O2 UK Confirms Plan to Re-enter Fixed Line Broadband Market

Mobile operator O2 (Telefonica UK) has confirmed earlier reports that it intends to return to the fixed line broadband market. The move could result in the provider either moving to build their own “full fibre” (FTTP) style network or partnering with another ISP (e.g. Virgin Media, Cityfibre).

Just to recap. O2’s original foray into the United Kingdom’s fixed line broadband market began some years ago with the acquisition of ISP BE Unlimited (aka – BE Broadband), which at the time ran a quite highly rated and fully unbundled (LLU) ADSL2+ based copper line network.

As time went on BE’s edge was slowly eroded by rival LLU providers, such as TalkTalk and Sky Broadband, which quickly sprang up to challenge them until they were eventually gobbled up by O2. Funnily enough BE’s original founders went on to create one of the country’s first true “full fibre” (FTTP/B) providers, Hyperoptic, but that’s another story.

Under O2 the network initially retained its reputation and for awhile continued to grow, although this slowly went into reverse following a series of price hikes, congestion problems, the disconnection of heavy users and their inability to launch any packages based off Openreach’s Fibre-to-the-Cabinet (FTTC / VDSL2) network.

Suffice to say that few were surprised when, in 2013, O2 finally took the decision to re-focus upon the roll-out of their 4G mobile network and sold their fixed line base on to Sky for a consideration of £180m (here). On the one hand this made sense, although it also occurred at a time when their rivals were just starting to focus on bundling and so may have left them at a disadvantage.

O2’s Plan for UK Fixed Lines

Back in April 2019 we started hearing reports that O2 might be returning to the UK’s fixed line market and mounting a challenge to BT. The suggestion was that Telefonica were considering several options, such as leasing bandwidth wholesale from BT / Openreach or Virgin Media (Virgin doesn’t do this yet but their parent is reviewing the idea of going open access or building an alternative network – here), building a new network or acquiring an established ISP.

The CEO of Telefonica UK, Mark Evans, has now confirmed to the FT (paywall) that [O2] are indeed looking at options to invest in new fibre lines. “Ultimately, there will be one type of network – a fibre backbone with a wireless tail,” he said. This makes us think that O2 might be more focused on going down the Dark Fibre route (i.e. using fibre to support 5G services), as opposed to the fixed line consumer broadband market.

Building a new fixed line network from scratch, in a market where a lot of alternative network (AltNet) providers are already doing battle against the big boys, seems likely to be too great of a risk for a company with O2’s flaky history in this field. As such we suspect they’ll opt for one or both of the other two aforementioned options.

In any case a decision on the approach they intend to take is expected to be taken by the end of 2019.