Ofcom has launched a consultation on its provisional views on a set of commercial offers that Openreach intends to introduce.

“As Openreach has significant market power, it must give Ofcom and the wider industry advance notice before introducing certain types of commercial offers,” noted the media regulator.

In June, Openreach notified Ofcom of its intention to roll out a range of offers, including:

• ‘Incremental New to Openreach Offer’. This offer gives Internet Service Providers (ISPs) a monthly discount for bringing new full-fibre customers onto Openreach’s network. It applies only to new customers above an ISP’s normal number of new sign-ups. The discount could be up to £9.50 per customer for up to 30 months.
• ‘Geographic Incremental New to Openreach Offer’. In areas where Virgin Media operates, this offer provides a one-off £50 discount on new full-fibre customers to Openreach, above the usual number of an ISP’s new sign-ups. Altnets also have significant presence in some of the areas covered by this offer.
• ‘Frontbook ARPU Share Offer’. When a household wants a higher-speed broadband package, they’ll typically pay more to their provider, who in turn will also pay more to Openreach. This offer will cap what an ISP pays on average for new high-speed connections at £19.32 per month. In practice it would make getting people onto higher speed packages more commercially attractive to ISPs.

Alongside these, Openreach also plans other offers, including specifically for high-capacity business connections.

Ofcom’s provisional views

Having considered responses to its Call for Inputs published in June and, guided by its overarching objective to promote sustainable competition wherever possible, Ofcom has reached its provisional views on Openreach’s notified offers.

Ofcom proposes to intervene to direct Openreach to withdraw its ‘Incremental New to Openreach Offer’, as it consider the charges are “not fair and reasonable and could harm the development of network competition”. This would be the first time that Ofcom has stepped in to block a commercial offer from Openreach.

Explaining its decision, the watchdog said: “Under this offer, Openreach is targeting significant discounts at new customers that are key to altnets’ ability to grow their customer base, while leaving prices for other customers unchanged. We are concerned that this could undermine sustainable competition. In particular, matching these discounts may not allow competitors to recover their costs, given the low prices they are already offering to all of their customers. Sustainable competition is fundamental because it means people having a choice between different networks. That choice drives companies to compete for customers through affordable prices and higher quality services. Without sustainable competition, over time prices could rise. And firms competing to deliver affordable, ever better broadband helps underpin economic growth.”

Ofcom added that the other offers planned by Openreach do not raise competition issues that warrant regulatory intervention.

Ofcom is now welcoming responses to its consultation from interested parties (by August 27th). It will then expect to make a final decision by the end of September.

Natalie Black, Ofcom’s Group Director for Infrastructure and Connectivity, commented: “Openreach must be able to compete, but they cannot use their significant market power to drive other networks out of the market. In reaching our final decisions on their planned offers, we will prioritise promoting sustainable competition, which is fundamental to keeping prices low in the long term and bringing better broadband to people across the UK.”

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Tags: Ofcom, Openreach