Adoption, consolidation and regulation dominated discussions at this year’s event, with tensions already running high heading into the Telecoms Access Review
Openreach argues it is not just a network, but an enabler of competition
In the morning’s fireside chats, Rob Hamlin (CSO, CityFibre) and Georgia Grimes (Director – Fibre Build, Openreach) both provided updates on their respective build programmes. Hamlin stated that while much of CityFibre’s ongoing rollout has been organic, two recent developments have helped extend its footprint: 1) participation in Project Gigabit, securing £800,000 in public funding; and 2) the acquisition of Lit Fibre, which has added 300,000 premises to its network. With CityFibre aiming to create a third scaled network (in addition to those of Openreach and Virgin Media O2), Hamlin suggested that further acquisitions may be on the cards. He considered that the market is becoming more conducive to consolidation, but thinks it unlikely there’ll be a “tsunami” of deals that some may be anticipating. Grimes highlighted Openreach’s role not only as a fibre builder but also as an enabler of competition through its physical infrastructure access (PIA) products and wholesale activities, adding that Openreach is the only provider to commit to a proportional build of urban and rural areas. Grimes argued that the current regulatory framework is working, reflected by billions in private investment, and should be maintained through Ofcom’s Telecoms Access Review (TAR) – a line repeated by colleagues throughout the day.
Altnets outline the take-up challenges at the wholesale and retail levels
In the subsequent panel, Conal Henry (Founder & Chair, Fibrus) described Fibrus as one of the “weird” altnets that will soon turn a profit – something he said almost goes against the altnet code of conduct. Henry considered that the altnet market is becoming (in)famous as a money pit, suggesting that even BT is struggling with adoption due to a “poisoned” brand. Other panellists also recognised the challenge industry is having in generating a return on investment. Rajiv Datta (CEO, Nexfibre) felt that many altnets will be reviewing their take-up projections in light of current market realities, with some operators currently offering services at unsustainable price points. Hamlin outlined the “inconvenient truth” that wholesale-only players (such as CityFibre) need to lure the largest retail operators away from the incumbent networks in order to achieve sustainable revenues. Despite the potential benefits for consumer choice, he indicated this was easier said than done, with BT/EE unlikely to use networks other than Openreach and Virgin Media O2 not currently wholesaling from CityFibre in areas outside of its cable coverage. In response, Grimes emphasised Openreach’s role in driving choice downstream, triggering an audible laugh from Henry.
Turning to the TAR, Datta cautioned that the UK’s fibre build phase is far from complete and that regulation of Openreach continues to be required “to keep it honest” and to enable scaled infrastructure-based competition at the wholesale level to materialise and be sustainable over the long-run. According to Datta and Hamlin, Ofcom should prohibit Openreach from making any further price reductions – referring to the Equinox scheme – that they considered might have the effect of locking in customers. Daren Baythorpe (CEO, ITS) focused his remarks on the business market, which he hoped Ofcom would recognise the need to regulate through the TAR. In his view, B2B is already less competitive than the consumer space, with active consolidation taking place at the retail level.
Zen Internet compares the UK’s fibre goldrush to an episode of the animated TV programme Wacky Races
Adoption and M&A were at the centre of a presentation by Richard Tang (CEO, Zen Internet), who compare the UK’s fibre market and its various players to the Wacky Races TV series (in which a range of competitors and the uniquely designed vehicles that match their personalities take part). Tang said that lots of firms had chanced their luck in the “great altnet gamble”, which has generally led to three outcomes: they get big (i.e. scale), get bought or get stranded due to overbuild. As a result, altnets are facing several dilemmas, including whether to build or acquire to extend their network, and whether to operate in both the wholesale and retail markets, or just upstream. Tang considered that while altnets had pretty much made a pact not to overbuild each other (which would be tantamount to a “cardinal sin”), the threat of overbuild from Openreach makes reaching the break even point of 30%+ adoption very difficult. With 25 networks covering over 100,000 premises today, Tang considered that there would only be four to six by 2030 – something many attendees appeared to agree with. He also involved some audience participation to gauge opinion on the prospects for niche rural players. Tang and a slim majority of the raised hands in the room felt that such providers would not be able to survive long-term, which drew some headshaking from B4RN and other regional operators.
Tensions rose as panellists debated the effects of wholesale pricing
Wholesale pricing was a key talking point during a panel on regulation, which saw some sparring between representatives of CityFibre and Openreach. Alex Blowers (Director, Regulatory Affairs, CityFibre) said that he “bought the argument” about pricing freedom for Openreach in 2019 when the UK’s fibre rollout was still in its infancy, as well as the “regulatory forbearance” in 2021 when Ofcom’s decision not to impose strict price controls provided the economic headroom for new players to enter the market. However, he argued that “extremely aggressive price constructs” since then have left altnets bruised, raising concerns about the destabilising effect a potential Equinox 3, 4 or 5 could have on many businesses. James Tickel (Director, Regulatory Policy and Strategy, Openreach), recognised concerns about price reductions but stated that the two Equinox offers were customer-led and deemed fair by the regulator. Tickel also expressed some confusion about what the altnet community was seeking to get out of the TAR, to which Blowers stated he’d had the conversation with Tickel three times, so either he was not communicating the message well enough or Tickel was not understanding it.
With the atmosphere slightly tense, Brian Potterill (Policy Director, Network and Communications, Ofcom) sought to intervene, stating that 2021 set a prohibition on Openreach pricing that would be loyalty inducing. For Ofcom, the problem statement is clear, centering on the prospect of future discounts and whether that deters switching. Potterill added that Ofcom is not considering imposing requirements on retail providers to use certain wholesalers, nor that the TAR will involve a fundamental change in the rules. This was welcomed by Tickel, as well as by Andrew Wileman (Director, Regulatory Policy, Virgin Media O2), who felt Ofcom was heading down the right path but must remain alert and reactive through the review process given the market remains in a state of flux. He considered that a switch or a meaningful commitment by a retail operator to a different wholesaler would require them having scale and that the UK market was not there yet, but might be within a couple of years.
The hot topic of poles generated more of a consensus among the speakers, especially around the benefits of cross-industry dialogue and sharing of best practices, and acknowledgement of the work DSIT is currently doing in this area. While not the most favoured part of the infrastructure toolkit, the panel agreed that new poles will inevitably be required to support some network deployments. Potterill urged operators to use planning rules wisely given that some residents don’t like poles or feel uninformed about them going up.
Consumers are happier to pay for coffee than fibre
Discussions around consolidation carried through into the afternoon, with Jonathan Harris (Programme Director, Connecting Cumbria) considering it could be beneficial if it reduces overbuild and shifts investment to more underserved areas. Gavin Rodgers (CEO, LBN) said that he is fielding calls every other week from other altnets about consolidation but with networks worth different amounts, proper valuations would be needed for him to consider any transaction. Elsewhere, the focus was on adoption – something panellists throughout the day saw as lagging. According to Eoin Heaney (Vice President, International, Calix), many people are paying more for coffee each month than they do for broadband despite the value of the latter being significantly greater. Krystian Heald (Head of Partnerships, ISPA) considered there was a role for the Government and for local community-based initiatives to help boost understanding about the social and economic value of advanced connectivity, particularly if operators are to avoid a race to the bottom in terms of pricing. Ste Ashton (Digital Infrastructure and Connectivity Manager, Worcestershire County Council) felt industry was facing a tougher challenge in driving fibre adoption than it did with superfast broadband, which was transformational for many at the time. Now the majority of people have a decent level of connectivity, persuading them to upgrade to fibre – and potentially pay more or switch providers in the process – will not be easy.
