{"id":31121,"date":"2022-05-24T10:01:24","date_gmt":"2022-05-24T09:01:24","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=31121"},"modified":"2022-05-25T17:30:29","modified_gmt":"2022-05-25T16:30:29","slug":"ofcom-and-bt-reportedly-prep-contingency-plans-for-altnet-flops","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2022\/05\/ofcom-and-bt-reportedly-prep-contingency-plans-for-altnet-flops.html","title":{"rendered":"Ofcom and BT Reportedly Prep Contingency Plans for AltNet Flops UPDATE"},"content":{"rendered":"<p>A new newspaper report claims that &#8220;<em>runaway inflation<\/em>&#8221; is threatening to cause a &#8220;<em>wave of bankruptcies<\/em>&#8221; among the new generation of alternative full fibre (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/fttp\">FTTP<\/a>) broadband ISP networks, which is said to have triggered <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/ofcom\" target=\"_blank\">Ofcom<\/a> into drawing up contingency plans with <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/britishtelecom\" rel=\"nofollow\" target=\"_blank\">BT<\/a> for how to handle the fallout, should smaller players start to fail.<!--more--><\/p>\n<p>Over the past few years\u2019 we&#8217;ve seen the UK become home to a mass of new alternative network (AltNet) providers (100+), many of which are backed by many millions &#8211; and in some cases even billions &#8211; of pounds in private investment. Quite a few of these also hold major plans to expand gigabit-capable <strong>Fibre-to-the-Premises<\/strong> (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/fttp\">FTTP<\/a>) based broadband ISP networks across the country (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2020\/04\/summary-of-full-fibre-build-progress-across-uk-broadband-isps.html\"><strong>Summary of UK Full Fibre Builds<\/strong><\/a>).<\/p>\n<p>The <a href=\"http:\/\/www.inca.coop\" target=\"_blank\" rel=\"noopener noreferrer\">Independent Networks Co-operative Association<\/a> (INCA) last year forecast that such AltNets aspired to cover 29.9 million premises by the end of 2025, which in practice will result in a significant level of overbuild between some operators. As we&#8217;ve said many times before, dense urban areas may be able to sustain a level of overbuild between four or more operators, but the challenges grow as builds move into smaller towns and more rural areas.<\/p>\n<p>Suffice to say that this has long been expected to result in a wave of industry consolidation, and to some extent we&#8217;ve already seen the opening salvos of that. For example, <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/cityfibre\" target=\"_blank\">CityFibre<\/a> acquired FibreNation from <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/tt\" rel=\"nofollow\" target=\"_blank\">TalkTalk<\/a> (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2020\/01\/cityfibre-buy-fibrenation-and-set-8-million-uk-ftth-homes-goal.html\">here<\/a>), Swish Fibre gobbled up People&#8217;s Fibre (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2021\/12\/troubled-uk-fttp-isp-peoples-fibre-acquired-by-swish-fibre.html\">here<\/a>), the <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/4thutility\" rel=\"nofollow\" target=\"_blank\">4th Utility<\/a> consumed Vision Fibre Media (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2021\/03\/the-4th-utility-acquire-london-fttp-isp-vision-fibre-media.html\">here<\/a>) and <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/communityfibre\" rel=\"nofollow\" target=\"_blank\">CommunityFibre<\/a> has acquired Box Broadband (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2021\/08\/communityfibre-expands-uk-reach-with-box-broadband-gobble.html\">here<\/a>).<\/p>\n<p>Crucially, the aforementioned deals have protected existing customers from service loss, but that may not always be the case. One school of thought suggest that smaller players that suffer a significant level of overbuild may, over time, see the value of the fibre they have in the ground diminish to the point where finding a buyer becomes much harder &#8211; raising the risk of a damaging collapse (right now fibre in the ground still holds a lot of value).<\/p>\n<p>One other risk is that some networks may place an inflated value on their fibre infrastructure, which could make it similarly difficult to find a buyer or weaken the models of those who do buy. At present, this is not such an issue, but it is one of those things that we believe may grow with time and <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/ofcom\" target=\"_blank\">Ofcom<\/a> look to be taking that seriously.<\/p>\n<p>According to the <a href=\"https:\/\/www.telegraph.co.uk\/business\/2022\/05\/23\/households-brace-internet-blackout-wave-bankruptcies\/\" target=\"_blank\" rel=\"noopener\">Telegraph<\/a>&#8216;s (paywall) industry source: &#8220;<em>It seems to be a bit of a red flashing light that <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/ofcom\" target=\"_blank\">Ofcom<\/a> is thinking about it at all. It cannot be entirely sustainable when you already have big network builders<\/em>.&#8221; We&#8217;d tend to disagree with this statement, which seems like it came from a bigger player. In fact, it would be a red flashing light if Ofcom WERE NOT thinking about it, since the potential for such an outcome is quite obvious.<\/p>\n<p>The regulator already has a <strong>Supplier of Last Resort<\/strong> style process for handling such situations and keeping people connected in the event of a failure, but it&#8217;s not perfect. As such, it&#8217;s perhaps only natural that they&#8217;d be talking with <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/britishtelecom\" rel=\"nofollow\" target=\"_blank\">BT<\/a> about this, although it&#8217;s not clear whether the newspaper meant the <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/go\/britishtelecom\" rel=\"nofollow\" target=\"_blank\">BT<\/a> Group, including <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/openreach\" target=\"_blank\">Openreach<\/a> (more likely), or just the retail ISP. We&#8217;d expect Ofcom to engage with other ISPs too, but the choices may vary depending on which network areas are involved in a future collapse, should one occur.<\/p>\n<blockquote class=\"bq1\"><p><strong>An Ofcom Spokesperson said:<\/strong><\/p>\n<p>&#8220;We keep a close eye on the broadband market to make sure we know what\u2019s happening on the ground, as part of our work to support fibre investment and protect customers. Usually, when a network company fails, it\u2019s sold as a going concern and customers don\u2019t experience a loss of service.<\/p>\n<p>In the unlikely event that a network suddenly failed and ceased to provide services, we would work with alternative suppliers to help customers get reconnected as quickly as possible. This could be through <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/openreach\" target=\"_blank\">Openreach<\/a> or an alternative provider, depending on the circumstances.&#8221;<\/p><\/blockquote>\n<p>However, in the above examples, the biggest threat of collapse doesn&#8217;t necessarily stem from &#8220;<em>runaway inflation<\/em>&#8221; as much as it does an altnet that fails to both build fast enough and attract the necessary level of take-up by customers.<\/p>\n<p>Such networks often like to grow at least an average 20% take-up to satisfy their long-term payback models (these may span up to 10-20 years), which is partly why so many altnets are pricing their new <a href=\"https:\/\/www.ispreview.co.uk\/index.php\/link\/fttp\">FTTP<\/a> packages aggressively to compete &#8211; leveraging both the cost efficiencies of a new fibre network with the need to peel customers away from established ISPs. But cheaper prices do, during the rollout phase, make it harder to gain a return on your investment. Finding the right balance is never easy.<\/p>\n<p>We should point out that, outside the UK, FTTP broadband services often become incredibly cheap in more mature markets &#8211; even those with similar economies to our own &#8211; thus there would seem to be some flexibility in the system for cheaper pricing to continue. Nevertheless, it is almost certainly unrealistic to expect that all the 100+ or so altnets currently building will survive. Many will consolidate and, yes, some will simply fail.<\/p>\n<p>The consolidation that we have seen thus far has been at the smaller end of the scale and, as stated above, customers have generally been protected (it&#8217;s usually in everybody&#8217;s interest to retain them). We&#8217;d expect that gradual trend to continue for the next couple of years, but the strain may really start to show once more operators find investors becoming nervous about the results delivered after the first major phase of build has completed.<\/p>\n<p>Right now, there&#8217;s still plenty of appetite from investors to spend big on fibre, but over time they\u2019re likely to adopt more rationality and greater risk aversion. The big operators are not immune to all this, but they do have marketing, coverage and familiarity of brand on their side, which counts for a lot. But those smaller players are a big threat to them, so it\u2019s also in their interests to talk up any negatives for altnets.<\/p>\n<p>At this point we&#8217;re reminded of something that Ofcom&#8217;s former CEO, <strong>Sharon White<\/strong>, said in 2015 (<a href=\"https:\/\/www.ispreview.co.uk\/index.php\/2015\/10\/ofcom-ceo-sees-danger-in-uk-telecoms-consolidation-and-rising-prices.html\">here<\/a>): &#8220;<em>[Our] experience is that competition, not consolidation, drives investment and delivers low prices<\/em>.&#8221;<\/p>\n<p><strong>UPDATE 5:29pm<\/strong><\/p>\n<p>We&#8217;ve had a comment from Giganet, which is an altnet itself.<\/p>\n<blockquote class=\"bq1\"><p><strong>Jarlath Finnegan, CEO of Network Builder and ISP Giganet, said:<\/strong><\/p>\n<p>&#8220;After decades of under investment, shoddy customer service, and lack of competition, the recent acceleration in full fibre infrastructure investment by alternative networks (alnets) has given the UK telecoms &amp; connectivity market a welcome shake \u2013 which is great news for consumers.<\/p>\n<p>There will always be winners and losers, but in the main these investments are built on sound principals. The regulator must ensure the market continues to support a more diverse and competitive sector which drives up standards and benefits the consumer.<\/p>\n<p>Without the alnets\u2019 significant investment, the future-proofing of the nation\u2019s coast-to coast digital infrastructure will suffer.<\/p>\n<p>At Giganet service comes first, and we believe our ethos, grounded in honesty and simplicity, will bring a new dynamic to the market that consumers have been denied for too long. As customers grapple with inflation and rising living costs, our flexible contracts, and our promise to abolish exit fees and mid-contract price rises, resonates.<\/p>\n<p>We are delivering on our plan and have full confidence in our business and our ambitions for the future.&#8221;<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>A new newspaper report claims that &#8220;runaway inflation&#8221; is threatening to cause a &#8220;wave of bankruptcies&#8221; among the new generation of alternative full fibre (FTTP) broadband ISP networks, which is said to have triggered Ofcom into drawing up contingency plans with BT for how to handle the fallout, should smaller players start to fail.<\/p>\n","protected":false},"author":1,"featured_media":29729,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[474,56,36],"class_list":["post-31121","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uk_isp_news","tag-bt","tag-fttp","tag-ofcom-regulation"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.5 - 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