement, the regulator states having assessed the proposal, broadly speaking it sees no issues with the offer which it describes as “supplemental” to the existing Equinox 1.

Due to be introduced from April first, as the names suggest the latest offering is the sequel of so far two rounds of price cuts Openreach is proposing in return for longer-term contracts with its customers. Competitors and opponents of the first offer already argued the scale of the ex-state-owned wholesaler could strong arm competition in the UK fibre market and deter investors.

But Ofcom seems set on its belief that the new pricing offer is consistent with the regulator’s “primary strategic goal of promoting investment”. “We have carefully assessed Openreach’s offer – taking into account the interests of consumers, as well as the impact on competitors and retail broadband providers” the regulator said in its statement today,” said a recent Ofcom press release.

“Our provisional view is that we should not intervene to prevent Openreach from introducing Equinox 2. We consider the offer is not anti-competitive and is consistent with the rules we consulted on before introducing them under our market review in 2021. Maintaining these rules for the period of the review is also important to achieving certainty for all companies looking to invest in broadband networks.”

It’s been no more than a few months since wholesale competitor CityFibre lodged a second complaint against Openreach Equinox 1 by filing a competition Act complaint with both Communications and Markets Authority (CMA) and Ofcom. Back then, telecoms.com received commentary from Openreach CEO Clive Selly that their pricing strategy often comes at the request of their customers – so no blame to be assumed by the wholesaler – and further suggested it helps “to accelerate the adoption of full fibre broadband”.

Today, Ofcom has at least acknowledged that Equinox 2 could potentially be part of a practice in which Openreach repeatedly amends its FTTP pricing, which in turn could lead to a barrier for both altnet entry and service providers’ ability to expand across the market. But the regulator said it had limited evidence on the matter and further information supplied by ISPs and altnets could help decide whether an investigation is needed.

We can be rest assured that rival networks are waiting in the wings to submit their objections as they have already alluded to Openreach foul play in the past having argued the incumbent is using its market power to maintain market dominance.

While this Ofcom statement is no affirmative approval of the new pricing proposal (at least not yet), it is also not clear from today’s announcement what makes up sufficient and reasonable evidence to open up an official investigation. If the new pricing is put through without any regulatory intervention following the consultation period, has Openreach been given a de facto green light for sequel number two?

One thing certainly seems clear: considering the current economic crisis and the recession we’re set to enter this year, Ofcom will sing its own praises if these reduced wholesale rates can consequently trickle down to reduced consumer rates. But is that a gamble worth taking?

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