Ofcom green lights Openreach to undercut alternative networks full fibre prices

In a blow to alternative network providers, Ofcom has allowed Openreach to sell its Equinox 2 full-fibre services at lower prices to retail providers.

To get the lower prices providers such as Sky, Vodafone, and TalkTalk have to agree to use mainly Openreach’s full-fibre products for new orders instead of legacy copper products.

Ofcom admits alternative networks are likely to face stronger competition from Openreach.

“However, we conclude terms of the offer do not create a potential barrier to using altnets. Equinox 2 is consistent with network-based competition. Not preventing Openreach from introducing Equinox 2 allows it to engage in network-based competition, without compromising our objective of promoting investment in gigabit-capable networks” said an Ofcom statement.

Vodafone UK CEO Ahmed Essen supported the move urged its other partners to come out with a reduced social tariff for people who struggle to afford connectivity.

‘ I fully support Openreach‘s new full-fibre wholesale pricing proposal, Equinox II. It will help broadband retailers offer more attractive packages and UK consumers will benefit from good value, choice, and innovation. But we want to continue offering our most vulnerable customers affordable social tariffs, too. And we can’t do this unless our partners – Openreach, CityFibre, and others – offer a substantially reduced wholesale social tariff. We hope Ofcom will support us in this request”..

 Tom Williams, CEO and Co-Founder of Lit Fibre which builds its own network and sells services direct to consumers said Ofcom’s approval of Openreach’s Equinox 2 scheme was not surprising, but he questioned if it will really lead to consumer benefit or just be a margin boost to the large retail ISP’s using Openreach’s network.

Greg Mesch, CEO of CityFibre said he is disappointed Equinox 2 has been approved/

“We will be undertaking a thorough review of Ofcom’s decision. While introducing price discounts to bind its wholesale customers and damage emerging competition, BT is at the same time significantly increasing prices for millions of its retail consumers. Ofcom must ensure that competition is effective and sustainable if consumers are to benefit.”

Telecoms analyst Paolo Pescatore says the Ofcom decision “will be a bitter pill to swallow for rival infrastructure suppliers like Virgin Media O2 and altnets that prices are too low, squeezing them out of the market.

“Rivals will feel that Openreach is trying to use its market dominance by locking in providers for longer. If so this will squeeze their own margins, making it harder to rollout their own networks and compete at scale. However, Openreach wants to have long term certainty as it invests in building out a fibre broadband network in the UK.

“Moving people to fibre is in everyone’s interests. However, the market cannot support all players. 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”

Openreach CEO Clive Selley assured Ofcom:

“We are confident that Openreach’s offer will continue the momentum towards adoption of fibre services that has built since the introduction of the Equinox offer, driving positive outcomes for Openreach’s CP customers and consumers. In making FTTP the technology of choice for CPs and their customers Openreach considers that Equinox 2 will deliver benefits for industry as a whole”.