Ofcom's decision to allow BT Group PLC (LSE:BT.A) to cut its wholesale prices will have casualties among smaller rivals of the former state monopoly, analysts reckon, while smaller rivals suggest it may not help consumers but just boost larger players.
Earlier today, the telecoms regulator gave the FTSE 100 group's Openreach arm the green light to reduce its wholesale prices, which it said was to encourage independent broadband providers like Sky, TalkTalk and Vodafone to move to high-speed full-fibre broadband.
Ofcom, which had ummed and ahhed over the decision, acknowledged that smaller alternative networks, known as 'altnets', are "likely to face stronger competition from Openreach" as a result of the pricing strategy, known as Equinox 2.
In theory, by offering lower wholesale pricing this saving should be passed onto consumers resulting in lower fibre broadband packages.
It was pointed out, however, that BT was among telecom providers hiking prices more than 14% for customers this year.
The decision will be “a bitter pill to swallow” for rival infrastructure suppliers like Virgin Media O2 and the smaller altnets, said industry analyst Paolo Pecatore, with prices “too low, squeezing them out of the market”.
He added: “There will be casualties. Already some are cash strapped and investment is driving up very quickly.”
It is likely to force some providers to come together in a new wave of consolidation, Pescatore added.
“Rivals will feel that Openreach is trying to use its market dominance by locking in providers for longer. If so this will squeeze their own margins, making it harder to roll out their own networks and compete at scale."
He said it was a significant, if not entirely surprising, move from Ofcom who initially did not raise any objectives and then seemed to backtrack.
“The market as things stand cannot support all players as there are too many chasing too few pounds. Consolidation is inevitable given the overbuild that is taking place.”
A Virgin Media O2 spokesperson said it is “carefully considering this decision” and fellow alnet CityFibre said it was “disappointed and will be undertaking a thorough review”, though pleased Openreach has committed to making no further changes to its wholesale pricing until April 2026.
CityFibre boss Greg Mesch said: “We must not forget that while introducing price discounts to bind its wholesale customers and damage emerging competition, BT is at the same time significantly increasing prices for millions of its retail consumers. Ofcom must ensure that competition is effective and sustainable if consumers are to benefit.”
Tom Williams, CEO of another altnet, Lit Fibre, said: “we question whether this will really lead to consumer benefit or just prove to be a margin boost to the large retail ISP’s using Openreach’s network.”