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BT’s pricing plans ‘put £20bn of fibre investment at risk’

BT - TOBY MELVILLE/REUTERS
BT - TOBY MELVILLE/REUTERS

BT’s plans to lower its wholesale prices could put at risk plans for £20bn of investment in fibre broadband across Britain, ministers have been warned.

Openreach, the network arm of BT, is planning to cut the fees it charges to service providers such as Sky and TalkTalk.

While that may lead to lower bills in the short-term, it could undercut efforts to invest in rival networks by locking customers into longer deals with BT.

A source at a rival said: “What people are worried about is that the price gets cut in the short term, that reduces investment in competition for BT and that in turn gives them more impact in the long term to increase prices, which is worse for consumers.”

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In a letter to Culture Secretary Michelle Donelan from the Independent Networks Cooperative Association, seen by The Telegraph, the so-called “alt nets” claimed BT’s plans would “put at risk” £20bn of private sector investment.

Investors have also complained to Ofcom about a lack of transparency and signalled in private meetings that the proposals put future investment at risk.

Companies to have voiced concerns include $280bn fund Mubadala, the sovereign wealth fund of the UAE which has invested in BT rival Cityfibre, sources said.

Antin Infrastructure Partners, which also backs Cityfibre, is also said to have raised questions with Ofcom, as have Aviva, an investor in County Broadband, and Infracapital, an investor in Gigaclear.

The funds declined to comment.

BT’s plans, dubbed Equinox 2, will see the former state monopoly change its pricing structure to make the move from copper wires to fibre optic cables more attractive to clients.

The FTSE 100 company argues the plan will shift more customers on to faster speeds and ultimately bring down prices. The proposal is expected to be shared with regulator Ofcom in December.

Competitors fear this could undercut them, making investment more difficult and slowing the pace of Britain’s fibre deployment.

Rival networks have demanded that Openreach put its plans forward to Ofcom for scrutiny and want the regulator to block future price cuts that tie customers into long-term deals. A previous round of discounts was unsuccessfully challenged by Cityfibre in the Competition Appeal Tribunal.

One source close to investors said the funds were “eyeballing” the UK government over BT’s plans.

Another investor in a BT rival said the impact of the planned wholesale price cuts was “pretty chilling” for the alt nets, adding that: “Many in the sector think that the intention of it is to reduce investment.”

Mark Shurmer, head of regulatory affairs at Openreach, said: “We take our legal and regulatory obligations extremely seriously and there’s a clear process for us to notify new pricing to Ofcom 90 days before it launches.

“We’re constantly in discussions with Communications Providers – often at their request – about our pricing and ways to accelerate the adoption of full fibre broadband, and we’ll continue to work closely with them to support their customers.

“Our prices will also continue to enable fair competition alongside our unprecedented investment, which we believe is a great outcome for consumers and businesses across the UK.”

An Ofcom spokesman said: "We have not received notification from Openreach about an ‘Equinox 2’ pricing offer. Should we be notified, we would consider whether it raises competition concerns requiring intervention. That would involve consulting with industry on our provisional view, before reaching a final decision."

Ms Donelan was approached for comment.

Find out if you could take advantage of price cuts with a BT Broadband deal