Openreach’s Equinox 2 FTTP pricing offer delayed by Ofcom
- BT’s fixed access unit Openreach had been gearing up to offer new discounted FTTP pricing to UK ISPs
- The new offer, dubbed Equinox 2, was set to be introduced on 1 April
- But UK regulator Ofcom now says industry responses have given it pause for thought
- Now Ofcom says it needs at least another two months to consider if Equinox 2 might be anti-competitive
The UK fibre broadband sector is buzzing today following an announcement from telecom watchdog Ofcom that the Equinox 2 tranche of discounted pricing offers recently proposed by Openreach, BT’s quasi-autonomous wholesale fixed access network operator, should not be introduced as planned on 1 April as it needs further regulatory scrutiny.
Openreach’s Equinox 1 wholesale prices are already well established and proving popular with dozens of UK ISPs: That initial pricing offer was challenged by alternative wholesalers such as CityFibre, which took the matter, albeit unsuccessfully, to the Competition Appeal Tribunal.
With ISPs clearly keen on cheaper wholesale prices, even if it means being tied into a long-term deal, Openreach duly developed Equinox 2 late last year, once again causing ructions in the UK broadband market – see Openreach stirs the UK broadband pricing pot with Equinox 2.
Once again, Ofcom took a look at Openreach’s proposals but announced in early February there was nothing amiss. “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 businesses across the UK,” noted Ofcom, adding that it “should not take any action at this time to prevent the new terms from being introduced.”
But it also launched a consultation to get feedback from the industry, and the responses have made it think twice, as it explained in an update posted onto the Ofcom website, and shared via the news boards of the London Stock Exchange, on Friday.
“Our consultation in relation to Equinox 2 closed on 4 March 2023. We had planned to publish our final decision, in light of this consultation, by the end of March 2023. We have received a number of detailed and extensive responses to the consultation, some of which raise issues that require further assessment. In order to assess these issues properly, we intend to gather and analyse some additional information. It will not be possible to do this before the end of March,” noted Ofcom.
“At this stage, we anticipate that it will take an additional two months to undertake this further work and issue our final decision, although we will seek to complete this work as quickly as possible. The Equinox 2 offer is currently due to launch on 1 April 2023. In order to provide certainty and stability for industry, our view is that it would be appropriate for the offer not to launch until we issue our final decision,” noted the regulator, adding that if Openreach “voluntarily defers the launch of the offer” it won’t have to use its powers to force the wholesale operator to do so.
Interestingly, Ofcom noted that a number of respondents had cited a Financial Times article from early February in which BT’s CEO Philip Jansen was quoted as saying somewhat inflammatory statements, such as “Why do you need multiple providers?” though Jansen subsequently wrote to Ofcom to claim that a number of quotes attributed to him were taken out of context.
But the damage was done, rival network builders seized on the opportunity to deride BT’s CEO for injudicious statements, and that will have made Ofcom think again about whether BT/Openreach is assuming market dominance and the regulator, by giving the green light to its Equinox pricing mechanisms, is perhaps not adopting a tough enough stance in the execution of its strategy which, as it states, is one that enables network competition and ensures “a level playing field for all fibre investors as that competition plays out.”
Certainly, CityFibre’s argument as it related to Equinox 1 was that Ofcom’s approval of that offer discouraged infrastructure investment by Openreach’s rivals. And CityFibre CEO Greg Mesch has weighed into the debate today but in a (disappointingly) measured way.
"Ofcom appears to be taking industry’s concerns seriously,” stated Mesch in a prepared statement shared with the media. “Taking more time to properly consider the impact of Equinox 2 is the right approach if UK consumers and businesses are to benefit from a healthy competitive market for the long term," he added.
What happens in the next two months will be critical for the UK’s fibre access network sector. There are now dozens of operators building FTTP networks, some of them overlapping, the costs associated with rolling out and running networks has gone up and money is now more expensive to raise. Indeed, some UK fibre altnets have been struggling to raise fresh funding and the always inevitable market consolidation process has begun.
The BT and Openreach teams know what they’re doing: They want to tie up as much ISP business as possible in long-term contracts and retain market leadership. Jansen says he welcomes competition, but few will believe that. Openreach, with its expansive fibre rollout investments, is reacting in part to the serious competition it now faces from CityFibre, which was for too long arrogantly dismissed (in private) as a no-hope operation that wouldn’t last. But CityFibre has lasted, has funding, is building out its network, and in a market where having the first fibre to the door is a massive advantage, has put the wind up Openreach, which now also faces more intense competition from Virgin Media O2 and is jointly owned by Liberty Global and Telefónica.
If late April comes and Ofcom says it has examined Equinox 2 and the responses to its consultation and still finds no issues with Openreach’s plans in their current form, further legal challenges, and serious questions about whether Ofcom is fit for purpose, will almost certainly be in evidence.
Openreach had not responded to a request for comment as this article was published.
BT’s share price is down by 6.2% to 137.5 pence on the London Stock Exchange today.
- Ray Le Maistre, Editorial Director, TelecomTV
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