UK full fibre coverage jumps to 68% as market shift looms

As of June, 84% of UK homes and businesses had access to ultrafast gigabit-capable broadband, Point Topic reported in its latest market report, up from 78% at the time of its previous report in October last year.

The analyst firm is using a mix of figures from the end of the first quarter of this year to the present to give a picture of market development in the UK. And the headline figures on coverage growth look pretty promising. Indeed, it notes that UK network builders "are on the way to meeting government targets and have created a competitive environment that offers consumers affordable, reliable, and future-proofed connectivity." It's hard to argue with that.

But in future that competitive environment will likely not look the same as it does today.

There has been much talk of consolidation in the UK market in recent months. There has been a trickle of M&A announcements: Nexfibre and Virgin Media O2 jointly acquired altnet Upp and its 175,000 premises covered in September last year, while CityFibre added 200,000 homes to its footprint – and a further 100,000 in the pipeline – when it announced the purchase of Lit Fibre in March, to name two deals.

The likelihood is that there will be more consolidation amongst the altnets. But the biggest potential market shift will come if Telefonica, via Virgin Media O2, gets the regulatory green light for its plan to create what is currently known as NetCo, a fibre wholesaler that is geared towards bringing about consolidation amongst the smaller players.

Point Topic predicts "a landmark shift" in the UK wholesale space, should NetCo come into existence. Essentially, it will leave CityFibre and incumbent Openreach battling to keep major ISP customers such as Vodafone, TalkTalk and Sky, it notes.

The altnets will not all be swallowed up, of course. Point Topic believes a handful of larger altnets will remain covering large regions of the UK, while a few smaller, localised players will also survive. There are a number of possible scenarios that could play out, including the creation of NetCo, and Point Topic has put together a handy table detailing the various outcomes.

Consolidation will happen fairly slowly – over the next 12 months – based on network rollouts and uptake figures, it notes.

As it stands, Openreach is building out FTTP at pace and as of the end of the second quarter of this year had passed 14.8 million premises, or around 45% of the UK. Connections to that network increased by 387,000 during the quarter to reach 5.08 million, giving a take-up rate of 34%.

Overall, Virgin Media O2's performance in the past couple of quarters has been "underwhelming," Point Topic said, in terms of fixed subscriber additions, at least. The telco itself blamed weak market conditions and substantial overbuild from rivals. Late last week the company claimed that its full fibre footprint has exceeded the 5 million premises mark.

As for the altnets, Point Topic has identified 16 whose FTTP footprints together create a significant network that can rival that of Openreach. Their combined estimated footprint comes in at 12 million premises (see chart), but uptake is much lower at around 15% on average – take-up ranges from 4% to in excess of 30%, maturity of network being a major factor – and the companies face greater financial challenges than the incumbent.

"At this point, those suppliers that can afford to play the waiting game, should," Point Topic advises. Its message is that with network maturity, potential wholesale price reductions, and regulatory changes, consolidation will be more protracted, but also more strategic and less reactionary.