BT’s Openreach could be forced to withdraw a heavily discounted offer aimed at new customers after the industry watchdog said the deal was “not fair and reasonable” and could damage competition from other broadband network providers.

Ofcom said it provisionally found the incremental “New To Openreach” offer was unfairly targeting “aggressive discounting” at new customers, which are key to allowing rival so-called altnets to grow their customer base.

It is proposing blocking the deal on the grounds it could hurt competition and drive up prices in the long term.

Such a move would be the first time Ofcom has used its powers to step in and stop a commercial offer from Openreach, which is BT’s wholesale network arm.

Ofcom said: “Matching these discounts may not allow competitors to recover their costs, given the low prices they are already offering to all of their customers.

“Sustainable competition is fundamental because it means people having a choice between different networks.

“That choice drives companies to compete for customers through affordable prices and higher quality services.”

Openreach – which is owned by BT, but run as a separate company – builds and maintains telecommunications network across the UK, such as the copper cables, fibre optics and telephone poles.

It does not sell telecoms or broadband services directly to households and businesses, but counts providers such as Sky and Vodafone as its customers.

Openreach’s new customer offer gives internet service providers (ISPs) a monthly discount for bringing new full-fibre customers onto its network, with up to £9.50 being offered per customer for up to 30 months.

Ofcom said the offer comes at a time when competition in the wholesale market is still developing.

“With around half of households that could access full-fibre broadband yet to sign up, it is vital that different networks can compete for these customers fairly,” according to the regulator.

Ofcom will now consult on its proposed action until August 27 and make a final decision by the end of September.

Natalie Black, Ofcom’s group director for infrastructure and connectivity, said: “Openreach must be able to compete, but they cannot use their significant market power to drive other networks out of the market.

“In reaching our final decisions on their planned offers, we will prioritise promoting sustainable competition, which is fundamental to keeping prices low in the long term and bringing better broadband to people across the UK.”