BT shares rally as Openreach reveals wholesale broadband price cuts, but proposal receives backlash from rivals
- Openreach already lowered its wholesale FTTP broadband prices last year
- CityFibre and Virgin Media O2 have complained to Ofcom about the proposal
- BT Group shares topped the FTSE 100 after today’s announcement
BT Group’s network arm has revealed plans to offer wholesale fiber at discounted rates as competition between service providers for new customers intensifies.
Openreach was first reported in October as considering lowering its wholesale broadband prices to attract new customers and retain big customers like Sky, TalkTalk and Vodafone.
It already started lowering its pricing structure in July last year, prompting official complaints from Virgin Media, O2 and alternative network providers like CityFibre to Ofcom that it would have a big impact on the competition in the sector.
New deal: Openreach’s Equinox 2 proposal offers wholesale broadband price bands up to 15% cheaper for customers from April 2023 than its “Equinox One” plan
The media regulator decided not to take any action against the company, arguing that lower prices for ISPs would not pose a significant barrier to the use of “altnets” and would lead to better outcomes for consumers.
It has pledged to review Openreach’s “Equinox 2” proposal, which offers price ranges up to 15% cheaper for customers from April 2023.
For example, those on Equinox One’s gigabit per second rental plan currently pay £22.64 per month and are expected to pay £24.87 from the start of April.
But if they upgrade to “Equinox 2”, their monthly bill will total £21.30, while those on a 1.8 gigabit speed deal will shell out £29.30 per month.
Rival companies have raised objections to this new pricing strategy, saying it would create market distortions and prevent customers from switching to cheaper and better deals.
“To avoid jeopardizing planned and future investments and to preserve fair competition, it is essential that these wholesale price proposals are carefully considered,” noted Lutz Schuler, Managing Director of Virgin Media O2.
CityFibre has already lodged a complaint with the Competition and Markets Authority and Ofcom, alleging that the company is “exploiting the addiction” of its wholesale ISP customers and discouraging them from using altnet groups.
Dozens of altnets have sprung up in recent years, often with the backing of private equity firms, seeking to disrupt the traditional broadband infrastructure market by offering faster speeds and more reliable services.
However, many are in a financially precarious position due to borrowing large sums to finance the expansion of their all-fiber network while Openreach itself ramps up development.
Katie Milligan, Commercial Director of Openreach, said: ‘We are investing £15 billion to upgrade the UK to super-fast, ultra-reliable Full Fiber broadband, and we want more homes and companies are using this new network as soon as we’ve built it. In this way, the whole country will benefit.
“To this end, we have responded to our customers’ desire for lower prices and long-term certainty.
“These offerings don’t commit them exclusively to Openreach, but alongside our new, faster speed tiers, we’re confident they’ll help them continue to support and delight their own customers in a highly competitive market.”
Shares of BT Group rose 3.2% to 117.5p late Wednesday afternoon, making it the first rise in the FTSE 100 index.