Summary
- Ofcom proposes to direct Openreach, BT Group’s regulated wholesale unit, to withdraw its Incremental New to Openreach Customer Offer.
- The offer would give ISPs up to £9.50 a month for as long as 30 months on new full-fibre customers above their normal volume of sign-ups.
- Ofcom’s provisional view is that the targeted charges are not fair and reasonable and could prevent alternative networks from recovering their costs.
- The regulator is not proposing to intervene in Openreach’s other notified geographic, higher-speed or business offers.
- The consultation closes at 5pm on 27 August, and Ofcom expects a final decision by the end of September.
The customer that matters most to a new fibre network is often not the one already connected. It is the next household that can turn sunk construction cost into recurring wholesale revenue.
Openreach’s proposed offer focuses its discount on precisely that margin. An ISP would receive up to £9.50 a month for as long as 30 months when it brings full-fibre customers to Openreach above its normal level of new sign-ups.
Ofcom’s concern is provisional but specific: alternative networks may be unable to match that targeted price and still recover the cost of building and operating their infrastructure.
Incremental design changes where the subsidy bites
A discount applied to every line lowers a broad price base. An incremental discount rewards additional acquisitions after an ISP crosses its normal flow.
That can make the next customer much cheaper for the retail provider without changing the price of its existing Openreach base. The incentive is therefore concentrated on the same contestable customers that an altnet needs for take-up.
The arithmetic reaches up to £285 over 30 months per qualifying customer. That is a maximum derived from the two published limits, not a guaranteed payment. The actual amount and duration could be lower, and eligibility depends on exceeding the ISP’s normal number of new sign-ups.
Ofcom argues that matching those discounts may not let a reasonably efficient rival recover costs, particularly when competitors already charge low prices across their customers. Its theory is about selective acquisition economics, not a claim that every discount by a dominant operator is unlawful.
Half the serviceable market is still open
Ofcom says around half of households able to receive full fibre have not yet subscribed. Those households are the remaining take-up pool for networks whose civil works have already been built.
The more of that pool a network converts, the more fixed cost it can spread over paying lines. Losing marginal customers can therefore affect an altnet’s unit economics more strongly than losing a customer in a mature, fully occupied network.
Competition also has a time dimension. A low targeted price can benefit an ISP and household now. Ofcom’s stated concern is that weaker network competition could lead to less choice and higher prices later.
That outcome is not proven by the consultation. Stakeholders can challenge the market definition, efficiency benchmark, likely matching response and consumer effects before Ofcom decides.
Three other offer types remain outside the proposed direction
Openreach also notified a geographic incremental offer: a one-off £50 discount for qualifying new customers in areas where Virgin Media operates, including places with substantial altnet presence.
Its Frontbook ARPU Share Offer would cap an ISP’s average payment for new higher-speed connections at £19.32 a month. Openreach also plans offers for high-capacity business connections.
Ofcom is not proposing to intervene in those offers. Its provisional view is that their effective discounts are materially smaller and unlikely to prevent a reasonably efficient network from competing.
That boundary matters. The action is not a block on Openreach discounting as a whole, and it is not a final ruling on every commercial offer.
First intervention remains a proposed precedent
Ofcom says a direction against the Incremental New to Openreach Customer Offer would be the first time it has stepped in to block an Openreach commercial offer.
The phrase describes the significance of the proposed decision, not a completed prohibition. The consultation is open until 5pm on 27 August. Ofcom plans to consider responses and decide by the end of September.
Openreach has significant market power and must notify certain offers in advance. That framework gives the regulator a window to assess competition before the pricing becomes established.
The final evidence will be the decision and its reasoning: whether the offer must be withdrawn, is modified, or proceeds. Until then, Ofcom has defined a line around one targeted discount mechanism. It has not yet made that line binding.
