Ofcom blocks ‘unfair’ Openreach pricing scheme

Ofcom, the UK communications regulator, has halted Openreach's latest pricing strategy, claiming it was unfair and granted the firm an unfair edge over rivals. Openreach, which operates the fiber broadband network, was asked to withdraw its 'Incremental New to Openreach Offer'. This offer would have offered internet service providers (ISPs) a monthly reduction for signing up new full-fiber customers to its network.

The regulator deemed the "substantial discount," up to £9.50 per customer for up to 30 months, as potentially undermining competitive sustainability, as smaller, competing ISPs would struggle to offer similar terms while covering their expenses. Moreover, the offer was exclusively targeted at new customers, which Ofcom argued could impact other operators' growth potential.

With roughly half of UK households with access to full-fiber broadband yet to subscribe, Openreach had a significant customer base to offer the discount. In its response to Openreach's proposal, Ofcom stated: "The offer is unfair and could harm sustainable competition, which is crucial for long-term low prices and improved services."

Openreach is responsible for constructing and maintaining the UK's broadband network infrastructure and faces competition from companies like Virgin Media O2 and Cityfibre. Openreach's managing director for commercial, James Lowther, said: "Ofcom's decision not to approve our incremental FTTP new to Openreach offer aligns with their consultation stance.

We presented this offer in good faith to aid our customers in competitive advantage and delivering better value for households. Despite our belief that the offer would have benefited customers and competition, we'll carefully consider the decision and continue constructive engagement with Ofcom and our customers." Other proposals Openreach put forward included a £50 connection rebate for signing up new full-fiber customers in areas overlapping with Virgin Media O2's network base, a cap on the average monthly wholesale costs ISPs pay Openreach when upgrading customers to higher-speed packages, and waiving the £90 upgrade fee for ISPs moving customers to faster broadband boxes.

Ofcom said it wouldn't intervene with these proposals as they "don't pose competition concerns," as the discounts they offered were significantly less substantial and unlikely to undermine competition.