UK wakes up to full fibre

Thursday 24 August 2017 | 15:50 CET | Background

The UK market appears to be experiencing a realisation that the ‘superfast fibre’ rolled out by BT in recent years might not be the ultimate in broadband experience. This may be about to change, as new entrants such as Gigaclear, Cityfibre and Hyperoptic are raising money for expansion and bigger players such as Virgin Media and Vodafone are embracing 'full fibre'.

To date, BT has focused on rolling out FTTC/VDSL2, offering speeds up to 76 Mbps. The result is the UK is far behind in terms of FTTP, with only around 0.5 percent of all broadband subscribers on ‘full fibre’ (FTTH/B, according to the European Commission, figures July 2016). There is so little development, the UK does not even make the OECD's statistics on fibre penetration

BT claims it is the biggest fibre provider in the UK, but at the end of June it had only around 550,000 homes passed and 100,000 customers on FTTP and its G.fast trials combined. It aims to take FTTP premises passed to over 2 million by the end of 2020, while a much larger 10 million households will get the copper upgrade G.fast

New players ready to grow

At the end of 2016, less than half (44%) of broadband subscribers in the UK had over 24 Mbps (known as ‘superfast' broadband in the UK), according to regulator Ofcom. There is clearly a market opportunity here, something new players appear ready to capitalise on. These include:

  • Gigaclear: Started in 2010 to bring fibre to rural communities in Oxfordshire, Gigaclear has benefited from state subsidies for rural broadband and now is active in 10 counties serving over 30,000 premises. In May it raised GBP 111 million in equity funding from new and existing investors for further expansion.
  • Hyperoptic: Founded in 2011, the company received early backing from a Soros investment fund. In July it raised another GBP 100 million from a group of banks. Hyperoptic provides fibre broadband in 28 towns and cities, with its network reaching 350,000 residential and business units. It plans to expand its network to 2 million homes and businesses by 2022 and 5 million by 2025.
  • Cityfibre: Whereas Gigaclear focuses on rural areas and Hyperoptic on multi-dwelling units, Cityfibre takes a wholesale approach. It partners with municipalities, businesses and ISPs to aggregate demand before rolling out its wholesale fibre network, and has also expanded through the acquisition of local fibre networks. In July it raised GBP 200 million in a private share placement to expand its footprint to 50 cities by 2020. The expansion will include a greater focus on FTTH.

In addition to the new fibre operators, the UK government has launched its own private investment fund for ‘full fibre’. The GBP 400 million provided over four years by the state should be matched by private investors to reach total investment of GBP 1 billion, the government hopes.

Big players working on plans

The market is clearly getting more interested in FTTP, with support from private and public investors, but altogether these investments will not take the UK far from its very low base. With BT still committed to copper, it will be up to other big players to take the lead.

Virgin Media has already made a modest commitment to FTTP. The cable operator said last year that "at least a quarter" of the planned 4 million homes passed it will add to its network under ‘Project Lightning’ will get FTTP. The company aims to expand its network footprint to around 60 percent of the UK from 45 percent in 2015. However, this is progressing slower than expected, with only around 800,000 new homes passed as of June, halfway through the five-year project started in 2015.

Another key player is Vodafone, which has long been rumoured to be discussing a merger with Virgin Media. However, the delays at Virgin Media may be pushing Vodafone to consider alternatives for its fixed broadband strategy. The latest reports suggest Vodafone’s attention has shifted to a possible alliance with BT’s Openreach for rolling out fibre across the country, focusing initially on big cities.

Earlier this year Openreach started consulting its wholesale customers on interest in a bigger roll-out of FTTP, and it appears Vodafone has stepped forward. Vodafone has long struggled to gain a place in the UK fixed broadband market, with only 245,000 customers at the end of June. To realise its convergence strategy there, the company needs to take a big step, and partnering with the biggest broadband provider in the country could be it. Vodafone brings is financial resources as well as its experience in cooperating on fibre roll-outs in Spain, Ireland and Portugal to the table for Openreach.

While a Vodafone-Openreach deal could be the key to breaking open the fibre market in the UK, Ofcom will likely have the final say. The regulator has secured big changes at Openreach to make the wholesale network operator fully independent from its owner BT. Agreeing to Vodafone taking the lead in fibre on its network would be a major test of just how independent BT really considers Openreach.

Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

::: add a comment