The regulator says its provisional view is to not intervene over Openreach’s plans to further reduce fibre-to-the-premises (FTTP) product prices for ISPs
Today, Ofcom has opened a consultation on Openreach’s controversial proposed discount plan, Equinox 2, which would offer major discounts to ISPs purchasing the operators wholesale fibre products.
In its statement, Ofcom said that their provisional decision would be to allow this latest wave of discounts, saying that the move would not threaten competition.
“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,” Ofcom said in a statement. “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.”
“In our provisional view, the proposed offer is consistent with our primary strategic goal of promoting investment in high-speed networks to deliver fast, affordable broadband to people and business across the UK.”
Openreach’s Equinox discounts are a controversial topic for the UK fibre industry.
The original Equinox discounts were first envisaged following the publication of Ofcom’s Wholesale Fixed Telecoms Market Review back in March 2021. Regulatory changes within this document allowed Openreach to potentially launch a range FTTP product discounts – now knowns as Equinox 1 – saying doing so would help keep their products competitive versus the typically cheaper products available from altnets.
In case cases, these original Equinox offers would provide price cuts for ISPs of up to a third for fibre products.
Naturally, this was a controversial proposal, with the UK’s altnet community arguing that it would be unfeasible for them to drop their prices to similar levels, thereby squeezing them out of the market. They also argued that this pricing would be a huge barrier for new market entrants to compete with the incumbent.
Nonetheless, Ofcom ultimately allowed Openreach to launch the Equinox offers, which were formally introduced in October 2021.
Now, Ofcom’s seemingly affable attitude towards further discounts in the form of Equinox 2 could set the altnets on the war path once again. While the provisional decision is certainly in keeping with Ofcom’s original ruling over Equinox 1, additional discounts will heap further pressure onto altnets and we are likely to see significant push-back during this consultation period.
“More than £20bn of investment in competitive fibre networks is at risk and yet Ofcom is comfortable proposing not to oppose the offer, summarily dismissing valid and material concerns articulated by many stakeholders,” said Gita Sorensen, Managing Director of GOS Consulting. “Not only are altnets disappointed about Ofcom’s proposed decision, but they are also angered by Ofcom’s unwillingness to engage with their very real concerns. Jansen’s statements yesterday about BT being an ‘unstoppable machine’ and that ‘there can be only one’ national fibre network are clear indications of BT’s intentions to establish a new full fibre monopoly. Equinox 2 is core to their plans to foreclose the wholesale market and deny altnets access to customers.”
It is worth noting that some legal challenges against these discounts have already begun, with CityFibre lodging an official complaint to the Competition and Markets Authority late last year, arguing that Ofcom was allowing Openreach to pursue “an aggressive strategy to foreclose infrastructure competition in the UK fibre broadband market”.
This is not the first time that CityFibre has been at the helm of a legal challenge against Equinox, having seen a previous appeal to the Competition Appeal Tribunal rejected last year.
Ofcom’s final decision on Equinox 2 will be announced at the end of March.
How will Openreach’s Equinox discounts affect the UK fibre market? Join the broadband community in discussion at this year’s live Connected North conference