UK fibre goldrush may be out-pacing demand

Freedom Fibre has just become the latest UK network builder to win funding through the government's Project Gigabit scheme – to the tune of £43 million – while Openreach this week detailed its latest network extension, taking full fibre to the tiny rural community of Hetton Hall, backed by the same state project, specifically its Gigabit Broadband Voucher element.

All these incremental investments – of which these are just two recent examples – form part of a much bigger overall spend by network builders big and small in the UK as the country attempts to claw its way up the full fibre coverage league tables. But while all this network expansion is hugely important, a new analyst report highlights another key issue these companies face: uptake.

And by all accounts that is a much bigger problem for the altnets than it is for the incumbent.

Eight Advisory has taken it upon itself to advise the altnets how they can improve their position in the UK market, publishing part two of a report on the subject that purports to give them strategies to increase both penetration and profitability. In part one, earlier this year, the analyst firm noted that together the UK altnets can claim an average take-up rate of 16% on their fibre-to-the-premises (FTTP) networks – uptake ranges from 5% to 30% depending on the maturity of the network – while Openreach comes in at 32%.

Part of the problem, Eight Advisory notes, is that aside from CityFibre, which has an extensive footprint, the altnets have been unable to break into the wholesale space. Even if they wanted to take that route to market, it would be more costly and complex for a retail ISP to work with multiple small networks than one large one.

"There is however a lot Altnets can do to drive take-up and in turn profitability and return on capital employed," part two of the report reads.

There's a strong element of teaching altnets to suck eggs here. The analyst firm's words of wisdom include suggestions to have a strong retail proposition, ensure all homes are sellable, and make sure marketing is consistent.

The firm also suggests altnets improve and simplify their go-to-market approach as they grow in understanding of what works to maximise take-up and reduce the cost per customer acquisition. That's surely something they should be doing already, but perhaps some are not there yet. Similarly, the recommendation to start engagement with potential customers early – long before the build starts – and keep them informed of progress sounds fairly obvious, but could serve as a handy reminder to some altnets.

There's also the aforementioned advice to consider the wholesale channel, despite the outlined difficulties. Opening the network to wholesale "may further drive penetration, deter others from overbuilding and reduce churn impact," Eight Advisory said.

Whatever go-to-market strategy they choose, uptake is very definitely on the altnets' radar.

"With 220,000 homes ready for service on our network that have been live for an average of around 10 months, this shows that customers are quickly making the move to Grain as soon as we go live on their street, and we are achieving a similar take-up rate on our premises to that which Openreach has been achieving on homes live over the same time period," said Grain chief executive Richard Cameron this week, when the fibre broadband provider announced it had reached the 30,000 customers milestone.

Uptake is perhaps less of a worry for Openreach in Hetton Hall, given that the community, in its own words, "clubbed together to fund a new broadband network." The location, in rural Northumberland, was more than four miles away from the nearest main fibre artery, which meant getting fibre broadband would be a costly endeavour. However, it was eventually fibred up via the Gigabit Voucher scheme and some funding from Openreach.

As of the government's latest update in April, the UK had issued a total of 136,700 Gigabit vouchers over a period of around seven years, of which 118,200 had actually been used to fund a connection.

The government also announced that as of the end of April it had awarded £1.38 billion of Project Gigabit funding covering 784,600 premises, since the first deal was inked in August 2022, boosted by 15 contract awards in 2024 to date. That number has now increased, with at least one more company having picked up a funding contract.

Freedom Fibre will roll out FTTP to 15,000-plus homes and businesses in rural Cheshire on the back of the £43 million Project Gigabit contract it announced this week. It expects to break ground early next year.

Freedom Fibre merged with VX Fiber in March to create a company with a footprint covering 300,000 premises, although the merged outfit does not share information on take-up. Interestingly though, Freedom Fibre is a wholesaler; it announced its newest retail partner Yayzi just this week. Yayzi joins a handful of retail ISPs using the Freedom Fibre network, a list which includes major player TalkTalk.

Clearly the wholesale model is a credible option for fibre altnets, and Freedom Fibre will be a good one to watch to see how well it works.