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The decision will allow Openreach to further reduce wholesale prices, a decision likely to be met with praise from the UK’s ISPs but trepidation from its alternative network providers

Today, following a public consultation, the UK telecoms regulator Ofcom has announced that it will allow Openreach’s proposed Equinox 2 fibre-to-the-premises (FTTP) discount scheme.

The scheme, building on the previous Equinox 1 offer, will see Openreach charge cheaper wholesale rates for ISP customers purchasing FTTP products, a move which they say will allow ISPs to become more competitive with alternative network providers.

The regulator said that the decision is “consistent with promoting investment in gigabit-capable networks by Openreach and other operators and promoting network-based competition”. They note that while Equinox 2 will make competition for altnets more intense, the conditional terms in the offer “do not create a potential barrier to using altnets”.

“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,” said Katie Milligan, Openreach’s Chief Commercial Officer. “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.”

For the UK’s altnet community, however, the decision is much more troubling, with some having previously claimed that Equinox 2 is anticompetitive, serving to lock-in ISP customers with Openreach by offering prices that altnets cannot match and creating a major barrier for entry for new prospective network builders.

Part of the fear here is that Equinox 2 could be merely a stepping-stone to even greater discounts in the future, with Ofcom offering no real resistance; indeed, Openreach’s proposals for Equinox 2 came less than a year after Equinox 1 first came into effect in 2021.

In this regard, however, the altnets are likely to have a level of certainty, with Openreach saying that they will not change the Equinox 2 pricing scheme or introduce further changes (i.e., a potential Equinox 3 scheme) until the end of March 2026.

“We are disappointed Equinox 2 has been approved and will be undertaking a thorough review of Ofcom’s decision. We are, however, pleased to see Ofcom’s pressure has brought about the end of Equinox, with a commitment from Openreach to make no further changes to its wholesale pricing until April 2026,” said Greg Mesch, CEO of CityFibre, the UK’s largest altnet.

“We must not forget that 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.”

BT, like many UK telecoms providers, increased their prices above inflation rates earlier in March this year, with BT increasing the prices for consumers by 14.4%.

The potential effects of Equinox 2 on the UK fibre market were one of the major talking points at this year’s Connected North conference in Manchester, with Openreach, Ofcom, and a number of ISPs and altnets sharing their views with the wider community.

At the event, we interviewed Gita Sorensen of GOS Consulting, who explained that much of the criticism levelled against Equinox 2 from the altnet community was not necessarily an attack of Openreach itself, but rather the transparency of Ofcom’s decision making process.

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Indeed, a statement from the Independent Networks Cooperative Association (INCA) today had similar misgivings over Ofcom’s methodology.

“Whilst we are still reviewing Ofcom’s statement in full, INCA is initially disappointed with Ofcom’s decision. Not only do we believe that this outcome will have a negative impact on competition and investment and ultimately consumers, we also believe that Ofcom’s approach to taking this decision was flawed,” read the statement. “This initially seems to be an illogical decision based on a questionable process. Government policy and regulatory decision making now appear to us to be out of sync when it comes to infrastructure competition. We call on government to clarify its Statement of Strategic Priorities to Ofcom to ensure that the regulator is compelled to put issues of infrastructure competition and investment at the heart of its decision-making process.”

On the other hand, CEO of Zen Internet, Richard Tang, was a vocal defender of the offer’s competitive qualities, tackling the topic on the keynote stage and further explaining his position in an interview with Total Telecom.

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Tang reiterated this opinion today, saying that Zen was pleased that Ofcom had given the offer the green light, saying it was “crucial in making full fibre broadband more accessible and affordable for millions of households across the UK”.

While Equinox 2 is sure to have a significant effect on the UK fibre market, particularly when it comes to accelerating altnet consolidation, the full extent of its impact will not be apparent for many months to come.

How is the UK’s telecoms ecosystem changing in 2023? Join the operators in discussion at this year’s live Connected Britain conference

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