Virgin Media O2 calls for ‘thorough scrutiny’ as BT’s Openreach launches new fibre offer

UK service provider Virgin Media O2 has called for closer regulatory scrutiny of BT wholesale subsidiary Openreach’s just-announced plans for lower-priced wholesale access to fibre-to-the-premises infrastructure under the ‘Equinox 2’ scheme.

The new wholesale offer proposes discounts to service providers for access to the FTTP network in exchange for commitments to connect most new lines to its fibre net.

The original Equinox scheme was previously challenged by fibre provider CityFibre on the grounds that it would negatively impact competition, but regulator Ofcom declined to intervene.

Equinox 2 goes further but BT maintains that the new offers do not commit service providers to use Openreach exclusively.

Virgin Media O2, which wants to target the wholesale market for its off-net fibre build-out – as opposed to its legacy HFC DOCSIS-based network – has expressed concerns about the scope of Equinox 2.

“BT is facing the biggest competitive challenge in its history with billions of pounds of fibre investment pouring into the UK, creating the prospect of genuine broadband wholesale competition at scale for the first time. To avoid putting planned and future investment at risk, and to safeguard fair competition, it’s vital that these wholesale pricing proposals are thoroughly scrutinised to ensure Openreach is not using its market power and dominance to lock in providers and deter them from switching to other networks,” said Virgin Media O2 CEO Lutz Schuler.

“We will be making our views clear to Ofcom and Government, who have both made repeated calls for more fibre investment and competition in the UK, and we ask that Ofcom delivers on its own strategy for a healthy broadband market as set out two years ago in its Wholesale Fixed Telecoms Market Review.”

According to analysts at Jefferies, while the intention of Equinox 2 is to “encourage ISPs to bulk migrate legacy customers to FTTP at pace”, there are no “volume commitments” associated with it, although there is a discount to current Equinox 1 pricing.

“It remains unclear why Equinox 2 is being launched at a time when Openreach is unable to execute existing demand to provision FTTP,” said Jefferies, adding that the lower pricing of the offer would “create a revenue headwind for Openreach”.

In October, Virgin Media O2 abandoned plans to acquire smaller rival TalkTalk over regulatory and credit concerns, leading analysts to speculate that TalkTalk would subsequently focus on negotiating better wholesale access to FTTP.

Jefferies said then that the abandonment of the merger plan relieved a potential threat to Openreach, which could have lost out from the removal of TalkTalk customers from its own fibre net.