Rivals prepare legal challenge over Ofcom approval of Openreach’s FTTP price cut

Several alternative network builders in the UK (AltNets), including Gigaclear and CityFibre, among others, are said to be set to take legal action against Ofcom’s recent approval of the “Equinox“Offer (here), which introduces a”Major”Price reduction (details) for the incumbent operators’ Fiber-to-the-Premises (FTTP) broadband products.

Naturally, ISPs who were much more dependent on Openreach’s wholesale products, and who have only a limited interest in building their own fiber-optic networks (e.g. TalkTalk, Sky Broadband, and Vodafone), generally supported the new discount program.

REMARK: The offer could, for example, drop monthly wholesale rental from a consumer FTTP tier of 115Mbps or 1000Mbps from £ 17.44 and £ 31.57, respectively, to just £ 15.50 and just £ 22. £. This excludes any extras that an ISP needs to add in order to make the retail price you pay (eg 20% ​​VAT, profit margin, service features, capacity, etc.).

However, the “Equinox”Discount generated a angry response from AltNets and Virgin Media (VMO2), many of which are currently busy investing billions (collectively) to deploy competing FTTP networks (Summary of full fiber releases in UK). Some of these networks will deploy in the same areas as Openreach, or be over-built by them in the future, and sell their own products from large competitors to ISPs.

These AltNets, many of which are in the early stages of their investment and therefore carry a lot of risk, have previously warned that Openreach’s new discounts could ultimately result in reduced investment and deployment of competitive fiber-optic infrastructure. Later, they fear, this could also reduce choice and innovation, and potentially lead to higher prices for consumers (although initially this should lead to lower prices through competition).

Previously, Openreach’s FTTP products tended to be more expensive, which made it easier for AltNets to increase adoption by being more price-aggressive, but now that will become more difficult. The other aspect focuses on how the new pricing might make it more difficult for AltNets with their own wholesale solutions to attract third-party ISPs to their networks, as they would have less reason to choose them over Openreach.

According to The temperature (paywall), the deadline for contesting Ofcom’s decision via the Competition Appeal Tribunal (CAT) expires at the end of November 2021 and several altnets, including at least CityFibre and Gigaclear, are now considering taking legal action against the regulator.

Officially, the CEO of CityFibre, Greg Mesch, simply said that they were “consider appropriate next steps“, while the CEO of Gigaclear, Gareth Williams, have confirmed that they intend to join the legal action proposed by a rival in the alternative network space. Meanwhile, Virgin Media said they keep all options open, although their own tentative plans for launching a future wholesale product could complicate their stance on such action.

On the other hand, we exist in a very competitive market, especially in urban areas, and therefore AltNets usually take a big risk in assuming that the incumbent would not adapt or would not be allowed to operate. adapt. In these areas, Ofcom’s market research had already decided that Openreach should not face a lot of regulation. It also partly reflected Ofcom’s earlier decision (here) to give Openreach a “fair betOn FTTP (i.e. looser regulation to encourage deployment), which was quickly followed by an accelerated commitment of £ 15bn to cover 25m premises by December 2026 ( around 80% of the UK).

In the end, Ofcom, which once again found itself in a very difficult balancing act between vested interests of opposing parties, ultimately dismissed all these concerns and decided that Openreach’s price cut would be. “”[not] have a significant negative impact on competition. “At first glance, this decision will now be tested in court.

As a general rule, legal challenges to regulatory decisions can be time consuming and expensive cases, although sometimes they are successful. A big question will be whether or not AltsNets will push for a pause in the remittance program until the matter is settled, but that can be difficult as it has already started.

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