CityFibre puts forward the case against telecoms consolidation

Whenever CityFibre CEO Greg Mesch takes the stage at an industry conference you can expect a combative presentation and once again he delivered.

There was of course the customary pop at Openreach and the odd moan about the way fibre is advertised, but the crux of the talk at Connected Britain this morning focused on competition. No-one in the industry is brave enough to suggest competition is bad, but there are nuances to every argument. This nuance from Mesch effectively undermined the recurring argument that consolidation is good.

“Whoever takes over from Sharon White at Ofcom must not only encourage competition but protect it,” Mesch stated.

Competition is a buzzword which can be applied to almost every facet of the industry, and CityFibre has certainly benefitted from the hype. This is not to say the focus from government and regulators to promote competition is the only reason CityFibre is a success, it did after all spot a weakness in the fibre market and aggressively capitalised ahead of Openreach. But a nod to the desire to promote competition should be made.

Intensifying the focus on increasing competition will continue to benefit CityFibre, and arguably it will continue to benefit the UK, however it does present a problem for others in the telco industry. The more successful CityFibre is, the more the argument that CSP consolidation will be a good thing.

“The spark of competition has transformed into a small flame, but that small flame can be snuffed out if not protected,” Mesch stated.

It hasn’t been long since the UK was captured by the Openreach monopoly, and even after Virgin Media entered the fray, the country wasn’t exactly a competitive hotspot. CityFibre has added another dimension and the growth of ‘alt-nets’, such as HyperOptic, is further adding variety.

The UK telco landscape is certainly changing, and CityFibre has evolved as a business. To describe it as a plucky challenge would be a bit unfair nowadays, especially with the financial injection from Antin Infrastructure Partners and Goldman Sachs. Mesch said the board has approved expansion plans, and soon enough CityFibre will have deployed a fibre spine in more than 70 locations around the UK.

The success of CityFibre is arguably a factor which is pushing Openreach towards a fibre-first mentality, perhaps because Mesch and co. proved there was appetite in the market. And elsewhere, there are more competitors appearing on a more regional basis. HyperOptic is gaining scale in London, Toob has a presence in Southampton and Gigaclear is growing in the South-West.

Perhaps most importantly, the alt-nets are now being considered as realistic alternatives.

At the same conference, Sky UK CEO Stephen van Rooyen pointed out the company had unveiled an RFP in March with plans to announce the selected partners in the Summer. Sky is taking an interesting approach here, with plans to work on a regional basis with alt-nets instead of taking a nationwide procurement approach.

Arguably, because of the likes of CityFibre and the increasing popularity of the alt-nets, fibre is being pushed up the agenda and this isn’t even considering the ludicrous and idiotic statements made by Tory Leadership content Boris Johnson.

For the UK Government and regulator, the increasingly prominent role of fibre validates and justifies its pro-competition, anti-consolidation position. If the fibre landscape can benefit from increasing the number of players, the same arguments and theories can be applied elsewhere. This success effectively undermines any pro-consolidation voices which might still exist.