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Last week’s wholesale deal has divided opinions on what the future holds for the UK’s broadband market
In the wake of last week’s news in which Sky and CityFibre announced a long-term partnership, various reports were published suggesting the deal would be a challenge for the UK incumbent BT.
Indeed, after the announcement, BT’s share price plunged 8% and £1 billion was reportedly wiped off the company’s balance sheet, which could highlight the threat that altnets pose to the UK broadband market.
The FT has suggested, however, that the new deal “complements, rather than replaces, its existing arrangement with BT’s Openreach network,” noting that the deal extends Sky’s availability to areas currently not served by Openreach and does not appear to involve a large-scale shift of Sky’s existing customers over to CityFibre’s network.
Speaking to the Telegraph, Graeme Oxby, Chief Executive of Community Fibre, echoed this sentiment, confirming that he “did not buy into” the claims that the deal would be “devastating” for BT.
The problem with the altnets, as the FT points out, is that their entrance to the market was in part facilitated by BT’s “slowcoach approach to fibre rollout”. This factor was highlighted last week by Quickline CEO Sean Royce, who in an exclusive interview with Total Telecom, said BT was too “distracted with BT Sport and buying EE” to focus on its fibre build, which allowed the altnets to seize that opportunity. More recently, however, Openreach’s full fibre rollout has accelerated, now covering 46% of UK premises and on track to reach 76% by 2026. This means a higher level of direct competition between Openreach and the altnet community, putting the latter under major pressure to find a path to profitability.
While the UK altnets combined account for around 13 million premises passed with full fibre, compared to Openreach’s 15 million, individually their reach is much smaller. CityFibre is by far the largest altnet, having passed 3.8 million premises.
Overall, while the CityFibre–Sky deal is unlikely to be a major headache for BT and Openreach, it does represent a vote of confidence for the altnets – at least the larger ones.
“We think there’s quite a lot of interest from the bigger ISPs [internet service providers] to migrate from Openreach to other full-fibre providers when they can,” said Oxby.
“That certainly seems to be the dynamic… that desire to have sometimes a better service but certainly a lower unit price and therefore higher margins, that allows them to compete and grow. I think it is a really important dynamic.”
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