Project Gigabit: The fight for the final 20
Project Gigabit, the process of awarding subsidies to cover the hardest-to-reach 10-15% of the UK with gigabit broadband, is well underway, with altnets having been awarded all of the contracts won so far, although these are only 5-10% of the prospective total.
While wholesale provision is mandatory under the contracts, logic and experience suggests that this option may prove impractical, leaving the national ISPs (such as BT, Sky and TalkTalk) at risk of losing up to 15% of the market, and consumers being denied hard-won choice.
Openreach would be well advised to build its own network in these areas using the ducts and poles of the subsidy winners (also mandated), to protect the prospects of its ISP customers and maintain consumer choice.
Related reports
BT: Strong in tough times
1 August 2023BT got its financial year off to a strong start in Q1, with Group revenue and EBITDA growth of 4%/5% both well on track to hit guidance of merely 'growth'.
Price rises across broadband, mobile and Openreach all landed well, driving strong ARPU growth of 5%/9%/10% respectively, but subscriber growth was likely weak, mainly reflecting a tough environment.
Growth is set to wane across the year as consumer price rise boosts start to re-contract out, leaving Openreach as the main growth driver for as long as the economic environment remains challenging.
Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.
Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.
The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
Altnets in the UK: Growing pains
19 July 2022UK altnet full fibre rollouts are accelerating, with an aggregate build pace close to that of Openreach, but customer acquisition is not growing at the same pace, and overbuild in the most attractive areas is becoming a significant issue.
Altnet business models remain challenging and are getting worse as Openreach builds out, and (although there are some notable exceptions) most will need to rapidly achieve scale and turn around their performance to survive.
Consolidation is very likely, along with business failures, and while some market share loss for Openreach looks likely as serious scale players emerge, the downside is limited, and even more so for retail ISPs.
Fixed wireless access: Having its moment
24 February 2023Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.
FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.
In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.
Winners and losers as the UK fibres up
28 January 2020The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term.
The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities.
The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain.
BT: Strong in tough times
1 August 2023BT got its financial year off to a strong start in Q1, with Group revenue and EBITDA growth of 4%/5% both well on track to hit guidance of merely 'growth'.
Price rises across broadband, mobile and Openreach all landed well, driving strong ARPU growth of 5%/9%/10% respectively, but subscriber growth was likely weak, mainly reflecting a tough environment.
Growth is set to wane across the year as consumer price rise boosts start to re-contract out, leaving Openreach as the main growth driver for as long as the economic environment remains challenging.
Market revenue growth surged to 2% in Q2, but entirely-and-more driven by price rises, with underlying trends negative across volumes and ARPU.
Broadband volumes in particular turned sharply negative, largely due to a post-lockdown hangover combining with weak economic conditions.
The outlook is bleak: price rise benefits are set to wane and then reverse, and weak volumes will feed through, with economic recovery needed for a return to sustainable growth.
Altnets in the UK: Growing pains
19 July 2022UK altnet full fibre rollouts are accelerating, with an aggregate build pace close to that of Openreach, but customer acquisition is not growing at the same pace, and overbuild in the most attractive areas is becoming a significant issue.
Altnet business models remain challenging and are getting worse as Openreach builds out, and (although there are some notable exceptions) most will need to rapidly achieve scale and turn around their performance to survive.
Consolidation is very likely, along with business failures, and while some market share loss for Openreach looks likely as serious scale players emerge, the downside is limited, and even more so for retail ISPs.
Fixed wireless access: Having its moment
24 February 2023Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.
FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.
In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.
Winners and losers as the UK fibres up
28 January 2020The speeds made possible by full fibre build are unnecessary for most users in the short term, giving limited commercial advantage to those that can offer them, but are likely to prove essential in the medium/long term.
The economics of full-scale, independent alternative networks look very challenging in our view – especially without the support of Sky – although there are some limited arbitrage/cherry-picking opportunities.
The Openreach full fibre model makes economic sense under Ofcom’s proposed regulatory framework, provided it retains the lion’s share of the market, although considerable risks remain.