The new CEO of the Independent Networks Co-operative Association (INCA), Paddy Paddison, which represents many of the UK’s alternative broadband operators, has today told ISPreview – as part of a new interview – that he’s optimistic about financial institutions supporting altnets again “over the next year” and wants to see more sharing (infrastructure, wholesale etc.) in the sector.
The past year or two have been more than a little bumpy for the markets many altnets. On the one hand, they’ve continued to drive positive competitive change and have built full fibre (FTTP) broadband lines to millions more premises (altnets now reach well over a third of UK premises) – Summary of UK Full Fibre Builds. Many consumers are thus already able to enjoy the benefits, which is often reflected by faster speeds and lower prices.
NOTE: In April 2024 INCA
reported that altnet based fibre networks had grown by 57% in 2023 to cover 12.9 million UK premises (up from 49% and 8.22m in 2022).
On the other hand, many altnets have also had to slow their deployments and make redundancies, while at the same time re-focusing toward efforts to grow customer take-up. This has been fuelled by a combination of issues, such as rising costs (build, leases, debt payments etc.), competition from rivals (e.g. overbuild, price discounts), the challenge of generating a viable level of take-up and the difficulty of securing fresh investment while interest rates remain high.
Despite the problems, INCA’s new CEO, who has only been in the job for a couple of months and is still a Non Executive Director of altnet ISP Wildanet (a company he helped to build), remains optimistic for the future and expects financial institutions to begin supporting altnets again. “I think that phase is nearly over and the institutions will begin supporting Altnets over the next year or so,” said Paddy Paddison.
Paddy also suggests that one of the “best things” altnets can do during the current period of uncertainty is to “cooperate with each other through infrastructure sharing, wholesale agreements and generally sharing best practice“. This might help to make their roll-outs more efficient and reduce some of the gripes people occasionally have around the deployment of excess poles or duplication of street works. INCA has established a number of projects to help facilitie this, which we cover in more detail below.
The full interview also explores the current challenges with market consolidation, the impact that the new government is having, Project Gigabit’s potential pivot to be more supportive of urban deployments (as opposed to today’s laser focus on rural builds), Openreach’s pricing of FTTP lines (i.e. future Equinox discounts after April 2026) and the need for Ofcom not to unfairly favour the incumbents over altnets etc.
The INCA Interview
1. I think it’s fair to say that, between high interest rates, rising build costs and tough competition, the past couple of years have been a bit of a rough period for alternative networks. At the same time, we’ve seen some larger players, like CityFibre, predicting mass consolidation, which they suggest could leave just a handful of networks standing at the end of it. But what do you expect the picture for altnets to be, come 2030, and where might that leave INCA?
Paddy Paddison said:
It’s true that the last year or so has been difficult with financial institutions being reluctant to lend to Altnets just at the moment that their initial equity funding was starting to run out. I think that phase is nearly over and the institutions will begin supporting Altnets over the next year or so.
In my new role I hear both ends of the expectations, from “there’ll only be three networks in the UK by the end of 2025” to “there will still be over 25 Altnets thriving”. Really, I think it will be somewhere in between. I was with CableTel in 1996 which in turn became NTL and saw firsthand the acquisitions that happened and the pace that some of them came through was amazing. However, I think there were a lot of lessons learnt during that period and no one wants to repeat the final result of an over leveraged operator that happened in the early 2000s. My personal view and the one I hope to get INCA members to agree to is that consolidation will occur at whatever pace the investment community feels gives them their best outcome.
While that’s happening, the best thing Altnets can do is cooperate with each other through infrastructure sharing, wholesale agreements and generally sharing best practice. It’s going to be my role to help those ideas ferment. In terms of where a reduced number of Altnets leaves INCA, well I suppose we will still be needed to be the voice of the independent sector even if there’s only two! I’m not one for looking to the gloomy side and think that for the medium-term INCA has a major role to play in ensuring that the Altnets get a fair playing field in both regulatory and competition issues.
2. The country recently welcomed a new government, which over the past few months has been sending some mixed signals. On the one hand we’ve seen various tax rises in the budget (increasing costs in certain areas), while on the other there’s been talk about making a “renewed push to fulfil the ambition of full gigabit and national 5G coverage by 2030” and unblocking planning.
How do you think the new government is doing, with respect to supporting altnets on this front, and what more would you like to see them do?
Paddy Paddison said:
A new government is always an interesting time, as it was when I came into the industry as Tony Blair’s government began its tenure. INCA is getting good engagement with the new government and certainly we feel that they understand that a good competitive market in telecoms and broadband is critical to their plans for growth.
The increase in Employer’s NI is certainly a difficult pill to swallow, especially with little time to make plans around it. Hopefully the government will offer incentives in other ways to ensure the continued investment in our sector isn’t eaten up through higher costs.
In terms of support for the industry and the gigabit goals I applaud Project Gigabit’s aims and what it has done so far. I do worry that the final part of the project may be given to the incumbent operator as a quick and easy way to ensure the money is pushed out the door before it gets withdrawn or spent elsewhere. That would be a mistake. Altnets that have won Project Gigabit projects are delivering on time and on budget, building high quality networks that will last a generation. I don’t want to see a repeat of Superfast programmes where the incumbent cherry picked the bits it wanted to do and then seemed to leave the rest undone. Don’t forget there are still premises in the UK with ADSL2 connections.
As for 5G coverage the government’s ambitions are sound and not wanting to cross into the mobile space I would suggest that they need to think more innovatively and in a more joined up way in how MNOs and Altnets can work together to help get coverage over the whole country.
3. Speaking of the new government, we’ve recently seen a lot of talk about some of the remaining funding for the £5bn Project Gigabit broadband roll-out potentially being directed to help fill in some of the slowspots and notspots for coverage that exist in urban areas (previously the scheme has been laser focused on rural areas).
The expectation is that this may be used to support an expanded Gigabit Broadband Voucher Scheme (GBVS). What are INCA’s thoughts on this and do you think Project Gigabit’s funding should remain ring-fenced for use in poorly served rural areas?
Paddy Paddison said:
INCA feels that all parts of the UK should have gigabit connectivity, by fibre if possible, so providing support for urban areas is just as important as providing support for the rural areas. It’s almost been a forgotten problem by government and its gratifying to see left behind parts of the urban landscape being upgraded to the same connectivity as the rest of the UK. It is also important to recognise that some of the causes of urban notspots can’t be solved with money alone. Other barrier busting work such as more flexibility on street works permitting and ensuring landlords understand the importance of having fibre installed at their properties is still needed.
4. How Openreach, as an operator with significant market power (SMP), chooses to price their own FTTP broadband services – at wholesale – has often been a point of contention for altnets, particularly given the economic and competitive challenges of the current market.
In that sense, how does INCA view Katie Milligan’s (Openreach CCO) recent pledge not to initiate a further round of Equinox (3) discounts on FTTP “until at least 31st March 2026“ (here) and what do you think Ofcom needs to do, if anything?
Paddy Paddison said:
I think you should read that as Openreach will initiate Equinox 3 on the 1st April 2026 if the TAR allows them to do that. INCA’s position is that the Equinox programme is anti-competitive and OFCOM should be taking action to dissuade another round of increased anti-competitive behaviour by the incumbent. It does not help customer choice, it does not help the UK’s growth, and its intention is to retain ISP customers. The name ‘Equinox’ seems to be used ironically, as there is nothing equal about it. The argument that lower Openreach wholesale prices will benefit consumers is not evidenced by the price increases BT Retail has imposed on its hard pressed customers over the last few years.
Please click over to page 2 for the final part of this interview..
