40% discounts up for grabs from Openreach for qualifying providers
In a move which should encourage providers to be more pro-active on encouraging existing customers to upgrade from ADSL/ADSL2+ connections to a GEA service or even for existing customers to upgrade to something such as G.fast or FTTP Openreach is launching a set discount offers. The discounts are only triggered once the provider increases their use of GEA services by a specific percentage, so this does not mean immediate price cuts for existing users, but is likely to mean lower prices for existing customers upgrading e.g. get a 80/20 service for the same price as 40/10, or 40/10 for the same price as an existing ADSL2+ service, and as always the competition for new customers is going to be even more agressive.
We’ve invested more than 11 billion pounds into our network over the last decade and whilst that’s helped the UK become a global digital leader, there are still millions more homes and businesses that could benefit from the better broadband infrastructure we’ve built.
This offer is a win/win for Communications Providers, their customers and Openreach. It will help Britain’s homes and businesses to experience the benefits of faster and more reliable broadband. And it will incentivise our wholesale customers to participate in our long-term investment in digital infrastructure by upgrading more of their customers to superfast and ultrafast services.Clive Selley, CEO Openreach
Increased demand for services will also help the various BDUK contracts that are still running (usually there is a 7 year contract term) and the gainshare mechanism is already funding some extensions to projects but higher demand generated from offers like this have the potential to trigger higher levels of gainshare. Openreach in its press relates states that £80m has been committed out of £528m that is has provisioned for return during the lifetime of the contracts. If gainshare money is not committed to further roll-outs it will at the end of the contract be returned to the local authority/Government.
Increased demand is all well and good but a common scream is that people are not able to order a GEA-FTTC service due to capacity issues, or the more annoying issue which is people cannot switch broadband provider during this period due to the quirks of have VDSL2 ports are allocated. We have previously looked at the impact of this, but running the numbers again indicates that 2.08% of UK premises were connected to a VDSL2 cabinet suffering a capacity issue (also called as being on the waiting list) on a total of just over 2,000 cabinets. The UK figure masks wide variations, e.g. East Lothian is running at 13.9% and Orkney at 10.7%. So while those affected are going to shout loudly, the number impacted at any one time is actually relatively small.
The discounts which are worth up to 40% are fairly complex since there are different trigger levels and they are attempting to offer options that will also benefit smaller providers. The table below is a short summary but communication providers should read the full briefing and Openreach price lists to see the full set of terms and conditions.
|FTTC or FTTP 40/10||FTTC or FTTP 55/10||FTTC or FTTP 80/20||G.fast 160/30||FTTP 160/10|
|All prices are per month and exclude VAT.|
|Standard pricing||£5.80 (i.e. per WLA)||£8.40||£9.95||£11.49||£12.75|
|For providers with under 50% current take-up, existing and new customers. Five year discount plan.||£4.99||£5.99||£5.99||£7.99||£7.99|
|For providers with over 50% current take-up, existing customers. Five year discount plan.||£5.80||£6.49||£6.49||£7.99||£7.99|
|For providers with over 50% current take-up, new customers. Five year discount plan.||£4.99||£5.99||£5.99||£7.99||£7.99|
|For providers with under 500 fibre orders per week via Openreach, existing customers. Five year discount plan.||£5.80||£6.99||£7.49||£7.99||£7.99|
|For providers with under 500 fibre orders per week via Openreach, new customers. Five year discount plan.||£4.99||£5.99||£5.49||£7.99||£7.99|
|For providers with under 50% current take-up, existing customers. Three year discount plan.||£5.80||£8.40||£8.40||£10.99||£10.99|
|For providers with under 50% current take-up, new customers. Three year discount plan.||£5.49||£7.49||£7.49||£10.49||£10.49|
|For providers with over 50% current take-up, existing customers. Three year discount plan.||£5.80||£8.40||£8.40||£10.99||£10.99|
|For providers with over 50% current take-up, new customers. Three year discount plan.||£5.49||£7.49||£7.49||£10.49||£10.49|
IMPORTANT: The GEA-FTTC and G.fast discounts apply across the whole footprint, but the discount on FTTP does not include Fibre First cities but is restricted to new build sites and BDUK areas. Interesting while the Fibre First areas will not qualify for a discount, the volume will count towards targets that trigger the discounts.
The pricing is at the wholesale level, so mainly impacts those that buy direct from Openreach i.e. Sky, BT Wholesale, TalkTalk, Vodafone and Zen. BT Wholesale obviously deals with a large number of broadband providers, so some of the discount may be passed on if they are able to trigger the discounts. The discounts have two targets:
- Openreach GEA Discount Volume and Bandwidth Mix target - containing targets on total fibre base, mix of customers on higher tiers (80Mbps and over) and mix of customers on Ultrafast technologies (GEA-FTTP and G.fast). The targets on Ultrafast will commence only in the second year of the deal and will be linked to a minimum build commitment provided by Openreach; or
- Openreach GEA Discount Forecasting accuracy target - CPs will have to provide 6-month forecasts and will be paid a portion of the rebate based on this metric.
The targets are pretty clear in their attempt to encourage people onto the higher speed tiers and with the increased volume of G.fast now appearing and FTTP delivery ramping up (including some limited overlap with existing FTTC areas where FTTC is not delivering superfast speeds in BDUK areas) getting people to upgrade to the faster products makes sense.
Exactly how this will translate at the retail level is hard to predict, particularly as the Openreach price only covers getting the data to the handover exchange, but it looks likely that we may start to see entry level FTTC services under £20 per month in the next few months and possibly free speed upgrades for existing customers.
As part of a wider strategy to try and diminish the ADSL/ADSL2+ customer base the discounts are just the start, but they may also reflect the increasing level of competition that is expected as FTTP rolls out across the UK from people like CityFibre.