HomeInsightsRegulatory and market challenges ahead as “Equinox II” BT offer rumoured for end of 2022


Recent press reports and wider industry dialogues suggest that BT is planning to offer a second Wholesale Price Cut offer for the sale of their gigabit-capable Fibre-To-The-Premises (FTTP) Broadband line to UK Internet service providers.

Based on a recent FT report, we note that an Equinox 2 offer will potentially be wider, covering migrating customers from copper to fibre lines. This appears to go further than the original Equinox offer, which was focused more on new connections – with Openreach offering ISPs discounted prices for their FTTP rental and connection services if they met targets to connect the majority of new lines to Openreach’s FTTP where available. Discounts were paid if ISPs met certain targets for the percentage of new sales orders they placed which were FTTP. The offer also provided ISPs with price certainty, lasting 10 years (until Sept 2031) and was available across Openreach’s FTTP footprint.

Rumours of “Equinox 2” are likely to attract concerns amongst Openreach rivals given that they are investing heavily in building rival fibre networks which could overlap with Openreach’s networks – and such an offer could again undermine their investments and result in overbuilds for the UK. There’s an argument that the mere announcement has already had a chilling impact on investments and potential deals in the sector.

Openreach rivals (and in particular, alternative network operators “Altnets”) challenged the “Equinox 1” offer before both Ofcom and the UK Competition Appeals Tribunal (“CAT”) on the basis of competition concerns such as the discount acting as a barrier to Altnet entry and expansion.

Equinox 1 was notified to Ofcom in July 2021 for review, as Openreach is required to provide 90 days’ notice of commercial terms to Ofcom where there the price or other contractual conditions proposed are conditional on the volume and/or range of services purchased.

Ofcom’s 90-day notification requirement comes from SMP (significant market power) conditions imposed on BT by Ofcom to regulate network access. This is part of Ofcom’s 2021-2026 Wholesale Fixed Telecoms Market Review measures designed to promote competition and investment in gigabit-capable networks with the aim of bringing faster, better broadband to people across the UK.

Ofcom decided not to intervene with Openreach’s Equinox 1 measures, concluding that the targets did not create a potential barrier to purchasing FTTP products from alternative networks.

Cityfibre appealed Ofcom’s decision to the CAT and lost as the CAT was cautious about interfering with Ofcom’s consultation process and expert decision as a regulator, noting that Ofcom’s consultation process was not so flawed as to be unlawful and had acted reasonably, with a sufficient evidence base to reach its findings.

Following the CAT’s decision earlier this year, rivals are therefore concerned that the findings of Ofcom and the CAT have paved the way for similar offers to Equinox 1 again being made by Openreach.

The detail of any “Equinox 2” offer together with how Ofcom might approach such an offer remains to be seen, with recent reports suggesting Openreach is likely to formally notify industry towards the end of this year, potentially again triggering a 90 day review process before Ofcom before the measures can be offered to the market.

While an Equinox 2 offer might be welcomed by consumers, if it’s similar or wider in scope than Equinox 1, it’s likely Openreach’s rivals will again raise concerns with Ofcom, and Ofcom could potentially reach a different conclusion for Equinox 2.

Ofcom has a duty to promote (rather than protect competition). As such, it has very wide discretion in terms of how it scrutinises any Equinox 2 proposal, so it will be interesting to monitor how any Ofcom review of any further BT “Equinox” offer develops. The UK’s present appeal mechanisms also provide it with more leeway against a merits challenge by any Openreach rivals.

Given current challenges for providers, a BT Equinox 2 offer risks being even more impactful with the likelihood of an even greater battle ahead given the potential impacts on the critical ISP relationships and the increasing cost of capital for future build.