When it comes to the UK fiber optic market, the term ‘integration’ seems unavoidable, but there has been little progress in this area over the past year. The market is still fragmented, Openreach continues to lose customers, and emerging alternative network operators (altnets) are starting to face funding shortages.
Openreach lost 450000 broadband lines in the six months ending in March, and according to Light Reading’s report in November, it has since lost another 411000 connections.
Nevertheless, Alison Kirkby, CEO of British Telecom (BT), firmly believes that the ongoing construction boom will ultimately give the company an advantage over emerging operators. She claimed on BT’s latest earnings conference call that the network construction volume of emerging operators has decreased by 40% year-on-year.
In terms of user adoption rate, this dominant operator also has an advantage over emerging operators. As of the latest statistics, its adoption rate is about 38%, while as of April, the average adoption rate of emerging operators was 16.4%. Openreach has the largest fiber optic coverage in the UK, reaching 20.3 million properties at the end of last quarter.
Another veteran operator, VMO2 (a joint venture between Liberty Global and Telefónica), also hopes to participate in the imminent wave of integration. This year, the company’s ambitions in the fiber optic field have suffered setbacks. The original plan was to spin off and sell its network company (NetCo), but it was put on hold due to a sudden management change at Telefónica.
In September, VMO2 finally launched a new internal fixed line wholesale department, providing access to its fiber optic network. The company stated that its goal is to become an alternative to Openreach, supported by a “newly developed digital first system”. VMO2 is facing some similar issues as Openreach, with the number of fixed customers declining for three consecutive quarters. Combined with its joint venture Nexfiber with Liberty Global, Telef ó nica, and infrastructure investment fund InfraVia, its total network coverage reached 8 million locations in the latest statistics. Nexfiber is building fiber optic networks, with VMO2 as its main customer, providing wholesale and open access networks as an alternative to Openreach.
However, nexFibre has slowed down its network construction pace, attributed by an analyst to difficulties in investment returns and the prospect of potentially acquiring emerging operators at lower costs in the future.
The dilemma of emerging operators
If the situation of established operators looks bad, then the days of emerging operators are also not easy, with signs that funds are drying up. According to reports, some banks have started to reduce loans, and other media reports suggest that many banks may lose millions due to bad loans from emerging operators.
A notable exception is the biggest challenger, CityFibre. In July of this year, it successfully secured £2.3 billion in financing aimed at more fiber optic construction and potential acquisitions. Regarding the acquisition, there are rumors that both CityFibre and VMO2 have become potential buyers for the second largest emerging operator Netonia.
Although there seem to be companies in the UK that want to build residential fiber optic networks, Neos Networks, which focuses on enterprise customer solutions, warns that fiber optic may become a bottleneck for the country to achieve its AI ambitions.
From an environmental perspective, there is also a glimmer of hope for the UK fiber optic market. At the beginning of this year, the Fiber to the Home (FTTH) Council stated that out of the 28 countries tracked (EU+UK), only 11 leading operators have adopted copper retirement strategies – and BT is one of them.
