Ofcom moves to block Openreach broadband discount in competition intervention

Ofcom will block Openreach’s wholesale broadband offers claiming it could squeeze rival network operators out of the market.

The regulator has provisionally ruled that Openreach’s proposed Incremental New to Openreach offer is “neither fair nor reasonable”. It has launched a consultation on directing BT’s network arm to withdraw it.

If confirmed, it would mark the first time Ofcom has intervened to block a commercial pricing offer from Openreachhttps://www.openreach.com/.

The proposed incentive gives broadband providers discounts of up to £9.50 per customer per month for up to 30 months for signing up additional full-fibre customers above agreed volumes.

The decision reinforces Ofcom’s determination to preserve infrastructure competition as operators increasingly bundle broadband and mobile services.

Alternative network providers argued the discounts were targeted at the customers they need to build sustainable businesses. Ofcom appears to agree that matching Openreach’s pricing could leave competitors unable to recover their costs.

Around half of UK premises that can access full-fibre broadband have yet to upgrade, making the next wave of customer acquisitions particularly important for Openreach, Virgin Media O2 and the growing number of altnet operators.

Ofcom said Openreach’s proposal targeted new customers while leaving pricing for existing customers unchanged, thus creating discounts that could distort competition during a critical stage of fibre rollout.

Ofcom stopped short of challenging the rest of Openreach’s proposed commercial package.

The Geographic Incremental New to Openreach Offer did not currently raise concerns that justified regulatory intervention. This offer includes a £50 acquisition payment in selected competitive areas, and a proposed Frontbook ARPU Share Offer  to encourage ISPs to sell higher-speed services,

Natalie Black, Ofcom’s Group Director for Infrastructure and Connectivity, said: “Openreach must be able to compete, but they cannot use their significant market power to drive other networks out of the market.”

She added: “In reaching our final decisions on their planned offers, we will prioritise promoting sustainable competition, which is fundamental to keeping prices low in the long term and bringing better broadband to people across the UK.”

Why it matters

The decision is likely to be welcomed by altnets and Virgin Media O2, both of which argued that aggressive wholesale discounting from the UK’s dominant fixed network operator risked undermining long-term infrastructure competition.

For mobile operators, the outcome also has wider strategic implications. As VodafoneThree, EE and Virgin Media O2 continue to push converged mobile and broadband propositions, maintaining a competitive wholesale broadband market becomes increasingly important to consumer pricing, partner choice and future investment.

The consultation closes on 27 August, with Ofcom expecting to publish its final decision by the end of September.