UK FTTH roll-out Slowdown:

ALTNET CONSOLIDATION, FINANCIAL UNCERTAINTY, LACK OF DEPLOYMENT RESOURCES, INCREASING DEPLOYMENT COSTS, OR ALL OF THE ABOVE?

For the last 5+ years the story has been the emergent alt-nets and another industry gold-rush akin to the CATV build out days. A plethora of communications service providers (CSPs) have appeared, designing and building FttP networks the length and breadth of the UK, aiming to disrupt the status quo of the big 2 with their vibrant branding, hoping to attract subscribers to ‘real’ full fibre broadband. Private and Public funding has been plentiful and relatively easy to come by, but with the volume of competitors, have build programmes been slower and take-up lower than expected?  

Several reports are predicting 2023 to be the start of consolidation, and indeed, we have already seen the first signs of it in the UK alt-net space. Alt-nets and their investor backers will be deciding whether to be the consolidator, the consolidated or stay strong and independent. 

From national fixed and mobile operators to regional CSPs, consolidation could potentially be seen across the entire telecommunications industry. The importance of factors such as infrastructure quality and technical synergies (architecture, OSS/BSS) has increased significantly when it comes to evaluating potential acquisitions, now being considered equally alongside subscriber numbers, take-up rates, wholesale capability and brand strength. Investors will be analysing all elements to gauge the short- and long-term commercial benefits of merging their existing alt-net investments or bringing another into their investment portfolio. 

Talk of consolidation has been front and centre at recent industry conferences. But are these activities the main cause for the recent slowdown of aggressive network build strategies seen over the last few years?  

One possibly more influential reason for the shift appears to be a new focus on generating higher take up rates. Only 18-months ago, Private Equity was talking about FttP being a long-term utility infrastructure play. Now, with interest rates and inflation at their highest for generations, the cost of borrowing/debt has been significantly increased. Investors are seemingly placing more emphasis on subscriber take-up to validate business models before releasing further funding.  The gun seems to have fired on the “subscriber race”, however, slowing down build activity in such a competitive market could prove a risky strategy. 

Investors or alt-nets looking to expand reach without committing to new build will explore M&A activities but converting THP to paying customers is crucial.   

Market share for the alt-nets can be highly localised and difficult when competing against household CSP names. A strong brand with good marketing will help newer alt-nets attract local subscribers and compete at the regional level against the national players but only if they can follow up the ‘new kid on the block’ marketing excitement with a network that is ready for service, quickly - lengthy design and deployment programmes will impact take-up rate; network unreliability and unresponsive customer support will encourage churn.

Once addressed and subscriber numbers on the up, attention will need to turn once again to networks needing to be designed and built.  And whilst some consolidation will have occurred meaning less competition; with 53% of UK households still lacking full-fibre FttP, the ever-decreasing circles of towns and villages without fibre means the race to plan, design and build as quickly as possible will soon resume. 

Supply chain challenges as a consequence of the pandemic are still prevalent and whilst associated material cost rises are unlikely to drop any time soon, availability issues thankfully seem to be easing.  Skilled resources, however, are still in short supply and salaries are still rising - the labour challenges are well reported with various initiatives in flight, but will they deliver the new crop of fibre engineers in time?  There is also the ‘race for duct space’ with many players vying for the same PIA real estate, so there could be a significant benefit to the alt-net who does not take their foot off the gas and who is not afraid to rethink their approach to planning, design, and engineering to get ahead of the rest.

 Since its inception in 2011, and with great success on 4 continents, Biarri Networks has challenged the ‘traditional’ planning and design approach. Our customers have welcomed the 10-30% reduction in network build costs, a ~25% quicker time to build, and the subsequent lower operational costs that are the typical outcomes from our automated and algorithmic-based approach allowing our customers to monetise their assets earlier.   

There are environmental benefits of our optimised network designs too (fewer components, less materials, reduced dig), and by utilising a fully digital process, Biarri enables the design, engineering and construction lifecycle to run its course without a single piece of paper being printed all going to support operator’s sustainability goals by minimising Scope 3 emissions which typically account for 70% of an operator’s total carbon footprint.  

Spending less on building a network, building it quicker, reducing the cost to support and maintain should bring more profitability and/or free up funds that could be repurposed for enhanced customer take-up campaigns and/or M&A activities. Biarri Networks now has a dedicated team in the UK & EMEA.  If you would like to explore how partnering with Biarri could support your FttP planning and design ambitions, help you to turn on customers quicker, and meet sustainability targets sooner, please reach out to us.