BT’s Openreach ordered by Ofcom to pull new customer deal

BT’s Openreach has been ordered to withdraw a heavily discounted offer aimed at new customers after the industry watchdog said the deal was “not fair and reasonable” and could damage competition from other broadband network providers.Ofcom said its final decision was to step in and force Openreach to pull the “Incremental New to Openreach” offer, which gave internet service providers a monthly discount of up to £9.50 for up to 30 months in order to attract new full fibre customers onto its network.It marks the first time Ofcom has used its powers to step in and stop a commercial offer from Openreach, which is BT’s wholesale network arm.Ofcom said: “We have determined that the large discount involved – up to £9.50 per customer for up to 30 months – may mean that other reasonably efficient operators couldn’t match it while also recovering their costs.“In addition, the offer is aimed exclusively at new customers, so could stymie altnets’ ability to scale up their customer base at a time when around half of households that have access to full-fibre broadband are yet to sign up.”It added: “For these reasons, we consider the offer would be unfair and could harm sustainable competition, which is essential for low prices and better services in the long run, as well as helping to power the UK’s growth and productivity.”But Ofcom said it was not intervening in other commercial offers Openreach is planning to introduce with smaller discounts.James Lowther, Openreach’s commercial managing director, said: “We put this offer forward in good faith to help our customers compete and deliver better value for households.“While we continue to believe the offer would have benefited customers and competition, we’ll review the decision carefully and continue to engage constructively with Ofcom and our customers.“We’ll launch our other offers and continue to compete fairly.”Openreach – which is owned by BT, but run as a separate company – builds and maintains telecommunications network across the UK, such as the copper cables, fibre optics and telephone poles.Read MoreIt does not sell telecoms or broadband services directly to households and businesses, but counts providers such as Sky and Vodafone as its customers.Openreach’s offer comes at a time when competition in the wholesale market is ramping up, with so-called altnets increasingly challenging the established players.A spokesman for Virgin Media said: “Although we believe the regulator could have gone further, we welcome Ofcom’s move to clip Openreach’s wings on its most aggressive offer and looking ahead it’s crucial the dominant incumbent’s behaviour is fully kept in check as meaningful wholesale competition emerges.“More broadly, these repeated tactics show why consolidation in a fragmented, unstable fibre landscape is needed so that the sustainable, scaled challenge Openreach clearly fears fully materialises, leading to better outcomes for providers and consumers.”It comes as the Competition and Markets Authority (CMA) is investigating Nexfibre’s £2 billion acquisition of rival altnet broadband provider Netomia as part of a full scale Phase Two probe.Nexfibre is backed by Liberty Global and Telefonica – the co-owners of Virgin Media O2 – as well as InfraVia Capital Partners.Nexfibre said Ofcom’s decision on the Openreach deal was “a positive step towards protecting competition in the UK fibre market”.It added: “Openreach’s tactic of drip-feeding price changes via special offers needs to stop at a time when competition remains nascent.“Ensuring alternative networks have the incentives to invest, grow and achieve scale will be critical to creating credible, sustainable competition.“That is precisely why our proposed acquisition of Netomnia matters; creating a stronger challenger that can drive competition, investment and greater choice for consumers.”