Key facts
- Ofcom has provisionally blocked a discounted broadband offer from BT's Openreach.
- The regulator stated the offer was not fair and reasonable and risked harming competition.
- This is Ofcom's first attempt to block a commercial offer from Openreach.
- Other planned wholesale discounts from Openreach have been provisionally cleared.
- Rival providers Virgin Media O2 and Nexfibre believe Ofcom should take a tougher stance.
Ofcom has moved to block a heavily discounted broadband offer from BT's Openreach, warning that it could squeeze rival fibre networks out of the market. The telecoms watchdog stated that the proposed discount for internet providers signing up new full-fibre customers was "not fair and reasonable" and risked harming competition.
The offer would have provided discounts of up to £9.50 per customer each month for up to 30 months when providers connected more new customers to Openreach than their usual level. Natalie Black, Ofcom’s group director for infrastructure and connectivity, said that while Openreach must be able to compete, it cannot use its significant market power to drive other networks out of the market.
If confirmed, this would be the first time Ofcom has blocked a commercial offer from Openreach. James Robinson, senior equity analyst at Assembly Research, noted that Openreach had launched the discounts quickly after Ofcom's latest Telecoms Access Review, suggesting the company was testing the waters. He added that Openreach faces an uphill battle to convince Ofcom that the discounts would not harm competition.
The regulator believes the discounts targeted new customers crucial for the growth of alternative fibre networks. Rival providers might be forced to match the pricing, even if unable to recover costs, potentially undermining long-term competition and leading to higher prices. Ofcom has, however, provisionally cleared other planned wholesale discounts, including geographic offers and incentives for higher-speed packages, deeming them less likely to distort competition.
Virgin Media O2 welcomed the decision but argued Ofcom's focus was too narrow, stating that the interrelated nature of the offers and Openreach's intent to 'test the waters' required a tougher stance from the regulator. Nexfibre's chief executive, Rajiv Datta, also urged Ofcom to widen its intervention, arguing that the cumulative effect of various offers formed a strategy to prevent wholesale competition and entrench Openreach's dominant position. Ofcom's geographic discount, targeting areas where Virgin Media operates, was not deemed to require intervention as the incentive was significantly smaller.