Networks Angered By Ofcom’s Openreach Decision

The Equinox Offer from BT’s Openreach essentially proposes that big ISPs can buy discounted wholesale Fibre-to-the-Premises (FTTP) broadband products. Openreach’s Equinox Offer gives ISPs (e.g., TalkTalk or Sky) cheaper/discounted prices for Openreach FTTP products, so long as they largely stop making new sales of legacy broadband products where Openreach FTTP is available, and switch to selling mainly FTTP products instead. The offer also includes free bandwidth upgrades and discounts on GEA Cablelink (which ISPs require to offer Openreach FTTP). The Equinox Offer Scheme runs from 1 October 2021 to 30 September 2031, and Ofcom has said that it expects that the main ISPs will sign up.

What’s The Problem with the Eqinox Offer?

After consultation with stakeholders by Ofcom, altnets raised concerns about the impact of the Equinox Offer on competition and disagreed with key aspects of Ofcom’s position in the Consultation.

For example, the Independent Networks Co-operatives Association (INCA), which represents the interests of alt-nets is concerned that Openreach may simply be using its market power to persuade ISPs to move to its fibre networks, thereby strengthening its already dominant market position. INCA is also concerned that Equinox could reduce wholesale competition, leading to higher prices and lower standards of service.

Could Harm Altnet Build Too

Ofcom’s report on the outcome of its consultation also highlights how The Joint Consultation Response submitted that the Equinox Offer could significantly reduce the benefits that Openreach claims the offer will deliver, and that altnets including CityFibre, the Common Wholesale Platform (‘CWP’), Dolomite Solutions, Fern Trading, Gigaclear, KCOM, VMO2, and others are concerned that the Equinox Offer will harm altnet build. Their argument is that the magnitude of the discounts available under the Equinox Offer will encourage take-up of Openreach FTTP and act as a barrier to entry for altnets.

Altnets have also said that Equinox could place downward pressure on wholesale and retail FTTP prices, thereby weakening the business case for altnet investment, especially in areas with higher deployment costs. This, in turn, could mean delays to fibre deployment in rural/hard-to-reach locations.

Beneficial, Says Openreach and ISPs

Openreach and the big ISPs who took part in the Ofcom consultation, however, say that Equinox will bring a number of benefits for homes and businesses across the UK including:

– ISPs getting long-term (price) certainty, thereby enabling them to compete in a highly competitive market.

– ISPs may also benefit from the simplicity of a single national rental price will for the entire Openreach FTTP footprint.

– Ultrafast full fibre technology can become the default choice wherever it’s available (GEA-FTTP becomes the preferred technology).

– CPs can create their own offers and can create a modest premium on GEA-FTTP.

– UK consumers will ultimately benefit from ISPs being incentivised to use FTTP, thereby supporting investment in FTTP networks.

– Sky, TalkTalk, and Vodafone have agreed that lower FTTP prices will benefit consumers and encourage take-up of FTTP, and Vodafone has said that the ten-year duration of the Equinox Offer will allow ISPs to provide price certainty to consumers.

Ofcom’s Decision

Despite the concerns of the altnets, Ofcom has concluded that, following its consultation about Openreach’s Equinox Offer, it does not raise competition concerns requiring ex-ante intervention, and Ofcom will, therefore, not be taking any action at this time.

What Does This Mean For Your Business?

Ofcom’s decision not to take any action is a blow for UK altnets who clearly feel that the already dominant Openreach is being allowed to use its market power, even more, to use lower prices to squeeze altnets out, weaken the business case for altnet investment, increase the barrier to entry for altnets, all of which in a way that may not offer great benefits (such as choice) to the consumer. Openreach obviously appears happy with Ofcom’s decision, as do the big ISPs who can look forward to the discounts and price certainty that Equinox appears to offer.

Although Ofcom is taking no action now, it is still early days, and it remains to be seen whether any intervention will be necessary a little further down the line, although this is of little comfort to altnets now. For consumers, home, and businesses, it’s also a case of waiting to see what benefits are passed-on to them with the scheme.