Openreach discounts for new fiber access contracts, which essentially offer wholesale customers lower prices, are viewed as a competitive threat by facilities-based competitors of Openreach. The new proposed tariffs, for example, only offer discounts in areas where there is competition from rival facilities-based fiber access providers.
Where Openreach is the sole provider of optical fiber access, the program and discounts do not apply. Some might say that is a typical response by a dominant provider to maintain or gain market share.
Competitors might see it as a way to drive competitors out of business using price mechanisms. At some point, that might be viewed as predatory behavior by regulators, as Openreach supports perhaps 600 retail ISPs. Up to this point, Virgin Media 02 has been the main facilities-based rival to Openreach, having perhaps 20 percent of the installed base. Up to 75 percent of the retail home broadband connections use Openreach.
Other small facilities-based ISPs have the most to lose. The big problem with building a rival access network are the stranded assets. If any provider in a competitive market manages to get 20 percent share, that also means 80 percent of the locations generate no revenue. As a general rule of thumb, 30 percent share is likely a lower boundary for sustainability in a competitive, facilities-based access market.
Openreach could make that a difficult target to reach, in markets where Virgin Media o2 also operate, alongside Openreach.
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