Altnets want BT to use their networks as Openreach plans to be everywhere

Altnets increasingly find themselves in a challenging environment. Having managed to wake BT from its slumber by starting to quickly roll out fiber, they are now facing competition from that very same company, which seems eager to build over them and maintain as much of its broadband hegemony as it can. 

As the altnets face reduced retail prices offered by Openreach under the much debated Equinox 2 pricing plan, the economic environment is not helping. With a wave of consolidation universally acknowledged to be around the corner, it is no wonder that smaller fiber players are feeling resentment toward Openreach.

This rivalry bubbled to the surface during the Connected Britain conference in London last week. While the altnets may want to see BT's retail business using their networks as well as Openreach's, it seems BT and Openreach have, at least for now, different ideas. During one of the panels, Greg Mesch, CEO of CityFibre, took issue with the fact that BT Retail still relies purely on Openreach's network.

"BT Retail should be on our network," he said, noting that the company won't use altnets even in areas where government subsidies effectively create a monopoly. If there were real separation of BT's retail business, it would be using altnets, he said.

Related:BT Openreach sets the cat among altnets with Equinox 2

With BT and Sky both wholly reliant on Openreach's network, the playing field is not level and 60% of the market is locked behind one company, Mesch complained. Structural problems in the market need fixing and the UK's Competitions and Markets Authority needs to "deal with it," he said.

This is not a new argument from altnets. Earlier this month, the Independent Networks Cooperative Association (INCA) – an organisation representing alternative networks in the UK – issued a report calling on the government to address what it calls market failures in broadband. It also wants the government to mandate a structural separation between BT Group and the physical infrastructure business.  

The report pointed to BT's exclusive use of Openreach's network, with the latter overbuilding altnets' networks even in areas where ­– according to INCA – two networks are difficult to sustain, echoing Mesch's arguments. Further, it claims that BT discounts broadband prices by up to 30% in areas where it faces infrastructure competition.

Building everything, everywhere, all at once

Prompted on stage to reply to Mesch's comments, Openreach's CEO Clive Selley argued that the company is in the process of building the largest network that will go "just about everywhere." In his view, what makes Openreach attractive to customers is that there won't be large swathes of the country not covered by its network, given the company plans to transform its entire copper network to fiber. By 2026, it should reach 25 million premises.

Related:Ofcom backs BT over altnets in broadband pricing dispute

Mesch called Selley's view a monopolistic one, and countered his arguments by emphasizing the benefits for consumers of competition. His arguments are part of an ongoing debate as to whether fiber constitutes a "natural monopoly" (paywall applies) or if there is space for multiple infrastructure providers. The benefit, of course, is that a more competitive environment is likely to lead to more attractive offers for customers and better service.

Earlier in the day, Howard Watson told the conference that BT has not ruled out using altnets' networks, saying "we continue to keep an open mind to that." BT is busy migrating its customers to fiber-to-the-premises (FTTP), and in some cases altnets' wholesale prices are higher than those offered by Openreach, he said.

"I know that some are even pricing their wholesale higher than their retail offer, which makes it extremely difficult to then consume." In a measured reply, Watson said that consuming a new wholesale broadband offer takes time, and that BT will continue to think about what the right commercial offers are and when they should be introduced.

Related:Eurobites: Altnets seethe as Ofcom OKs Equinox 2

Given the likelihood of more consolidation, BT may have opted for a wait-and-see approach. And while the company has little reason to help altnets by using their networks, it is easy to see why its position does little to appease smaller providers without which the UK's fiber rollout would arguably be further behind than it is.