Ofcom proposed on Tuesday to block a discount wholesale offer from Openreach, the first time the regulator has moved to suspend a commercial contract from BT’s network arm. The offer would give ISPs a discount of up to £9.50 a month per customer for up to 30 months when they connect new full-fibre customers to Openreach, rather than their normal business speed.
It is the structure that worries the regulator. Because the discount only applies to enrollees above the provider’s normal rate, it targets marginal customers on whom alternative networks depend for growth.
What Ofcom said
The regulator concluded that the price was “not fair and reasonable” and risked harming competition in the still-developing whole-fiber wholesale market. Competitors could be forced to match prices if they cannot recover their costs, which Ofcom said would weaken competition and ultimately drive up prices.
“Openreach must be able to compete, but they cannot use significant market power to drive other networks out of the market,” said Ofcom’s group director for infrastructure and communications, Natalie Black.
The three proposals leave Ofcom alone
Openreach has put forward four commercial bids and Ofcom is provisionally clearing three others. One is a one-off £50 discount for new full-fibre customers above the usual sign-up level in Virgin Media O2 areas.
💜 of EU technology
The latest rumblings from the EU tech scene, a story from our wise founder Boris and some questionable AI art. Free in your inbox every week. Register now!
Another limits fees for new high-speed connections. Ofcom said the geographic offer was significantly smaller than it wanted to block and therefore less likely to distort competition.
Openreach disagrees
“We are disappointed that Ofcom has raised concerns about one of our four proposals, which we put forward in good faith at a time when so many households are watching every bill,” said James Lowther, managing director of commercial at Openreach.
“In such a competitive market, we do not believe regulation should protect weak business models and disagree with Ofcom’s analysis,” he added, adding that the company would engage through consultation.
Opponents say one in four is not enough
Virgin Media welcomed the O2 proposal but argued Ofcom was taking too narrow a view. A spokesman accused Openreach of drip-feeding discounts to discourage providers from using rival fiber networks, saying “the interconnected nature of the proposals and Ofcom’s clear intention of Openreach’s means of ‘testing the waters’ should be tougher”.
Nexfibre CEO Rajiv Datta made a similar claim. He hailed the bloc as the “most egregious” proposal, but said the regulator must weigh the “cumulative impact of a steady trickle of other proposals that form part of a broader playbook to prevent the emergence of wholesale competition at scale.”
Why is time important?
James Robinson, chief equity analyst at Assembly Research, noted that Openreach had been reluctant to introduce new commercial proposals during Ofcom’s latest Telecoms Access Review, then moved quickly after it was concluded. “Openreach has moved very quickly to test the waters and its proposals have certainly done that,” he said.
Robinson said the company now faced “an uphill battle and a tight timetable” to convince Ofcom that the cuts would not harm competition. It added that the regulator had at least clarified the boundaries of Openreach’s pricing strategy.
There is a battle for the market
Around eight in ten UK homes now have access to full fiber broadband after BT invested around £15 billion in its network and dozens of sub-networks built alongside it. About three-quarters of the country can connect to at least two networks, and about a third can choose between three.
Openreach is targeting 25 million premises by the end of 2026 and expanded its work with Google Cloud to include artificial intelligence. Scale is the whole argument: the first to reach cutoff density sets wholesale prices for everyone.
This dynamic is not new to UK telecoms regulation. Ofcom spent years deciding how much to limit BT’s control over the national gridultimately separating Openreach rather than breaking it up entirely.
What’s at stake beyond broadband?
The improvement in coverage has been real. Ten years ago, the milestone was 30 Mbps availabilitya benchmark that now seems odd next to gigabit fiber.
Connectivity is also an economic input, not a consumer product. Analyzes have repeatedly found that the UK’s digital economy is bigger than the headline figuresdigitally intensive firms grow faster and hire more than their peers.
Broadband competition is now embedded in the broader infrastructure debate. The government has committed £1.3bn to AI equipment, skills and adoption At London Tech Week, a program that suggests basic connectivity is both cheap and universal.
Ofcom’s consultation will run until 27 August and a final decision is expected at the end of September. Whichever way it comes down, the regulator has now determined it is willing to intervene in Openreach’s commercial pricing, which is a change in itself.
