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May 24, 2023

Ofcom clears BT’s controversial Openreach Equinox 2 fibre broadband discount scheme

Rivals had raised concerns that the new pricing offer was anti-competitive, but the regulator is satisfied it should go ahead.

By Matthew Gooding

Telecoms regulator Ofcom has given the green light to Equinox 2, a wholesale fibre broadband discount scheme proposed by BT’s Openreach. The watchdog had been looking at the arrangement, which will see BT’s infrastructure arm sell access to its fibre network to broadband providers at a discounted rate, following complaints from the network’s rivals.

BT’s Openreach will be allowed to introduce a new discount package, Equinox 2, regulator Ofcom has said. (Photo by Richard Baker / In Pictures via Getty Images Images)

Other fibre broadband providers, so-called altnets, had complained that Equinox 2 was anti-competitive, with Openreach using its size and market dominance to “lock in providers and deter them from switching to other networks”.

But an Ofcom spokesperson said this morning that the regulator does not consider Equinox 2 to be anti-competitive.

Why Ofcom is allowing Openreach’s Equinox 2 discounts to go ahead

Ofcom said that in coming to its decision, it had “considered the level of prices under Equinox 2, and concerns among some market participants about Openreach’s practice of discussing and developing discounts with retail providers”. The spokesperson said: “Having carefully assessed information from providers and altnets, we do not have concerns that warrant further investigation at this time.”

The regulator opened a probe into Equinox 2, which builds on Openreach’s original Equinox discount scheme, after it was announced in December last year.

The spokesperson added: “Openreach has informed us that – in response to concerns raised – it plans to make certain commitments regarding its future conduct, including not having any current plans to change its Equinox 2 rental prices and no intention to initiate further changes until at least 31 March 2026. This may provide further clarity for altnets and their investors. However, we have not relied on these commitments in reaching our conclusions.”

BT, which last week said it was making 55,000 staff redundant, in part because the fibre roll-out is likely to come to an end over the next few years, believes Equinox 2 will give certainty to ISPs.

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Katie Milligan, chief commercial officer at Openreach said: “This is good news for customers as it means lower prices and long-term certainty – encouraging the switch to faster, more reliable broadband connections. It’s also good news for the UK, as it supports our continued multi-billion-pound investment in upgrading the country’s broadband infrastructure.

“We take our legal and regulatory obligations extremely seriously and we’ll continue to compete fairly whilst delivering an unrivalled, nationwide service and choice for customers.”

The concerns over Equinox 2

Openreach is spending £15bn on building fibre networks, and aims to bring such connections to 25 million premises in the UK by December 2026. So far it has completed more than 10 million, and the Equinox 2 discounts are a bid to convince ISPs such as Sky, TalkTalk and Vodafone to move more of their customers across to full fibre offerings and justify Openreach’s hefty investment.

However, other companies offer fibre infrastructure, and complained that Equinox 2 will give Openreach an unfair advantage. “BT 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,” said Virgin Media O2 CEO Lutz Schuler in December.

“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.”

On today’s decision, a spokesperson for Virgin Media O2 said: “Encouraging and supporting investment is crucial if Ofcom is to meet its own strategic priorities to drive fixed network competition at scale. While we’re pleased Ofcom took more time to review these proposals, it must be prepared to act decisively in future to keep BT in check and protect its own long-term objectives. We are now carefully considering this decision.”

Ofcom’s decision could make life more difficult for Openreach’s rivals, and telecoms analyst Paolo Pescatore told Tech Monitor it will be a “bitter pill to swallow” for Virgin Media O2 and the altnets.

“This was a significant move from Ofcom which initially did not raise any objectives and then seemed to backtrack,” Pescatore says.

“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. 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.

“This is further complicated by the cost of living crisis with all retail prices heading in the wrong direction.”

Read more: Is the telecoms industry really in freefall?

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