POSTED ON 29 MAR 2023
READING TIME: 6 MINUTES
The emergence of new alternative network providers (Altnets) helped drive the UK’s gigabit revolution, but a period of consolidation is now on the way, according to an Internet Services Providers' Association (ISPA) report.
The report interviewed leading investors to assess what’s next for Alnets and gigabit broadband investment in the UK. ISPA is the UK's trade association for providers of internet services, which promotes collaboration and dialogue between its members and the wider internet community.
Altnets are playing a key role in the transformation of the UK’s broadband infrastructure through the delivery of gigabit broadband capabilities, building on the strong foundations laid by Openreach and Virgin Media O2. These independent networks contributed to the diversity of supply, with national networks building wholesale services for internet service providers (ISPs) to sell to consumers and businesses.
The UK now has 39% full fibre and 70% gigabit-capable broadband coverage. In September 2021, just 46% of premises had a gigabit-broadband connection available.
Over the past decade, investors gave scores of Altnets billions of pounds to establish new infrastructure - often in underserved locations. This included urban operators serving high-density areas and multi-dwelling units, rural operators focused on hard-to-serve areas, providers focused on specific regions and those providing competition in towns and cities.
The report says new Altnets are not expected to enter a market that’s now reached saturation point. Investors agree that the number of companies building networks is unsustainable, so there’ll be a ‘land grab’ as bigger and better operators merge with others. Investors will consider which network providers have the potential to be Openreach’s closest competitors.
“There’s already evidence that consolidation is happening in the market,” says Niall Halpenny, Director of Telecoms, Sonalake. “UK fibre sector investor Fern Trading recently combined AllPoints Fibre, Giganet, Jurassic Fibre, and Swish Fibre into one consolidated national fibre challenger. Trolli is another Altnet that is up for sale and reportedly attracting interest from Virgin Media O2 and Zzoomm.”
One of the challenges of consolidation is the complexities and costs involved in integrating systems, data and IT infrastructure. SwitchedOn Fibre™ is our modular Business Support System (BSS) software suite that automates the lead-to-cash journey across wholesale, retail and enterprise services. It facilitates consolidation by making it easy to integrate between different providers, networks or systems.
“Our BSS suite is a standard space product that adheres very closely to TM Forum standards, which help to break down technology barriers between digital service providers, technology suppliers and systems integrators. As the TM Forum standards evolve, we evolve with them to ensure you are compatible with the market over time. This reduces the friction when bringing two organisations together.”
The report found that investors want operations that can scale up quickly. Investors may have previously prioritised the number of premises passed, but now they are more interested in actual connections, ARPU, the cost of serving new customers and the speed of integrating newly consolidated assets. Niall says that SwitchedOn Fibre™ is specifically designed to improve scalability.
“SwitchedOn Fibre™ helps you to scale your business through automation. It automates the process but also provides visibility, transparency and the data insights you need to see what’s happening with your business. You can see where you are and aren’t delivering, anticipate demand, troubleshoot issues, and identify trends or even trends within trends.”
All the investors interviewed by ISPA agreed that consolidation would lead to a greater emphasis on wholesale in the future.
“There’s a strong correlation between growth via consolidation and wholesale unless you're already a large retailer who wants to buy more customers. If you're a network operator, consolidation and wholesale go hand in hand. As you buy more networks, it’s a challenge and major investment to develop a strong retail brand.
“It’s a lower risk and cost to open your network to wholesale and let others such as Vodafone or Sky do the selling. Our BSS suite can be configured for wholesale, retail and enterprise services, and this offers business model evolution for the Altnet as it navigates through these choices.”
The large-scale deployment of fibre in the UK coincided with the global pandemic, a shift to working from home and a growing demand for online streaming, gaming and video calls. While existing FTTC solutions could once meet consumer needs, there’ll be an increased demand for data in the coming years.
Consumers now have more choices than ever when it comes to FTTP services. The introduction of One Touch Switching (OTS) in 2023 will allow seamless switching between providers. That’s expected to lead to more switching to fibre networks, more wholesale and the eventual demise of the copper network.
“OTS should lead to a quicker migration to fibre networks, provided a fibre offering is properly priced,” adds Niall. “As newer operators with the best quality networks grow, this should lead to more consolidation. OTS should favour better quality networks so Altnets should embrace it.”However, Altnets must also update IT systems and processes to connect with the new OTS Hub, which requires OTS readiness assessments and solutions. Sonalake’s pivOTS™ solution suite provides a practical toolkit for providers to fulfil their OTS obligations while reducing the need to modify their existing backend processes and systems. Not only does
For now, FTTP’s reliability and performance provide a competitive advantage but investors believe that value add is the best way to compete in the future. The report suggests Altnets will need to review their offering as the market matures.
Providers looking for new investment face a different climate from the one in which they initially secured funding. To secure long-term funding, Altnets must differentiate themselves from the competition and gigabit speeds will not be enough.
“Now that fibre is no longer a differentiator, your services will be key. SwitchedOn Fibre™’s automated system with advanced data analytics helps you achieve greater efficiency and customer satisfaction. It provides better customer service, predicts infrastructure requirements as you expand, and anticipates the staffing levels you need to meet customer demands.”
The report says investors will focus on customer stickiness and satisfaction, proof of network asset performance and profitability. It added that average revenue per user (ARPU) will be an essential metric for providers looking to secure funding.
The report concludes that Altnets face major challenges like the cost-of-living crisis, supply chain pressures and consolidation. However, with the rollout of OTS and BT’s switching off the Public Switched Telephone Network (PSTN) in 2025, it says there are still huge investment opportunities in the broadband sector.
If you like to learn more about our SwitchedOn Fibre™ platform, schedule a demo today.