InfraVia Capital, which jointly owns nexfibre with Virgin Media O2’s shareholders Liberty Global and Telefónica, has warned (via The Times, paywall) that there could be a risk to investment in broadband if Openreach is allowed to monopolise this market. The company has said that its plans to invest to reach up to 20 million premises could be at risk if the regulator does not act to stop Openreach from taking advantage of its scale. InfraVia have recently invested £850m into Nexfibre to allow the acquisition of Netomnia to go ahead. This was announced at the time that it would create a full fibre network for nexfibre at 3.4 million premises and unlock £3.5bn in investment.
“This is £3.5 billion of real investment, with a clear path to 20 million premises. But that future depends on active enforcement of the TAR commitments to ensure the conditions for real competition. The choice is clear: back a sustainable, competitive market – or stand by as Openreach, like Darth Vader, tightens its monopolistic grip.”
Bruno Candès, Partner, InfraVia Capital
The reference here to TAR is the Telecoms Access Review, which puts price controls in place to ensure that Openreach doesn’t drop prices below cost to push out other industry players. Openreach recently announced some price incentives which can reduce the cost for ISPs who meet certain targets in customer acquisitions or upgrades over the Openreach FTTP network. It seems that InfraVia are keen to publicise the threat of this whilst the Competition and Markets Authority (CMA) work on reviewing the merger of nexfibre and Netomnia. In the past, when BT had a dominant network that it was using to build out broadband access (ADSL/VDSL), regulators used several layers to help control competition. This included mandatory wholesale access, cost-based caps, equal-treatment rules, and tests preventing BT from squeezing competitors’ margins. This might be something that InfraVia are looking at pushing regulators to implement to ensure that their investments remain profitable in the long term.
Openreach appears to have responded to this, as quoted by The Times:
“Ofcom has said that Openreach should be allowed to compete, and we agree. We want the whole UK to benefit from the world-class network we’ve built at a world-class cost. We realise competition is tough for some, but we plan to keep competing and keep stepping up for our customers and the UK.”
Katie Milligan, Chief Executive, Openreach
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I have a problem with these companies who pick and choose the low hanging fruit complaining of Openreach monopoly, for fair competition they should have to provide cover all over, even in remote areas.
Which is essentially impossible given Openreach’s history and its head start.
In reply to anonymous, I agree openreachs competitors should not be allowed to just do the easy bits, they should be forced to cover the whole country.
By doing that you would load them with unaffordable investment requirements, they can only afford to make the investment where they have a reasonable expectation of a return.
Does no one who comments here really have any understanding of how business and investment works?