Vodafone UK CEO Pushes Ofcom to Clear Openreach FTTP Prices Cuts

The CEO of mobile and broadband ISP Vodafone UK, Ahmed Essam, has joined other retail internet providers in publicly calling on Ofcom to approve Openreach’s proposed “Equinox 2” discount scheme for their Fibre-to-the-Premises (FTTP) based products, which is being challenged by alternative networks (AltNets).

At the end of 2022 Openreach confirmed that it planned to introduce another round of wholesale discounts on their full fibre products from 1st April 2023 (here), which would help ISPs on the same network to stay competitive with newer and often cheaper AltNets (Summary of UK Full Fibre Builds). Lower prices could also boost take-up by consumers and thus aid the move away from copper lines.

However, more than a few rival networks viewed the move as being anti-competitive (here), with CityFibre even lodging a Competition Act complaint with the Competition and Markets Authority (CMA) and Ofcom (here). The regulator then provisionally ruled in February 2023 that Equinox 2 was “not anti-competitive” (here), but in March they opted to impose a two-month delay on its implementation after identifying “issues which require further assessment“.

Openreach’s proposal is widely desired by ISPs on their network and some, such as Zen Internet (they use both CityFibre and Openreach’s services), have already argued in favour of the discount scheme being allowed to proceed (here). Now the boss of Vodafone UK, which is a provider that also harnesses full fibre services from both Openreach and CityFibre, has similarly lent his support to the incumbent.

Ahmed Essam, CEO of Vodafone UK, said:

“We think their proposed offer poses no threat to efficient alternative fibre providers and, importantly, doesn’t discourage retailers like Vodafone from using other wholesalers. Indeed, we hope to widen our use of alternative fibre providers in the near future. We strongly believe that a competitive wholesale market is essential to ensure UK consumers benefit from good value, choice and innovation.

So we hope Ofcom will recognise the value of Openreach’s Equinox II offer to consumers and its important role in encouraging wider fibre adoption.”

The confirmation that Vodafone are also planning to add other AltNets to their platform in the “near future” is arguably a much bigger development here, although it won’t really be major news until they start putting some meat on the bone by announcing solid agreements. An ISP of their size would be more likely to invest time and effort to onboard larger AltNets with an attractive wholesale solution, such as perhaps Netomnia and CommunityFibre.

However, Essam also stressed that he would like to see wholesalers introduce broadband social tariffs to help support ISPs that offer similar products to vulnerable customers, which may be a bone of contention for Openreach and others that have ruled out such a product (example). But to be fair, Openreach do already offer some solutions that complement social tariffs, such as a regulated FTTC tier and connection discounts for those on state benefits.

Ahmed Essam added:

“As a purpose-led business, we also want to offer broadband packages that are affordable for our most vulnerable customers. This is why we launched our social broadband tariff in October 2022 – the cheapest on the market at the time. At just £12 a month it represents fantastic value for money.

Unfortunately, it is unsustainable at that price. Even though our costs having been rising sharply due to rampant inflation – our energy bills in particular have spiralled – we’ve kept our social tariff at £12 a month. But the wholesale element of that social broadband bill accounts for more than the entire retail price!

So if we’re going to continue offering affordable – financially viable – social tariffs to digitally excluded people – as we, Government and Ofcom want – we need Openreach, CityFibre and others to offer an equivalent wholesale social tariff at a substantially reduced rate. We’re hoping Ofcom will support us in this ask.”

Naturally, everybody is currently playing to their own vested interests. Retails ISPs will always welcome cheaper wholesale prices, while AltNets will welcome measures that help to protect their investment against much larger and more well-established incumbents, such as Openreach. Similarly, consumers will welcome anything that makes their broadband cheaper, or which at least inhibits them from getting dramatically more expensive.

In the middle of all this, Ofcom has the difficult task of trying to find some balance between the often-bitter industry divisions, although so far, they’ve shown little desire to push for social tariffs at the wholesale level. As for their stance on Equinox 2, we suspect that they may still approve the proposal, albeit possibly with some caveats that may or may not cause problems if Openreach try to push an Equinox 3 or 4 further down the road.

Either way, we expect to learn the outcome soon, unless the regulator delays their decision again.