The Connected North conference held last month highlighted once again the dominating theme of consolidation in the UK fibre market and concerns over overbuild. With over 100 alternative network operators (altnets) actively building fibre networks in the UK, we ask who will survive and thrive? Which altnets will be at risk and what does this mean for altnet market growth strategies? What is the future of regulation and market structure?
Consolidation is a common trend in industries that experience rapid growth and fragmentation, and the UK fibre market is no exception. As more and more fibre operators enter the market, competition intensifies, and the cost of acquiring and retaining customers increases. The question is, how sustainable is the current approach, how long will investors continue to pump cash into altnets to enable them to survive, and what does this mean for the future of regulation and the UK fibre market structure?
Size matters
One possibility is that larger altnets, such as CityFibre and NetOmnia, could dominate and potentially acquire smaller alternative network providers to expand their reach and market share in unserved areas. These larger players typically have deeper pockets, greater resources, and more established infrastructure, which could give them a competitive advantage in the market.
However, not all altnets will be acquired. The larger operators may not need to acquire smaller altnets given their capacity to build faster than the time and cost it takes to close an acquisition deal. For example, NetOmnia and CityFibre have previously reported building fibre at an average rate of 30,000 to 88,000 premises per month respectively. This may put many of the smaller generalist altnets at risk, particularly those near CityFibre or NetOmnia build areas.
Investor driven consolidation
To ensure of survival, altnets can adopt two strategies. They can merge with each other to create a larger, more powerful entity, such as Fern Trading's announcement that it is consolidating Jurassic Fibre, Swish Fibre, Giganet, and AllPoints Fibre into a single fibre altnet with the potential to pass one million homes. This merger could lead to increased efficiency and cost savings as operators pool their resources and eliminate redundant operations, resulting in lower prices for consumers and improved service quality.
To our knowledge other investors such as Infracapital – whose UK investments include Fibrus, Ogi, Gigaclear, and Wight Fibre collectively targeting 2.7 million homes – have not announced consolidation plans; however if they do the UK fibre market could experience yet another significant shift in market structure.
Purpose driven niche
Another emerging strategy in the UK fibre market is for altnets to develop a niche and differentiate themselves from their competitors. This niche strategy focuses on purpose-driven values such as providing fibre to social housing. Established larger altnets such as HyperOptic, Community Fibre and new market entrant Giggle are leading with this approach.
Another niche strategy is to focus on unserved rural geographies which is the approach taken by many smaller or lesser-known wireless ISPs and fibre altnets.
Figure: Who will survive and who will thrive. Source: Intelligens Consulting, May 2023.
Either niche strategy has the potential to create a strong market position for these players. By aligning with a purpose or hard to reach area, these altnets can differentiate themselves from other market players and attract a loyal customer base. This approach also has the potential to attract investors who are interested in supporting purpose-driven companies that make a positive impact on society.
A note of caution however
Consolidation could also lead to reduced competition and potentially higher prices for consumers if the market becomes too concentrated. It is therefore important for Ofcom to monitor market developments closely to ensure that competition remains healthy and consumers are not disadvantaged.
It's important to note that the fibre market is still evolving, and it's difficult to predict exactly which companies will come out on top. Smaller alternative network providers could also thrive if they are able to carve out a niche and offer differentiated services that meet the specific needs of their target customers.
In summary, the survivors in the UK fibre market will likely be those with deep pockets, established infrastructure, or those that are able to carve out a niche for themselves as demonstrated in the figure above. The market will continue to evolve, and it will be interesting to see which companies emerge as the dominant players in the coming years.
About
Intelligens Consulting are telecoms, smart city and digital transformation experts and management consultant to investors, operators and public bodies. We have worked with large and small altnet fibre operators and wireless ISPS support their growth and market expansion strategies. Please contact us on info@IntelligensConsulting.com should you wish to discuss anything discussed in this article.