BT’s networking division Openreach is seeking to slash its broadband prices to attract new customers and secure big customers like Vodafone, TalkTalk and Sky as rivals lay full fiber cables across the UK United.
The incumbent network operator, part of the BT Group, has met with some of its largest corporate customers to suggest a number of changes to its tariff structure that would make its offer more attractive and help them switch customers from copper to full fiber, according to two people. who attended the meetings.
Openreach makes money by selling its broadband wholesale to internet service providers, including its parent group BT.
For many years its only rival was Virgin, which also had its own network, but more recently nearly a hundred smaller alternative networks – or “altnets” – emerged with the aim of laying fiber as quickly as possible to attract customers frustrated with their existing service.
“BT faces the biggest competitive threat in its history, so a plan to cut wholesale prices again could well be a sign of desperation on the incumbent’s part to flex its fiber muscles and lock in internet service providers looking elsewhere,” said a competitor who saw the outline of the new pricing proposals.
Openreach’s proposal, dubbed “Equinox 2”, would be the second time the group has decided to cut its wholesale pricing structure in the space of two years. The first, announced in July last year, was challenged by the recent merger of Virgin Media O2 and the UK’s largest altnet, CityFibre, who both told the regulator the move was uncompetitive . CityFibre without success tried to block the move with the Competition Appeal Tribunal.
Equinox 1 offered a fixed price for 10 years and lower prices for Openreach full fiber products if broadband vendors committed to stop selling legacy copper products and met certain fiber sales targets.
The latest proposed price changes, seen by the Financial Times, include reducing the amount Openreach charges companies like Sky on an ongoing basis for network usage, decreasing the share of revenue per customer that goes to Openreach and reducing the amount it charges for migration. customers from copper lines to fiber lines between £30 and £37.
Openreach plans to formally notify the industry in December, when companies can consult with Ofcom, the regulator, for 90 days, ahead of an expected start date in April.
The changes have so far been warmly welcomed by some Openreach customers, according to people briefed on the talks.
“First of all, it was about building. Now it’s about connecting customers well,” said Katie Milligan, managing director of customer, commerce and propositions at Openreach, in response to questions from FT about the proposed new pricing. “That’s of course up for discussion . . . invariably things will change once we have [companies’] feedback.”
The decision to reduce fees for migrant customers comes after TalkTalk published research last month which found that a quarter of the people of the UK are likely to have even slower connections on older copper networks by 2030 due to reluctance to switch providers, in part because of cost.
Openreach has responded to the altnet threat by stepping up its build efforts, spend £12bn to reach 25m homes by the end of 2026. Meanwhile, Virgin Media O2 is looking to upgrade its network to fiber by 2028 and has formed a new joint venture between its owners, Telefónica and Liberty Global, as well as the Infravia infrastructure fund, to lay fiber up to 7 minutes from new premises.
Industry insiders recognize that for a company’s business model to be economically viable, it will need to capture around 40% of customers in the places it digs, either by directly selling broadband contracts to consumers or by wholesale to internet service providers.