BT subsidiary Openreach offered a long-term discount on its wholesale broadband service for communications provider customers that pledge to use fiber-to-the-premises (FTTP), aiming to boost adoption of the technology as it undertakes a nationwide buildout.
Katie Milligan, Openreach’s managing director of Customer, Commercials and Propositions, said in a statement, “We’re determined to make full fiber the default option for customers throughout the U.K.” She added its new pricing scheme “makes full fiber a must-have for every home and business, and it means more people could start benefitting from our most revolutionary and reliable broadband sooner.”
Openreach is currently working to deploy fiber to 25 million locations across the U.K. by 2026. Analysts at New Street Research broke down the operator’s offer in a note to investors, explaining that U.K. telecom regulator Ofcom has set certain price caps on wholesale service. While the cost of Openreach’s slowest speed tier of 40 Mbps down and 10 Mbps up is set at the maximum level allowed by Ofcom, increasing discounts apply for those taking faster speeds.
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“For higher speeds the prices gradually rise up to £22.0 pm for 1 Gbps, which is a 30% discount to the current list price of £31.6,” New Street analysts wrote. Openreach said in a press release the wholesale rates will apply to its entire footprint and promised pricing certainty through September 30, 2031.
Jefferies analysts added in a separate note that Openreach is also discounting connection fees, setting these at £25 for customers new to the network and £50 for existing customers compared to a current rate of £99.
To get in on the deal, Openreach said communications providers must commit to using FTTP wherever possible rather than fiber-to-the-cabinet or copper. While there are no volume targets for them to meet, New Street Research noted customers are required to migrate a certain percentage of subscribers to FTTP where it’s available. “This % starts at 75% and increases to 90% in October 2022,” they wrote. Jefferies analysts specified these targets apply to so-called new provides, meaning “new customer connections or existing customers changing technology” rather than a provider’s customer base.
Both New Street and Jefferies highlighted Ofcom as a potential stumbling block, with the latter noting the regulator’s approval is required. Ofcom “will need to be comfortable that the new offer does not unfairly foreclose network competition to Openreach. It appears to us that the new offer has been designed carefully to avoid falling into this trap,” the team at Jefferies wrote.
While the move doesn't appear intended to eliminate competition, Jefferies analysts said the offer “should have the effect of accelerating migration of Openreach lines to FTTP before altnets have deployed their networks widely.”