Two months after it extended its work into reaching a final decision on whether Openreach could introduce controversial wholesale pricing arrangements for its full-fibre services, known as the Equinox 2 offer, UK communications regulator Ofcom has made the final decision that it will not intervene to prevent the BT broadband division from carrying out its intended plans.
Under UK regulatory rules, services providers are obliged to notify Ofcom of certain offers before they come into effect in order that they are assessed before they are introduced and allow the regulator to prevent them from being offered commercially.
The Equinox 2 offer was originally due to launch on 1 April 2023, and on 14 December 2022, Openreach notified Ofcom of the pricing for its full-fibre services, designed to give retail providers – such as BT, Sky, TalkTalk and Vodafone – lower fees if they agree to use mainly Openreach’s full-fibre products for new orders instead of its legacy copper products.
Moreover, in its statement regarding the issue, Ofcom said it considered the Equinox 2 offer as not anti-competitive, and that it was consistent with the rules it had consulted on before introducing them under its full-fibre market review in 2021.
Ofcom stressed that maintaining these rules for the period of the review was also important to achieving certainty for all companies looking to invest in broadband networks. In conclusion, in Ofcom’s provisional view, the proposed offer was consistent with what it said was its primary strategic goal of promoting investment in high-speed networks to deliver fast, affordable broadband to people and businesses across the UK.
In February 2023, Ofcom said that after carefully assessing Openreach’s offer – taking into account the interests of consumers, as well as the impact on competition among rival retail broadband providers – its provisional view was that it should not take any regulatory action, but in March 2023, it decided to extend by two months its work into reaching a final decision on the issue.
Now having carefully assessed the range of evidence available, including responses to its public consultation, Ofcom has decided not to prevent Equinox 2 from being introduced. In reaching its view, Ofcom said it considered the impact on citizens and consumers’ internet service providers and alternative networks.
As regards the initial category, Ofcom concluded that Equinox 2 was consistent with promoting investment in gigabit-capable networks by Openreach and other operators, and promoting network-based competition, ultimately delivering better consumer outcomes.
Ofcom also considered ISPs were now likely to benefit from network-based competition, being free to use a range of providers such as the alternative networks (altnets). It also considered that not preventing Openreach from introducing Equinox 2 allows it to engage in network-based competition, without compromising our objective of promoting investment in gigabit-capable networks.
It also considered the level of prices under Equinox 2, and concerns among some market participants about Openreach’s practice of discussing and developing discounts with retail providers. Having assessed information from providers and altnets, Ofcom did not have concerns that it felt warranted further investigation at this time.
Openreach has informed Ofcom that it plans to make certain commitments regarding its future conduct, including not having any current plans to change its Equinox 2 rental prices or initiate further changes until at least 31 March 2026. While it observed that this may provide further clarity for altnets and their investors, Ofcom stressed that it did not rely on these commitments in reaching its conclusions.
In response to Ofcom’s decision to approve BT Openreach’s Equinox 2, the Independent Networks Co-operative Association (INCA), the trade body for the UK’s independent network providers, said it was initially disappointed with Ofcom’s decision. Not only did it believe this outcome would have a negative impact on competition and investment, and ultimately consumers, it also believed Ofcom’s approach to taking this decision was flawed.
“This initially seems to be an illogical decision based on a questionable process,” said INCA CEO Malcolm Corbett. “Government policy and regulatory decision-making now appear to us to be out of sync when it comes to infrastructure competition. We call on government to clarify its Statement of Strategic Priorities to Ofcom to ensure the regulator is compelled to put issues of infrastructure competition and investment at the heart of its decision-making process.”
Greg Mesch, CEO of CityFibre, said the company was also disappointed the scheme had been approved, and will be undertaking a thorough review of Ofcom’s decision.
“We must not forget that while introducing price discounts to bind its wholesale customers and damage emerging competition, BT is at the same time significantly increasing prices for millions of its retail consumers,” he said. “Ofcom must ensure that competition is effective and sustainable if consumers are to benefit.”