Amid ranging assessments of the future of the altnet market, panellists also made numerous asks of the new Government, from AI to infrastructure
The commercialisation of emerging tech and growing the UK’s skilled workforce dominated conversations on the digital economy
AI was unsurprisingly the hot topic of the opening sessions of Connected Britain 2024. An interview with Marc Allera (CEO, EE and Consumer, BT Group) kickstarted the talk around AI on Day 1 as he likened the technology’s meteoric rise to the beginning of the web browser. He also highlighted the importance of reliable standalone 5G networks needed to handle the immense processing power required by AI. Keri Gilder (CEO, Colt Technology Services) opened a later discussion by suggesting that the UK needs to better monetise its AI sector. Gilder worried that, with a lack of commercialisation of the UK’s existing innovation ecosystem, the UK would be left further behind by the US and the EU. Regarding the EU, panellists broadly played up the UK’s opportunity to differentiate the tech economy here through a unique public policy approach to AI. Though panellists had varied thoughts on the impact of public funding in tech markets in comparison to private investment, Julian David (CEO, techUK) called on the Labour Government to invest now in order to achieve the cost-savings potential of technological adoption in the medium to long-term. Panellists also urged the UK to develop a more digitally skilled workforce. Paul Alexander (Head of Cloud Infrastructure, Nokia Europe) suggested that more businesses should maximise the use of apprenticeships to engage young people into the industry while also developing their digital skills. Iain Milligan (Chief Network Officer, Three UK) noted a skilled workforce, as well as a more efficient regulatory environment, would be needed to achieve the full benefits of network innovation such as Open RAN.
Familiar lines were drawn on altnet consolidation and the structure of the fibre market
While well-worn tensions flared over the competitive landscape of fibre, panellists did find common ground over the success of fixed market regulation thus far. Lutz Schüler (CEO, Virgin Media O2) started the day’s conversation by comparing the fibre market to a game of musical chairs: altnets were yet unsure of who would be left without a seat when the M&A music stops. Unlike some previous events, altnets offered an aligned and optimistic vision for a three-network future, as Neil McArthur (CEO, Freedom Fibre) predicted “orderly consolidation” with no foreseeable “train wrecks” coming down the line. Interestingly, Benjamin Weland (Managing Director, Head of Healthcare and TMT, Lloyds Banking Group) – speaking later in the day – took a different view, foreseeing some “forced” merger activity in the short-term and stating that the consolidation process was likely to get a bit messy. Rajiv Datta (CEO, nexfibre) picked up Schüler’s earlier prediction of a two-network market, further suggesting that meaningful merger activity would happen within the next year and contending that securing the financing to complete a national network build would not be possible in a three-network market. For the incumbent’s part, Katie Milligan (Chief Commercial Officer, Openreach) emphasised its focus on stability in the next phase of its investment, both in maintaining the pace of rollout and consumer take-up and in the regulatory environment. Greg Mesch (Founder and CEO, CityFibre) gave the most impassioned plea on behalf of the altnets, sharply criticising the idea that sustainable competition could emerge in an environment without strong regulatory intervention and without Openreach ultimately losing market share to its competitors. Though CityFibre’s wholesale deal signed in August with Sky was a point of conversation throughout the day, response from competitors was predictably muted while Mesch claimed it completed the network’s customer base.
The wholesale versus retail dilemma for altnets came to the fore once again
A subsequent panel on fibre investment raised an increasingly familiar question posed at industry events about the type of commercial model altnets should adopt. For Giles Rowbotham (General Counsel and Chief Development Officer, nexfibre), the answer is obvious: there should be a distinction between the infrastructure and customer-facing aspects of a provider’s business. Pointing to how nexfibre operates with respect to Virgin Media O2 (its sister company and anchor tenant), he considered that it is more appropriate structurally that marketing and build functions are managed and financed separately, especially for smaller altnets. In contrast, Richard Cameron (CEO, Grain Connect Limited) argued that his company provided a clear exception to that rule, stating that its integrated wholesale and retail model has worked, delivering positive free cash flow and enabling it to compete in the downstream market even where it is overbuilt by Openreach and therefore faces competition from the incumbent upstream. Both speakers agreed though that the funding environment had become more difficult, presenting a challenge as altnets work to both expand their footprint and their subscriber base – and potentially driving some conversations around consolidation. Weland stated that banks have experience with many altnets struggling, although that can “cloud the view of the sector”, and added that altnets can certainly be successful but doing so requires increasing penetration and scale (whether via the wholesale and/or retail route). In his view, larger ISPs like Vodafone or Sky can’t and won’t interface with 20 different altnets.
Panellists focused discussion on rural connectivity around planning reform and consumer education, deflecting conversation on satellite
Despite the progress in fibre buildout touted elsewhere, panellists also outlined the continued challenge of extending connectivity to the more rural and remote parts of the UK. While Lucie Smith (Director of Corporate Affairs and Television, Digital Mobile Spectrum) and others did recognise the work underway through Project Gigabit and the Shared Rural Network, she stressed the importance of developing a comprehensive industrial and infrastructural strategy to continue to make progress on the Government’s targets as set out in the Wireless Infrastructure Strategy. Colin Hutchinson (CFO, Fibrus) and Tony Smith (Delivery Director, Gigaclear) both emphasised the ongoing issue of securing public and private land access in rural communities. Frederick Persson (EVP for Digital Solutions, Prysmian Group) also discussed the importance of educating rural consumers on the unique use cases of advanced connectivity, such as in the agricultural sector. Though it's often discussed in the context of rural connectivity, satellite broadband was largely ignored or dismissed by industry panellists throughout the day. Instead, Dame Melanie Dawes (Chief Executive, Ofcom) interestingly gave nearly the same attention to satellite as to fibre rollout in her remarks. She detailed the importance of satellite for emergency services, weather predictions and space monitoring. Rebecca Molyneux (Deputy Director, Broadband Regulation and Investment, DSIT) echoed this sentiment, referencing the growth of Starlink’s coverage within the UK as well as the expected launch of Amazon’s Project Kuiper network. Despite Ofcom and the Government’s attention, industry panellists were sceptical of satellite’s potential to serve any more than the most remote areas. Greg Mesch claimed the technology was inconsequential to the market, offering that it could cover 1m UK homes without having any impact on the outlook for fibre networks.
A fair bet for all: INCA seeks to influence Ofcom’s wholesale market analysis
As Ofcom looked on from the back of the room, the Independent Networks Co-operative Association (INCA) hosted a session focused on the ongoing Telecoms Access Review (TAR) and what it believes the regulator should prioritise. Prefacing discussions by stating that it wasn’t able to provide any real detail on its thinking at this stage, INCA nonetheless outlined at a high-level what it thinks the regulator should be focused on, including simplifying the PIA remedy and managing the fallout from Openreach’s exchange closures. It also alleged that BT was actively pushing wholesale prices down, which harmed competition and should be prohibited through a price floor. According to Malcolm Corbett (CEO, INCA), government policy and Ofcom’s regulation have helped enable market entry, but those must now support sustainable competition, with altnets having a fair chance of making a return on investment (ROI). He added that the association has spent £300,000 to commission around 10 papers to help communicate its views and evidence to Ofcom and DSIT. Tim Stranack (Co-founder, Community Fibre and Chair, INCA) suggested these papers have themselves delivered an ROI, attracting the attention of policymakers and helping to establish a positive relationship with them – something well-known not to have always been the case.
