Virgin Media has warned of the damage that could be inflicted on the telecoms industry if BT strikes “deeply discounted” broadband deals with rivals. The company fears competing network builders could suffer if Openreach, BT’s broadband builder, is allowed to offer long-term wholesale contracts on the cheap.
The cable operator has pressed regulators to “monitor the behaviour” of Openreach as it renegotiates with customers while upgrading the nation to ultra-fast broadband.
In a submission to communications regulator Ofcom, Virgin Media said “much more detail” was needed on how to solve the “conundrum”.
“If a larger retailer negotiates a deeply discounted and long-term deal, it is unlikely to focus on committing to a partnership with an alternative infrastructure provider if such a deal should jeopardise the discounts received from Openreach,” Virgin Media said. “If Openreach were successful in securing the large majority of its wholesale customer base on long-term arrangements, it is difficult to see how competition from alt-nets would not be adversely impacted.”
Virgin Media, the UK’s second biggest telecoms network, is owned by Liberty Global, the New York-listed company controlled by billionaire “cable cowboy” John Malone.
Pay-TV giant Sky was reportedly in talks with Liberty Global last year over investing in – and becoming a customer of – a new full-fibre network that would stiffen the competition with BT. Since then, Liberty Global has upped the pressure on BT by unveiling a £31bn mega-merger in May between Virgin Media and mobile operator O2.
Mike Fries, Liberty Global’s chief executive, said on Wednesday that once the merger was complete, it would look at building a “robust network” in the UK.
He said it might be “potentially with other partners, potentially with financial partners, creating some sort of wholesale arrangements” that could be “very accretive and very interesting”.
Ministers are counting on Virgin Media and BT to play a key role in blanketing Britain in gigabit speeds by 2025.
Alternative network builders such as CityFibre and Hyperoptic are also supporting efforts to hit the target, but are laying fibre lines on a much smaller scale.
Openreach competes with the so-called “alt-nets” over wholesale contracts, which allow broadband providers to sell access to their networks.
Yet concerns persist that BT’s financial might could crush the “alt-nets” if its commercial deals go unchecked.
It comes as broadband provider TalkTalk hit out at BT this month after failing to secure a long-term deal, which would have handed it access to Openreach’s full-fibre network.
It was scuppered by concerns that BT could have been accused of breaching competition rules if it went ahead.
An Openreach spokesman said it takes its “legal obligations very seriously” and was working to offer “attractive propositions” while “safeguarding competition”.
A spokesman for Virgin Media said: “Clearly, if additional investment is going to be committed in future, then the right conditions need to exist for the economics of building new network to stack up.”
Ofcom said some “long-term, wholesale discounts can act as a roadblock to investment from rival companies” and it will “restrict them if necessary”.