Fibre-optic connections in the UK grew by 4.3mln over the last 12 months with 12.4mln premises, or well over half of the government’s total target of 22mln by 2025, now able to connect to faster internet speeds.
“The roll-out of full-fibre technology continues at record pace,” telecoms regulator Ofcom said.
The government has set a target of 85% of homes by 2025 and 100% by 2030.
BT’s Openreach and Virgin Media O2 are the two big hitters putting the fibre-optic cable in the ground.
Openreach said in April its “ultra-fast, ultra-reliable full-fibre broadband” can reach more than 7mln homes, making it the largest provider by some way, and plans to reach 25mln homes by the end of 2026.
Virgin Media O2 aims to reach 15.5mln homes by 2028 with its fibre-copper hybrid wiring.
Of course, one area can have multiple fibre optic options, with the less established providers known as ‘altnets.’
Altnets don’t sell the broadband directly to the consumer like BT or Virgin Media, but instead sell to the likes of Plusnet and TalkTalk, who then package the service to consumers.
The need for altnets was borne out of BT’s reluctance in the early years of fibre-broadband to upgrade its copper wiring, leaving households frustrated with slow internet speeds.
This created an opportunity for the smaller companies to swoop in and snatch customers.
Hypernopitic, CommunityFibre and Gigaclear make up some of the roughly 100 businesses in the space.
However, industry experts suggest that the game is tough, and many of them would need a share of 40% of the households in the areas they cover to remain viable.
Ollie Perry, a partner at consulting firm Oliver Wyman said in the FT, “If I’m the CEO of the company that’s the sixth overbuilder, I don’t think I’d be in the job very long.”
“There is absolutely room for different operators — there isn’t room for several operators connecting to the same building.”
“If you add up all of the activity — all of the planned activity — not many of these companies will make enough money to survive. It’s just not possible,” said Philip Jansen, chief executive of BT said in the FT.
One company which might break the duopoly, however, is CityFibre (AIM:CFHL).
CityFibre was formed in 2011 and is the largest independent, wholesale-only fibre operator, with its internet reaching 2mln homes.
This is a quarter of the way to its target of 8mln homes by 2025.
While many of the altnets may fail to the wayside, CityFibre boss Greg Mesch is confident there will be a third national network to break the duopoly.
“When you have a duopoly they stop investing. When you have a challenger there are two things they must do to survive: they must have a better product and they must have better economics,” said in the FT.
Openreach and Virgin Media O2 have the spending power and infrastructure to ensure they can service most areas.
However, given the growing demand for fibre-optic broadband as well as a need for a wider array of package providers to meet all consumer price points, space may be there for an altnet to join the sector leaders.