This monthly insight sheds light on the challenges faced by alternative network providers (altnets) in the UK. Despite an increase in the number of premises passed by the top 10 altnets, they have downward revised their future build plans suggesting a slowdown. The article examines factors such as low take-up rates, macroeconomic conditions, and a drop in fibre cable demand that have contributed to this slowdown. Additionally, we explore strategies that altnets can employ to drive take-up rates, improve cash flow, and secure their future survival in a highly competitive market.
Increase in net additions and build rates
As of the end of June 2023 the number of premises passed by the UK’s top 10 altnets has increased to 7.4 million. This compared to 5.4 million reported in our update in January 2023. This growth includes comprises two new entrants; F&W and Lightspeed replacing BRSK and Toob from the previous control group of top ten altnets in January 2023.
The number of net-additions for the control group reached 1.7 million premises which is up from 5.4 million premises passed in January 2023 to 7.1 million in June 2023. That’s an average build rate of 279,000 premises per month. This is an increase on the build rate reported in January - we estimated that the top 10 altnets achieved an average monthly build rate of 194,000 premises per month.
There is no change in the make-up of the top 3 altnets comprising CityFbre, Hyperoptic and Community Fibre, which represent 66% of the total at just 5 million premises passed. CityFibre experienced the largest increase in net additions of all the altnets reaching 800,000 premises representing a build rate of 133,000 in the last six months. For comparison purposes, Openreach has a targeted build rate of 62,000 premises per week or to 248,000 per month.
Altnets have downward revised their future build plans
Although the growth in premises passed and build rates will be good news for some, the top 10 altnets have significantly downward revised their future build plans. In January 2023 we estimated that the top 10 altnets would pass just over 30 million premises in the next 4-5 years but their revised plans now indicate just under 22 million premises, representing a 28% drop. This drop suggests that the altnets and their investors are less bullish than they were six months ago. Sources confirm a decline in demand for fibre cable as a result.
This decline can be attributed to various factors, primarily macroeconomic conditions, and low take-up rates. With take-up rates remaining low – in some cases below 1% - altnets face a cash flow squeeze. In a market where a take-up rate of around 25%-30% is considered the norm, having a below 1% take-up rate is unsustainable.
The cost-of-living crisis, high energy costs, and the UK's high inflation rates further exacerbate the situation, prompting altnets to downscale their build plans. This has resulted in instances like Broadway Partner's administration filing and industry-wide layoffs, with some altnets reported to be operating with skeleton workforces to manage existing customer connections only.
Strategies to support altnet survival
To improve their survival prospects altnets could implement several market and network strategies to secure their future survival:
Altnets should continue to target underserved areas where demand is high and where established providers may have limited coverage or slower speeds. Altnets can take advantage by attracting customers who are currently dissatisfied with existing providers.
Marketing efforts can be stepped up to raise awareness, drive demand, and to help differentiate on price, quality, and service where there is competition.
Wholesale only altnets can onboard more ISP partners to help increase take-up rates and demand for their networks, while vertically integrated altnets may want to consider opening their networks to ISPs.
Altnets may also wish to consider wireless network technology as an alternative to fibre to support a low cost alternative to network expansion resulting in faster deployment and improved cash flow.
About Intelligens Consulting
Intelligens Consulting are telecoms, smart city and digital transformation management consultant to investors, operators and public bodies. We have also advised large and small altnet fibre operators and wireless ISPS to support their growth and market expansion strategies. Please contact us on info@IntelligensConsulting.com should you wish to discuss anything discussed in this article.
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Notes
1. Current and future premises passed estimates are based on publicly available data as of 04 July 2023 and may be subject to inaccuracies as a result.
2. The control group of top 10 altnets by premises passed in January 2023 is defined as CityFibre, HyperOptic, Community Fibre, G.Network, NetOmnia, Gigaclear, Toob, Fibrus, Trooli and BRSK.