Openreach NTO offer: Ofcom’s approach to enforcing SMP conditions
In short: The Openreach NTO offer, a national discount for internet service providers (ISPs) that win new full-fibre customers, must be withdrawn by 30 September 2026. Ofcom found its prices not fair and reasonable under SMP Conditions 1.3 to 1.5 and did not intervene in the other notified offers, in its statement of 28 September 2026.
Ofcom has directed Openreach to withdraw its notified national discount for ISPs that win new full-fibre customers, and has not intervened in the other offers Openreach notified this summer. Ofcom reached that result by applying to a particular set of commercial terms the conditions it imposed on BT in March 2026, after finding that BT has significant market power in wholesale fibre access. Openreach, BT and Sky argued that Ofcom should not intervene; VMO2 and most of the alternative network builders (altnets) argued that it should intervene further. Respondents differed on how Ofcom should apply a legal standard it had already set, and Ofcom decided the question in its statement of 28 September 2026.
Key points
- Ofcom directed BT to withdraw the Incremental New to Openreach Customer Offer (Access Change Notice OR1108) by 30 September 2026. The offer had been due to start on 1 October 2026. Source: Ofcom statement, Annex 2, Schedule paras 9 and 10.
- Ofcom found each incremental price under the offer below the midpoint of its adjusted cost range for a reasonably efficient operator (£14.42 to £22.17 a month, midpoint £18.29), and one increment below the bottom of the range. Source: Ofcom statement, paras 5.113 and 5.114.
- Ofcom did not intervene in the Geographic offer targeted at Virgin Media O2’s (VMO2’s) areas, the Ethernet Net Demand offer, the Frontbook ARPU Share and Box Swap offers or the Equinox area expansion. Source: Ofcom statement, paras 4.49, 6.95, 7.102 and 8.41.
- On every offer consulted on in July, the final decision matches Ofcom’s provisional view of 28 July 2026. Source: Ofcom statement, para 2.37.
- Ofcom has published sixteen responses. It accepted INCA’s correction to one connection charge and corrected an error in its own model, and neither changed a decision. Source: Ofcom consultation page; Ofcom statement, paras 3.43 fn 42, 6.71 and 6.72.
The statutory framework: duties, market power and SMP conditions
Ofcom acts pursuant to duties set by the Communications Act 2003. Its principal duty under section 3(1) is to further the interests of citizens in communications matters and of consumers in relevant markets, where appropriate by promoting competition. Under section 4, in carrying out its functions under Chapter 1 of Part 2 of the Act, which include setting conditions and giving directions and consents, it must act in accordance with six requirements. They include promoting competition, encouraging network access to such extent as Ofcom considers appropriate for securing sustainable competition and efficient investment, and promoting access to very high capacity networks.
Ofcom gives effect to those duties in fixed access markets through market reviews. Where Ofcom finds that a provider has significant market power (SMP) in a market, Ofcom must set such SMP conditions as it considers appropriate under section 87(1). Ofcom did this in the Telecoms Access Review 2026-31 (TAR26), which found that BT has SMP in wholesale local access (WLA), leased line access and inter-exchange connectivity, and set conditions that took effect on 1 April 2026. Three are relevant here. Under SMP Conditions 1.3 to 1.5, BT must provide FTTP access in WLA Areas 2 and 3 on fair and reasonable terms, conditions and charges; in the leased line markets the equivalent condition excludes charges where a charge control applies. Ofcom reads the fair and reasonable requirement for FTTP charges as requiring a sufficient margin between Openreach’s FTTP prices and its physical infrastructure access (PIA) prices for a reasonably efficient operator to compete (para 5.159), a point Bratby Law discussed in its note on altnet use of Openreach’s ducts and poles. Under SMP Condition 4, BT must not discriminate unduly, and different prices in different geographic areas may be deemed undue discrimination unless Ofcom consents in writing. Under SMP Condition 8.6, BT must give 120 days’ notice of any terms that depend on the volume or range of services an ISP buys. Ofcom set separate rules in TAR26 for Openreach’s copper charges as copper is retired, and Bratby Law has written on its decision of 9 September 2026 on the copper retirement second threshold.
Openreach, the BT division that runs the access network, does not need Ofcom’s approval to offer new commercial terms. Ofcom uses the notice period to decide whether a notified offer is consistent with the conditions and, if not, to give a direction under SMP Conditions 1.11 or 8.14 (Bratby Law described this mechanism when Ofcom called for inputs in June). Any direction or consent must meet the tests in section 49(2): it must be objectively justifiable, not unduly discriminatory, proportionate and transparent.
In TAR26 Ofcom also set out how it would assess notified terms. On conditional terms it asks a series of questions, the first being whether the conditionality could create a barrier to using a rival network. On price it compares Openreach’s price for the customers an offer targets with a range of costs for a reasonably efficient operator (REO), meaning a notional altnet of efficient scale, taken from its Fibre Cost Model. Ofcom said it was more likely to have concerns where prices are “at the mid to lower end of the range” (TAR26 Volume 4, para 1.178). Bratby Law set out the framework in more detail when Ofcom consulted in July.
What Openreach notified
Openreach notified a package of offers on 1 June 2026 and an expansion of its Equinox offer area on 30 July 2026. The Incremental New to Openreach Customer Offer (the NTO offer) gave a £35 connection rebate and a £9.50 monthly rental rebate on new-to-Openreach and subsequent-provide full-fibre (FTTP) orders above an ISP-specific baseline, with the rental rebate running for 18, 24 or 30 months according to how far the ISP exceeded its baseline (para 5.7). The Geographic offer added a £50 connection rebate on above-baseline orders in postcodes served by VMO2, and Openreach applied for consent under Condition 4 (paras 6.2, 6.6). The Ethernet Net Demand offer gave a one-year connection rebate on Ethernet Access Direct (EAD) business circuits above 90% of an ISP’s 2025-26 net orders (para 7.4). The Frontbook ARPU Share and Box Swap offers, aimed at moving customers to higher-speed products, took effect on 1 July 2026 (paras 4.1, 4.6, 4.7). The Equinox expansion extends existing Equinox pricing to premises ready for service up to 31 March 2027; Openreach sought consent while maintaining that none was required (paras 8.2 to 8.4, 8.11).
The arguments made
Respondents to Ofcom’s consultation of 28 July 2026, which closed on 27 August 2026, addressed six questions under the conditions.
On whether the NTO prices were fair and reasonable, Openreach argued that comparing five-year revenues from a narrow group of above-baseline customers with a cost benchmark built for recovery over 40 years was a mismatch, that the relevant increment was all FTTP supply in the market, and that treating the REO midpoint as a floor would go beyond TAR26 (Openreach response, paras 14 to 16, 22 to 26, 57 to 61). It also said that altnets already price near or below the bottom of the range, and that most customers the offer targeted would come from VMO2 (paras 5.125, 5.131). nexfibre, relying on an economic report, said that the low-cost end of the range, modelled on an operator with 5 million premises and 40% take-up, was out of date now that altnet coverage had exceeded 16 million premises, and that a range built on 16 to 24 million premises would give a midpoint of £21.21, against which the Frontbook offer would fail (nexfibre response, paras 48 to 66). INCA, Connect Fibre, Fibrus, VMO2 and nexfibre said that the relevant comparison is the price an altnet must offer to win customers (para 3.15), and Fibrus, Gigaclear and Hyperoptic raised the pressure on altnet financing (para 3.14). Eight respondents, including INCA, CityFibre, Gigaclear and VMO2, said that the five-year customer lifetime was insufficiently supported and asked for a shorter one (paras 3.11, 3.12). INCA said that the connection charge Ofcom used for the Geographic offer included premises outside VMO2’s footprint. Substantial Group asked Ofcom to confirm that the midpoint would not become a safe harbour for a successor offer.
On conditionality, CityFibre and another respondent asked Ofcom to clarify that a direct financial penalty for moving volumes to a rival is not the only kind of barrier its first question covers (para 5.10). The joint response from Hyperoptic, Fibrus and Gigaclear argued that “an incremental volume discount with progressively more favourable marginal terms can itself create a forward-looking incentive to concentrate purchases on Openreach” (joint response, para 19). Openreach and Substantial Group agreed with Ofcom’s provisional view that the NTO conditionality was not a barrier.
On whether harm could arise and whether a direction was proportionate, BT suggested that ISPs using more than one network are likely to route orders through preferred-supplier arrangements rather than by reference to baselines, and that a direction would fall hardest on ISPs that buy only from Openreach, such as its own retail arm (BT response, pp 3 and 4). Sky said an ISP cannot tell at the point of sale whether an order will be incremental, so the discount would barely reach retail prices (Sky response, para 2 and Annex, paras 3 to 12). BT argued that a direction was inconsistent with Ofcom’s stated bias against intervention, and Openreach that the harm was speculative (paras 5.119, 5.120). VodafoneThree, VMO2, CityFibre, nexfibre and INCA were among those supporting the direction.
On the Geographic offer, Openreach said that geographic pricing in response to an established competitor is commercially rational and competition on the merits (Openreach response, para 5.3), and BT supported consent. VodafoneThree supported consent subject to safeguards and monitoring. VMO2, nexfibre, INCA, Fibrus, Gigaclear and Hyperoptic asked Ofcom to refuse consent, Connect Fibre disagreed with Ofcom’s provisional view and OFNL (BUUK) urged it to reconsider. VMO2 argued that it is a nascent wholesale competitor rather than an established retail operator, that consent would set a precedent for targeting a named rival’s footprint (VMO2 response, paras 119 to 169), and that, where there is no objective justification, Ofcom had to identify a plausible benefit to competition before consenting (para 6.20).
On the Ethernet offer, VodafoneThree, CityFibre, INCA and Connect Fibre argued that Ofcom should intervene, or at least test the offer against an altnet’s costs rather than Openreach’s own. Openreach said that, other than in the high network reach market, no fair and reasonable price obligation applies in these markets and that narrowing margins is ordinary price competition (Openreach response, paras 136 to 139); BT and Substantial Group supported or did not oppose Ofcom’s provisional view, Substantial Group asking for monitoring.
On process and cumulative effect, VMO2 asked Ofcom to reach a provisional view on the Equinox expansion and consult separately on it, arguing that TAR26 gave it a legitimate expectation of that process (VMO2 response, paras 6 to 19; para 8.12). nexfibre asked for the full 120-day period. INCA asked for careful review, VodafoneThree did not object, and Substantial Group saw no separate conditionality barrier but asked Ofcom to confirm that its price analysis covered the new premises (paras 8.13 to 8.15). Openreach said that consent was not required, because a price that is not unduly discriminatory is not prohibited by Condition 4.1, and that the expansion would have no material market impact, so section 49A(1)(b) did not require consultation (Openreach letter of 30 July 2026, paras 7, 9). nexfibre, VMO2 and BUUK asked Ofcom to assess Openreach’s successive offers for their pattern and cumulative effect; Openreach said that negotiating with and responding to its ISP customers is “a key element of competition on the merits” (para 8.54).
How Ofcom decided
Ofcom decided that the NTO prices were not fair and reasonable under SMP Conditions 1.3 to 1.5. Each incremental price for above-baseline customers fell below the midpoint of the adjusted REO range, and one fell below its bottom (paras 5.113, 5.114). In WLA Area 2 the margins may not allow a reasonably efficient operator to recover its costs, and harm to altnet take-up or prices was plausible enough to justify intervention (paras 5.158 to 5.162). Ofcom kept its price test. It held that the question is whether a targeted or time-limited offer undermines competition, and that a REO cannot offset low margins on some customers against a wider base as Openreach can (paras 3.35 to 3.38, 5.80 to 5.96). It said that it models a single efficient operator in the range, not the altnet sector taken together (paras 3.21 to 3.28), and that the comparison “is not intended to be a bright line test” (para 3.39).
Ofcom made the following changes to its analysis. It kept the five-year lifetime but ran three-year and four-year sensitivities, in which every incremental price remained below the midpoint (paras 3.29 to 3.34, 5.104, 5.114). It ran nexfibre’s sensitivity spreading connection rebates over the customer lifetime (para 3.43), accepted INCA’s point and substituted a connection charge of £32.07 for £41.47 (paras 6.71, 6.72), and corrected its own error in deducting nominal connection charges from real capital costs (para 3.43, fn 42). None changed a decision.
On conditionality, Ofcom clarified that its first question is not limited to a direct financial penalty and covers conditionality that is loyalty-inducing, directly or indirectly, meaning that placing orders with Openreach could affect the prices or rebates an ISP receives on its other volumes (paras 5.20 to 5.22). It held that the NTO offer did not meet that description, because an ISP that places volumes with a rival loses only the rebate on those volumes (paras 5.23 to 5.25), and reached the same view on the Geographic and Ethernet offers (paras 6.16 to 6.18, 7.26 to 7.28). Ofcom therefore based its decision on the NTO offer on its price finding alone.
On harm and proportionality, Ofcom accepted that ISPs cannot be sure how far a discount will reach retail prices and that the risk to competition is lower at retail level than at wholesale level. It decided that the wholesale risk remains, because some ISPs choose a network connection by connection and altnets may need to match Openreach’s price for all new connections to win wholesale customers (paras 5.143, 5.146, 5.147, 5.154, 5.157). It gave the direction under SMP Conditions 1.11 and 8.14, having consulted on it for 30 days, and set out its reasons on each of the section 49(2) tests (paras 9.3 to 9.9).
On the Geographic offer, Ofcom accepted that the offer targets customers altnets need to win and that at least one altnet is present in 47% of the postcodes it covers (para 6.50). It held that TAR26 does not require it to identify a plausible benefit to competition, noting that additional pricing pressure is “a pro-competitive aspect of commercial life”, and that finding no evidence of objective justification does not preclude a finding of no capacity to harm (paras 6.42, 6.43). It found the price above the midpoint of the adjusted range (para 6.87) and VMO2 markedly different from an entrant altnet (paras 6.54, 6.55). Taking account of the scale of the discount and the differential with altnet prices, it concluded that the risk of harm to long-term competition was not sufficiently plausible to amount to undue discrimination (paras 6.96, 6.97).
On the Ethernet offer, Ofcom applied an equally efficient operator standard, testing Openreach’s revenue against its own incremental costs. It reasoned that TAR26 imposed no ex ante (in advance) control on low EAD prices in these markets, and that the equally efficient operator standard is consistent with competition law applied after the event (paras 7.54, 7.58 to 7.65). It will monitor the offer (paras 7.81, 7.97 to 7.99).
On the Equinox expansion, Ofcom found that the conditional terms were unchanged in structure and the price differences unlikely to harm competition (paras 8.18 to 8.20, 8.41). It answered the requests for further consultation at paragraph 8.42: “given our assessment above, and taking account of stakeholder responses to our 4 August 2026 request for input”, it did not consider further consultation necessary or proportionate. On cumulative effect, Ofcom said it would monitor offers individually and together, would be concerned to see Openreach repeatedly propose schemes that warrant intervention, and would consider action after the event if the evidence supports a theory of harm (paras 8.58, 8.60, 8.61).
Summary: the legal question, the arguments and the decision
Paragraph numbers are to Ofcom’s statement.
| Legal question | Argued for intervention | Argued against intervention | What Ofcom decided |
|---|---|---|---|
| Are the NTO prices fair and reasonable (Conditions 1.3 to 1.5)? | Altnets, VMO2, VodafoneThree: prices too low for an efficient altnet; nexfibre: the REO range is too low | Openreach: the increment and time horizon are mismatched; the midpoint should not act as a floor; altnets already price near the bottom of the range | Not fair and reasonable; direction to withdraw (paras 5.114, 5.158 to 5.162) |
| Is the REO range right? | nexfibre: use 16 to 24 million premises (midpoint £21.21) | Openreach: a 40-year benchmark is unsuited to short offers | Range kept; Ofcom models one efficient operator (paras 3.21 to 3.28, 3.35 to 3.38) |
| Is five years the right customer lifetime? | Eight respondents, including INCA, CityFibre and VMO2: shorter | No argument recorded | Kept, noting Openreach’s own modelling used five years; sensitivities added (paras 3.29 to 3.34) |
| Is the conditionality a barrier to rival networks? | CityFibre, joint respondents, INCA: indirect loyalty effects count | Openreach, Substantial Group: not a barrier | Framework clarified; no barrier found (paras 5.20 to 5.25) |
| Could harm arise, and is a direction proportionate? | Altnets, VMO2, VodafoneThree: yes | BT, Sky, Openreach: ISPs will not divert volumes; harm is speculative | Wholesale risk plausible; direction proportionate (paras 5.143 to 5.147, 5.157, 5.162, 9.8) |
| Is the Geographic offer unduly discriminatory (Condition 4)? | VMO2, nexfibre, INCA, Fibrus, Gigaclear, Hyperoptic: refuse consent | Openreach, BT; VodafoneThree with safeguards | Not unduly discriminatory; Ofcom “content” for it to proceed (paras 6.42, 6.43, 6.95 to 6.97) |
| Should the Ethernet offer be tested against an altnet’s costs? | VodafoneThree, CityFibre, INCA, Connect Fibre | Openreach; BT and Substantial Group (with monitoring) | Equally efficient operator standard; monitoring (paras 7.58 to 7.66, 7.81) |
| Did the Equinox expansion need further consultation? | VMO2 (provisional view and consultation); nexfibre (120 days) | Openreach: consent not required and no material market impact; VodafoneThree did not object; Substantial Group asked for confirmation on price analysis | Further consultation not necessary or proportionate (paras 8.12 to 8.15, 8.42) |
| Should successive offers be assessed together? | nexfibre, VMO2, BUUK | Openreach: responding to ISP customers is competition on the merits (para 8.54) | Monitoring individually and cumulatively (paras 8.48 to 8.61) |
Consents and process
For the Geographic offer and the Equinox expansion, Ofcom recorded each decision as being “content for Openreach to implement” the offer (paras 6.3(b), 6.95, 8.41). For the Geographic offer this answered the consultation question whether Openreach’s application for consent should be granted (para 2.36); Ofcom dealt with the Equinox expansion after the consultation (para 2.38). Ofcom published the direction on the NTO offer as Annex 2 to the statement. In Annex 1 Ofcom states that a consent is subject to the section 49(2) tests and to section 49A (para A1.7). Under section 49A, Ofcom must allow at least 30 days for representations on a consent under an SMP services condition where it is of the opinion that the consent would have a significant impact on a market.
In TAR26 Ofcom said that on a geographic consent application it would “reach a provisional view” and “would expect to consult for one month“, and that it may streamline certain steps where appropriate, for example where the evidence indicates that the price differences are objectively justifiable or where the issues are limited in scope. It added that it would exercise its discretion in deciding whether to consult, taking account of its statutory obligation under section 49A (TAR26 Volume 3, paras 9.146 to 9.148). For the Geographic offer, Ofcom consulted for 30 days. For the Equinox expansion, it invited comments by 27 August 2026 through a website update on 4 August and decided on the basis of those responses and its assessment (paras 8.5, 8.42).
Ofcom compared Openreach’s prices with a REO cost range in both the 2023 Equinox 2 decision and the 2026 statement. In the 2023 Equinox 2 statement, using its 2021 cost model, it considered where Openreach’s average price sat relative to the range and found it above the top, describing the comparison as not a bright line test and also taking account of altnet prices (paras 4.40, 4.41). In the 2026 statement it compared each price increment for the customers an offer targets with the midpoint of the adjusted range (paras 5.113, 5.114). Ofcom states that its 2026 approach follows the TAR26 guidance, that the comparison is not a bright line test and that its method choices depend on the facts of each offer (paras 3.39, 5.51, 5.93).
A person affected by a decision given effect by a direction or consent under an SMP condition may appeal to the Competition Appeal Tribunal under section 192(1)(b) of the Act, and the Tribunal decides the appeal on judicial review principles under section 194A(2).
Timing and next steps
BT must withdraw the NTO offer by 30 September 2026. The Geographic and Ethernet offers may start on 1 October 2026, and the Equinox expansion on 1 December 2026; the Frontbook ARPU Share and Box Swap offers have applied since 1 July 2026 (paras 6.95, 7.102, 8.41, 4.1). On pass-through, the Federation of Communication Services (FCS) said there is no guarantee that BT Wholesale passes special offers on to the smaller providers that buy through it, and Ofcom treated pass-through by wholesale aggregators as a commercial matter (paras 8.44 to 8.47).
Frequently asked questions
Why did Ofcom direct withdrawal of the Openreach NTO offer?
Ofcom found that the discounted FTTP prices under the offer were not fair and reasonable under SMP Conditions 1.3 to 1.5. Each incremental price fell below the midpoint of its adjusted cost range for a reasonably efficient operator, £14.42 to £22.17 a month, and margins in WLA Area 2 may not allow such an operator to recover its costs (paras 5.113, 5.114, 5.158 to 5.162).
When must Openreach withdraw the offer?
Under the direction, which took effect on 28 September 2026, BT must withdraw Access Change Notice OR1108 by no later than 30 September 2026. The offer had been due to start on 1 October 2026 (Annex 2, Schedule paras 9 and 10).
Does Openreach need Ofcom’s approval for its commercial offers?
No. Under the TAR26 SMP conditions Openreach must notify terms in advance, 120 days ahead for terms conditional on volume or range under Condition 8.6. Ofcom then decides whether to give a direction. Ofcom’s written consent under Condition 4.1 is the route for geographic prices that would otherwise be prohibited as undue discrimination.
Can the decision be appealed?
A person affected by a decision given effect by a direction or consent under an SMP condition may appeal to the Competition Appeal Tribunal under section 192(1)(b) of the Communications Act 2003. The Tribunal applies judicial review principles under section 194A(2).
For advice on notified Openreach offers, geographic consent or an appeal under section 192, contact Rob Bratby at Bratby Law.
