Virgin Media O2 has accused BT-owned Openreach of using aggressive discounts to squeeze competing fibre networks out of the UK broadband market. Chief executive Lutz Schüler wants Ofcom to block the offers, arguing that Openreach is exploiting its enormous scale at precisely the point when smaller networks are struggling to survive.
From 1 October, Openreach plans to give broadband providers an extra £50 rebate for each additional Full Fibre connection they win in areas served by Virgin Media O2. Separate national discounts will increase according to how many new connections a provider sends Openreach’s way, potentially cutting wholesale rental costs substantially over the following two years.
That could translate into cheaper broadband packages in the short term, which obviously sounds good. The concern is what happens afterwards. If the discounts persuade major providers to funnel more connections onto Openreach, rival networks could lose the volume they need to remain viable. Once those competitors disappear, Openreach would face less pressure to keep its prices low.
Image credit: Virgin Media O2
Lutz Schüler is Virgin Media O2’s Chief Executive Officer
Cheap broadband now, less choice later?
Schüler argues that the offers are designed to make providers more dependent on Openreach and less willing to commit business to competing networks. Openreach sees it differently, saying the market is more competitive than ever and that its discounts will deliver better value while moving more homes away from ageing copper connections.
Virgin Media O2 isn’t a neutral observer, though. Its owners are trying to combine nexfibre with Substantial, the company behind Netomnia, Brsk and YouFibre, creating a larger network challenger and unlocking a claimed £3.5bn of investment. Ofcom is now considering whether Openreach’s offers undermine that competition, with the targeted £50 rebate unable to proceed without its consent.
