Openreach receives backlash for proposing more wholesale broadband price cuts

The BT Group’s network division has unveiled plans to offer wholesale fiber at reduced rates as competition between service providers for new customers intensifies.

Was open range first reported in October to explore a drop in its wholesale broadband prices to attract new customers and retain prominent customers such as Sky, TalkTalk and Vodafone.

It began cutting its pricing structure way back in July last year, leading to official complaints to Ofcom from Virgin Media, O2 and alternative network providers such as CityFibre that it would seriously affect competition in the sector.

The media regulator decided not to take action against the company, arguing that the reduced prices for ISPs would not significantly impede the use of ‘altnets’ and would lead to stronger consumer outcomes.

It has vowed to investigate Openreach’s “Equinox 2” proposal, which offers price ranges up to 15 percent cheaper for customers from April 2023.

For example, those on the ‘Equinox One’ one gigabit rental plan are currently paying £22.64 per month and will pay £24.87 from the beginning of April.

But if they move to ‘Equinox 2’ their monthly bill will total £21.30, while those with a 1.8 gigabit speed scheme will pay out £29.30 per month.

Rival companies have raised objections to this new pricing strategy, claiming it would create market distortions and prevent customers from moving to cheaper and better deals.

“To avoid jeopardizing planned and future investments and to ensure fair competition, it is vital that these wholesale pricing proposals are thoroughly scrutinized,” said Lutz Schuler, CEO of Virgin Media O2.

CityFibre has already filed a complaint with the Competition and Markets Authority and Ofcom, alleging that the company is exploiting ‘dependency’ on its wholesale ISP customers and preventing them from using altnet groups.

Dozens of altnets have sprung up in recent years, often backed by private equity firms, seeking to disrupt the traditional broadband infrastructure market by providing faster speeds and more reliable services.

However, many are in a financially precarious position as they have borrowed significant amounts to fund the expansion of their entire fiber optic network, while Openreach has accelerated development itself.

Katie Milligan, Openreach’s chief commercial officer, said: ‘We are investing £15bn to upgrade the UK to ultra-fast, ultra-reliable Full Fiber broadband, and we’re keen to see more homes and businesses using this new network once we’ve built . This will benefit the whole country.

‘In this way, we are responding to the wishes of our customers for lower prices and long-term certainty.

“These offerings don’t tie them exclusively to Openreach, but alongside our new, higher speed levels, we’re confident they’ll help them continue to support and delight their own customers in a highly competitive market.”

BT Group shares were up 2.7 percent to 116.95 pence late Wednesday afternoon, making them the best gainer on the FTSE 100 index.