Investors Share Views on UK’s Difficult Alternative Broadband Market
A new newspaper report has revealed what digital infrastructure investors think of the UK’s current market for alternative broadband networks (altnets). Suffice to say that, after a difficult couple of years, there still seems to be a fair mix of both strong pessimism and optimism for 2025, which perhaps reflects the different states of the market’s many providers.
ISPreview’s regular readers will already be familiar with the many challenges being experienced by network operators over the past couple of years. The current situation has been fuelled by rising build costs, fierce competition from rivals (i.e. overbuild and the challenges of growing take-up), the problem of growing brand familiarity and the difficulties of securing fresh investment during a period of high interest rates (inc. the rising cost of debt repayments).
In response, we’ve seen many network operators adopt a more protectionist strategy, which often involves scaling-back (or even halting) their deployments of new full fibre (FTTP) gigabit broadband networks and switching their focus to growing customer take-up (i.e. commercialisation).
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At the same time, some other network operators and investment firms have gone on a consolidation drive in an effort to capitalise on the difficult climate. But we didn’t see as much consolidation occurring during 2024 as many expected (this is partly suspected to be due to disagreements over valuations) and it remains to be seen whether that changes in 2025. For some, an inability to consolidate could mean a greater risk of failure, which might cause even bigger losses further down the road if their assets get hoovered up on the cheap (i.e. during administration).
Back in October 2024 Enders Analysis published a report that calculated how the 20 largest altnets had collectively suffered losses of around £1.304bn in 2023 (increased from £755m in 2022), while also suggesting that most altnets were now heading for under 20% take-up within 5 years of build completion, “even at maturity“ (here). But Enders also estimated that altnets needed a 40% take-up rate to deliver a reasonable return, which in reality will vary dramatically between operators as the cost to build and maintain such networks varies significantly (some could get a reasonable return with sub-20% and others will need more). Location is also a factor (rural vs urban).
What do investors think?
One thing missing from our above analysis is what the infrastructure investors themselves think of today’s market and its prospects for 2025, which is particularly relevant since these are the very people and organisations who will ultimately decide the fate of many altnets. Thankfully, the FT (paywall) has published an article that includes a mix of feedback from various investors, which we’ve summarised and paraphrased below.
However, we do have to sound a note of caution on the below remarks, as investors will always be speaking from a position of their own vested interests and that will be coloured by where they currently have their money. For example, investors with a strong altnet position won’t want to talk the market down too much, unless they’re planning to drive some consolidation themselves. So keep that in mind for context.
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Summary of Thoughts from Altnet Investors
➤ Vicente Vento, CEO of investment management firm DTCP (they back CommunityFibre in London), warned that banks had in recent years financed some projects that, in hindsight, they probably should not have done.
➤ Ben Terry of Amber Infrastructure (they back toob, CommunityFibre etc.) expects altnets to continue their focus on commercialisation instead of new infrastructure build in 2025 so as to demonstrate a clear trajectory toward profitability and self-funding. Ben added that consolidation was still firmly on investors’ agendas and “many discussions are underway“, albeit with sticking points like valuations tending to slow that process.
➤ Max Gilbert, MD of investment bank Houlihan Lokey (they’ve advised on deals, like the one between CityFibre and Lit Fibre), does not expect investor sensitment to materially improve during 2025. But he was cautiously optimistic after the sector had gone through somewhat of a “reset period” and a good number of altnets were now expected to be break-even, in terms of ebitda, during the next year or so.
➤ Cesar Bravo of Hamburg Commercial Bank (altnet investor) said they’d taken a step back from the market, but were now looking at potential deals and increasingly baking key performance indicators into covenants from the beginning. The bank still sees the sector as having strong fundamentals and businesses that make for attractive investment opportunities.
➤ An anonymous senior investor at a asset manager that specialises in digital infrastructure warned that a “large chunk” of altnets are uneconomic (mostly due to limited take-up) and is predicting a lot of failures, with lenders sitting on a big pile of material losses and trying to avoid write-downs.
➤ A second anonymous industry investor felt the challenges of what altnets were trying to do had been underestimated during the “gold rush” period and that some may go bankrupt, with assets being sold off for a lower price than they cost to build. But they also said that the characteristics that attracted them to the market in the first place still remain (i.e. the networks are expensive build, but they’re cheaper to run).
➤ A third anonymous executive at a digital infrastructure investor said they had declined ten different proposals to invest in UK altnets over the past 3 years, usually because the there were risks in the altnets assumptions on pricing, profitability and competition (e.g. one altnet it saw had been valued at half the amount of invested capital). The executive felt more consolidation was inevitable.
The comments above, which are quite varied but do seem to agree on some shared points of view, broadly reflect our own impression of today’s market. But it shouldn’t be forgotten that, for altnets, there are still signs of optimism, at least for those operators that are in the best position right now to capitalise on it.
For example, Ofcom’s new One Touch Switching (OTS) system, despite its challenges, is making it easier for consumers to change broadband ISP, particularly between those on physically separate networks (doing this was much more tedious before). The dominant market player, Openreach (BT), is also continuing to lose a sizeable number of broadband lines each year to rivals (line losses in H1 were 377k, a 2% decline in their broadband base).
On top of that, we’ve been seeing a rise in the number of debt raises by altnets over the past year. In addition, there are signs that we could see greater infrastructure sharing occurring between networks in the future, which if done well could reduce deployment costs and increase coverage. Some of this may come via INCA’s efforts to encourage it (here) and possibly also Ofcom’s new Telecoms Access Review (TAR). But it’s still a bit uncertain, due to the difficulty of bringing so many competing interests together.
Finally, it’s important to remember that not all network operators have felt forced to slow their pace of build to focus more on commercialisation. Some operators have felt confident enough to keep building at the same or even greater scale than they were before the current climate established itself, such as Openreach, Netomnia (inc. Brsk), Nexfibre (Virgin Media) and a few others.
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The future direction of the market is thus far from being set in stone, and there are plenty of big developments expected during 2025. Not forgetting Virgin Media’s move to open up their existing network to wholesale. The next 12 months are thus sure to be eventful.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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Poor business plans are at fault here and, more importantly, investors understanding (and the due diligence) of any business plan e.g. potential of market share and competitor analysis
See https://www.thescte.eu/resources/downloads/editorial-broadband-journal/december-2024/1884-those-that-fail-to-learn-from-history-are-doomed-to-repeat-it-by-first-mile-networks
Just what are the benefits of FTTP? For me it was an alternative to an unstable openreach line, that they assured me was okay. I haven’t looked back since switching, but if my connection were more stable I don’t think I would have bothered. It’s also interesting that I had to explain to my adult children how my connection was different. Perhaps a killer app (4k or 8k tv?) would excite the public’s interest and this technology would become better understood and more popular.
Indeed, ultrafast speed is not of interest to most people. There are two main business cases for Altnets.
One is to undercut at retail, by cherry-picking the cheapest-to-build areas. Openreach are unable to respond in kind, because their wholesale pricing is regulated. The idea is if you can sell for a couple of quid cheaper per month, you’ll get a reasonable takeup of people who don’t care who their broadband supplier is. Cityfibre is a good example of this (via retail partners like Vodafone). The risk is that over time Ofcom will allow Openreach to reduce their prices.
The other is to deliver an alternative where the existing copper network performs poorly, primarily rural: this is the model of Gigaclear. The builds in these areas are expensive but the existing service is rubbish, so there is high demand and you can charge a premium – or in the case of B4RN, the build costs are offset by volunteer participation. This is risky because Openreach could come along at any time and upgrade their own network in response.
For Openreach, the business case for FTTP is about remaining a nationwide player and not drifting into irrelevance with its dinosaur copper network. There is a much stronger push for this in areas where there is altnet competition, than where there is none.
It is supposed to be more reliable and maybe on a national scale it is, but apart from a problem I had with FTTC in which only my Huawei modem would connect, I had no real problems. But I did start to get some slower speeds just before my last contract was up. I still think it was a way to try to get me to change to FTTP.
I was fine, 36Mb/s, over 9 years apart from the issues above, it was great, I only moved because plusnet wanted to push me to FTTP and stick a 24-month contract onto me. An altnet offered me 500Mb/s for £24 a month on a 12-month contract. I thought, if I have to move to FTTP, then I may as well go to a network that is better than Openenreach and also gets me away from Openreach again.
Apart from the small problem they had when someone dug though the main fibre, which affected other providers as well, it has been rock steady with my router anyway.
I was in no hurry to move.
@NE555, I agree with you, but Openreach is a dinosaur with their FTTP network compared to some Alt networks. I can get if I want to 2Gb/s both ways, something people on Openreach network can’t. Not saying it is useful to most people but having the same speed up and down I am finding useful at the moment, if I send some files to my partner’s NAS, it is very quick 🙂
I have 500Mb/s and so does she.
For me? Faster speeds and to a lesser degree better reliability, but mainly the speeds.
The problem with speed though is that you have two factors:
1) the LAN/device speed, especially with wifi
2) Actual need
One reason we moved back in the day from adsl to vdsl was because when both myself and my parents were streaming we’d have buffering issues.
These days, probably gaming is the best pracrical need most people will have for faster speeds, it’s nice to be able to download games and maybe updates relatively quickly.
Of course there are other things e.g. OS updates, but this may be done in the background so may not be as obvious.
Better performance, better reliability, better energy efficiency (for operators). If it wasn’t for an altnet I’d still be struggling on a creaky 30Mbps connection; some people might be satisfied with that but for the rest it just isn’t good enough.
@tech3475, you say about changing from ADSL to VDSL because of streaming. Most people were lucky to get 5Mb/s with ADSL unless they were living on top of the exchange, I had 3 if I was lucky, depending on which way the wind was blowing 🙂 That is why when I had a chance to try a wireless network that could give me 10Mb/s I jumped at the chance. Sadly they were not able to cope with the amount of customers they had, but I give the company credit for trying to do something, after all they are a local payment company not a broadband provider.
But you can’t really compare going from ADSL to VDSL with going from VDSL to FTTP. With VDSL the majority of people can do what they need to do, stream video, even 4k, would never do that with ADSL, even HD for most was difficult. Yeah, a faster FTTP speed will allow you to download things faster, but in this day and age, apart from games, what do the average person download? Somone said they download movies, where are they stored and what services do movie download these days?
I know I am going to get blasted for this, but you stick the averge small family in a house and switched between FTTC maybe around 40Mb/s and FTTP 150Mb/s every orther day, I doubt they would notice, unless they download a load of games everyday.
The problem these days, people want it now, at this, yesterday even. Heavan knows how some of them would manage if they had to go out to a video rental shop, rent a VHS tape and stick it in their video deck or load a game from cassatte into their computer.
Yeah, yeah, I know, times change, technology gets better, but sometimes i wonder if it makes better people.
People are getting lazy and impatient. yeah, I will be balsted for that as well. I don’t care
@Ad47uk
First of all, at the time I had ~16mbps despite and the only reason I bought this up was because it was an example of being effectively ‘forced to upgrade’ as opposed to Neil who had to explain what the potential benefits were when they upgraded to FTTP.
As for downloading things faster….what’s the actual problem with that? If I come home from a late shift and fancy playing a quick game and it has a large update (which these days can be tens to over a hundred gigabytes), yes I don’t want to waste what little play time I have waiting for a download. Possibly made worse if you want to play with friends/family online which may be time sensitive.
I also mentioned software downloads e.g. OS updates, which depending on context is something that again might be nice to have downloaded sooner rather than later e.g. it’s late, I have work the next day and I’m at my parents updating their stuff.
There’s also upload speeds, I want a higher upload speed because I do relatively large uploads and the longer these take the more problems it can cause e.g. I want to take the NAS offline for maintenance (which happened the other day) or in absolute worst case scenario I can’t ask a house fire to wait a little longer while the backup completes.
Your comparisons to rental shops is also flawed because, guess what, back in the day my family rarely used them because they were an inconvenience as our nearest was a good distance away and games didn’t have the afformentioned updates which again could really suck on slower connections.
However, I’ll give you this, different people have different needs and wants.
I know someone who would probably benefit from FTTP at FTTC speeds purely because they have reliability issues with FTTC.
But who am I kidding, I’m sure you’ll be spouting the same closed minded ignorance the next time the discussion of speed comes up because heaven forbid someone doesn’t have the same usage pattern as you.
I wouldn’t be surprised if it was the 90s/early 00s you’d be saying no one needs broadband and dial up is good enough.
/blasting Ad47uk….again.
Are you serisouly asking what are the benefits of FTTP? Really? In 2025?
How about securing a network technology that is so efficient now and cost-efficient when upgrades are needed tomorrow?
Openreach is already showing it, for a set physical network implementation, they can easily increase speeds or offer symetrical speeds with little to no physical upgrade required.
Put simply, fibre is your 21st century broadband.
The whole setup re FTTP is flawed. Yes, have private investment to put in the infrastructure, but no to over installation. One fibre for each property to a defined standard with any isp allowed access. Once that is completed, then yes allow a second fibre.
We now have fibre providers providing empty promises.
Finally, and most damming, the UK could have fibre over twenty years ago, instead a painful journey from dialup, isdn, adsl, vdsl and g-fast.
This is why we should have had dark fibre laid years ago, owned by the government, or a non-profit-making company, even so non-profit-making companies can be full of people wanting to get what they can out of it.
Then ISP could then use that network, like they do with Openreach now, but no shareholders to pay out for and anything money made go back into updating the network or repairs .
@Ad47uk: The idea that the government would be forward thinking and have ownership of a network operator which widely installed dark fibre would never have happened. Few people remember how it all owned by the GPO and that BT was only fully fully privatised in 1993. Very few know about how the Campaign for Unmetered Telecommunications (CUT) was resisted by both BT and its supposed regulator OFTEL with ludicrous claims that the network would be overloaded or even damaged by switching from dial-up to unmetered flat-rate calling for local and even long-distance calls as was prevalent in US and Canada.
However, under pressure BT eventually relented and began to provide unmetered Internet access at weekends in 1999. Then at about the same time some cablecos including NTL and Telewest began to provide broadband using their networks – and it was unmetered. This stung BT into rolling out ASDSL to counter this competition.
So, what we have is unmetered broadband which everyone takes for granted and it was CUT with competition backed by private capital which has driven it. We really don’t need the dead hand of government in this industry again.
By 1999 BT had spent millions installing a new layer of switching in the telephone network – the Wide Area Tandems (WATs) – to allow for unmetered usage. The telephone network wasn’t designed for lots of people to make long calls at the same time and the grade of service (GoS) was being very much affected by Internet usage.
BT and others spent a lot of money because the network was being congested by Internet usage and people making ‘normal’ calls were finding that calls were failing.
ADSL was nothing to do with any campaign group – it was the logical step to take to overcome a growing congestion problem that was going to continue to worsen as Internet usage grew. There was never any plan to limit or meter xDSL usage because usage did not directly impact the cost of network operation, unlike Internet over PSTN where it very much did.
None of this is a surprise. And for areas with 3 FTTP suppliers available at least 1 can expect to get less than 33% take up.
Indeed, for 3 FTTP networks to be viable I would have thought you would pretty have to have an even split which is unlikely to be the case. My street has Openreach and All Points, the streets to either side of me also have F&W (Hey! Broadband) and VMO2 have been surveying the estate (they have already built a fair amount). Openreach got in more than 2 years before anyone else and already have a 50% + take up.
I ways thought it was weird that youfibre moved into my brothers area, which already had BT and VM, on the surface I’d have thought aiming for a BT only/non-fibre area would make more sense.
That said, I’d welcome a third network in my area. Main reason I’m considering a deal with the devil…I mean VM is because I want faster upload speeds.
Hmm, has antone done a sanity check accross the user base numbers and all providers claims?
Businesses apart the UK consists of <30 million households (28.4 in 2023, ONS) (and therer will be many sole/small/home/contractor Biz's in there) And from other news OR already has 17.4 ~60% of them,
So appart from wasteful dupli/tripli installations of which I double many will take more than 1, that only leaves 13M for everyone else other than OR, and that assumes 100% coverage all that 'difficult' to reach housholds, farms etc..
Seems totaly unfair that a lot of these will go to OR, perhaps they should be split up accross all Altnets to provide a fair distribution of connectivity pain & proffit, not just allow population dense 'easy' pickings.
But het ho, as has been said 1 decent fibre to each property is all teh country needs for zero wasted effort/cost/tax burden would even reduce investor lotter/manipulation and provider 'consolidation' / bankruptcy (which ultimately ends up being paid for by who..)?
The cable TV franchises were as you described. They all had government granted regional monopolies and wide latitude as to the areas they’d chosen to cover. BT was banned from competing fairly, nor could they provide similar services in non-cabled areas. It was still not a financial success and that was with the “benefit” of being able to use the generous US bankruptcy laws to shed debt.
Unclear if you meant that OR should be prevented from building in favour of allowing an altnet to hold the monopoly, but if you did then I’d say that’s an utterly ludicrous suggestion
@Ivor,
Nope, No No no, I did not mean that OR should be prevented at all (it is highly uncompettitive to prevent them). I meant that they should not be penalised any more, or less than anyone else – it should be a level playing field. To coin modern management spin, should simply be the ‘best athlete’ for the area.
Given contractor downselection practice, I’m surprised any contractor can be rulled out on whim, the downselection of bidders should be auditable, scutinised for fairness on selection, particulalry if from ‘Government’.
{y has been said many times before. There are to many players in a very overcrowded market, At present the alt nets attract funding on growing sales figures, Figures they are unlikely to achieve
I suspect it will go a similar way to what happened with Cable TV the Alt nets will be taken over or fold and we will be left with two or three big players
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