MATT REES ALTNET CONVERGENCE
ALTNET CONVERGENCE: Phase two of the fibre gold rush
The UK currently has a market of over 100 gigabit broadband providers, collectively investing more than £4bn into fibre rollouts across the country. This rapid rollout has met its primary objective of extending gigabit access across the country. But, as the dust slowly starts to settle, what this market looks like long-term is uncertain, writes Matt Rees , CTO, at Neos Networks.
A FRAGMENTED FIBRE MARKET It’s easy to forget how far we’ve come in under four years. Before the start of the decade, the UK’s digital divide was slowly widening. In 2019, gigabit coverage in the UK sat at just 6%. Despite disruption from the pandemic threatening to compound this, it has now expanded to nearly 80%, according to data from the Department for Science, Innovation and Technology (DSIT). Alternative network providers (altnets) have had a huge part to play in this. Coming on to the scene to help expedite the fibre rollout across Britain, they’ve also introduced much- needed competition to the legacy service providers who couldn’t fully meet the UK’s demands. This was made possible by huge amounts of investment from the UK government, which committed £5 billion as part of Project Gigabit, aiming to achieve at least 85% gigabit coverage of the UK by 2025, and then nationwide coverage by 2030. Despite being on track to hit these targets, the UK government recently committed a further billion pounds to boost broadband to over 677,000 hard-to-reach homes and businesses. Furthermore, private equity investment – looking to capitalise on the huge commercial opportunities in the UK’s largely unserviced gigabit broadband
market – has also spurred altnets’ progress here. Total expenditure by altnets is estimated to be between £8bn to £9bn so far. While all of this has had the desired effect, with gigabit broadband availability skyrocketing in only a handful of years, the speed of the rollout has left the UK’s fibre market in a skewed position. With so many broadband providers currently in operation and the blank spaces on the map slowly being filled in – the next stage in UK fibre will likely see a wave of consolidation as operators begin prioritising profitability. ONE WAY OR ANOTHER While the UK’s fibre rollout is not entirely over, it is beginning to slow down. As we enter the next stage, the focus will shift from expansion to consolidation. Altnets were originally targeted with a metric of homes connected, but this does not equate to signing up customers and many are struggling to make a return on their investments. With private equity investment also beginning to dry up, altnets will start to prioritise profitability. There are several possible routes through this, from outcompeting incumbents on service quality or reducing operating costs to protect margins. More ambitious altnets
aiming to truly compete in the long term with the legacy ISPs will need to be able to deliver the same national reach and unified approach as the likes of Openreach and Virgin - not an easy task. One option here could be closer collaboration between altnets. This convergence could offer significant benefits beyond simple network expansion. Resource sharing would mean more efficient use of infrastructure like fibre cables or street cabinets as well as reduced costs and quicker future rollouts. Smart use of this strategy could benefit two (or more) collaborating altnets as they look to expand coverage and challenge the supremacy of traditional ISPs with a more competitive and high-quality service offering. Of course, ensuring cooperating altnets do not directly compete with each other will be a priority to ensure the relationship is truly symbiotic. Beyond this blue-sky convergence, the possibility of more permanent network consolidation seems increasingly likely. Ambitious private equity investors may see the diverse altnet market as an opportunity to capture a bigger slice of the pie through mergers and acquisitions. For example, we recently saw the merger of VX UK and Freedom Fibre, a deal which sees private investor InfraBridge
18
| ISSUE 36 | Q1 2024
www.opticalconnectionsnews.com
Made with FlippingBook flipbook maker