Nexfibre urges Ofcom to support consolidation and curb BT

The UK fibre builder, which is working to establish itself as the second scale player in the market behind the incumbent, is keen to have its say ahead of Ofcom's upcoming Telecoms Access Review, scheduled for next year.

Nexfibre, which didn't exist when Ofcom last examined the market via its Wholesale Fixed Telecoms Market Review in 2021, is naturally looking after its own interests with its 'UK Fibre: A Fork In the Road' report, published on Tuesday.

But it also gives us a glimpse into the company's plans to grow its wholesale fibre business in the UK and where it perceives the potential stumbling blocks along the way to be.

It outlined five key recommendations for the regulator, the fifth of which, almost an afterthought, is around consolidation. Specifically, Nexfibre wants to make sure that Ofcom et al would back mergers and acquisitions, for the good of the market, of course.

"To support economically sustainable competition, Ofcom and the CMA should not seek to impose a minimum number of competing networks in a market but allow consolidation to the sustainable number of rivals on a localised basis," it said.

The UK has already seen some altnet consolidation. CityFibre has swallowed up a number of rivals including, most recently, Lit fibre, while Nexfibre itself teamed up with sister company Virgin Media O2 to buy Uppp, and just over six months ago Netomnia and Brsk came together.

It stands to reason that smaller altnets will struggle to compete. As Nexfibre pointed out in its report, rising interest rates, amongst other things, have hit fibre players hard, leading to job losses and a slowdown in fibre build-out during 2024.

But it seems unlikely that Nexfibre is taking an altruistic stand on behalf of its less deep-pocketed rivals here; let's not forget that Nexfibre is funded by InfraVia Capital Partners, Liberty Global and Telefónica. We can probably safely predict that Nexfibre has other acquisition targets in its sight as it seeks to compete with the incumbent.

Speaking of whom, Nexfibre claims that BT and its Openreach division are already exhibiting behaviour that is putting the squeeze on rival network builders and it wants Ofcom to crack down on this.

It claims BT is harming competition and deterring market entry by employing shady pricing tactics for duct and pole access and exclusionary pricing in the wholesale space; on that last point, it referenced the Equinox and Equinox 2 pricing schemes that altnets vocally opposed a couple of years ago.

In general, Nexfibre is determined that Ofcom should not be tempted to deregulate BT in any area, insisting that there is not yet sufficient competition for the market to be considered competitive. And it wants the regulator to go further to address the above issues that are already causing harm.

That's just Nexfibre's view, of course. Ofcom may well see things differently. It has already disclosed that it will look at consolidation as part of the Telecoms Access Review, and the tone of its musings on the matter last spring suggested that it is likely to be pro-M&A in fibre.

But regulation on the incumbent, or indeed the lack thereof, is always going to be a more contentious issue. Ofcom's previous market review ultimately triggered an acceleration in fibre building from both Openreach and competitors like VMO2 and CityFibre. The regulator is unlikely to want to rock the boat this time around, so we can expect decisions that are designed to maintain the momentum in the fibre building market, momentum that Nexfibre’s report claims is under threat.