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Thanks for posting the article Larry. The article makes some interesting points.
"While Ofcom's measures to stoke competition have proved successful, building blocks must now be put in place to ensure customers benefit from rich rewards of full-fibre, without an over-reaching broadband network taking them offline."
"However, James Barford, of Enders Analysis, gives a more sombre assessment. The large alt-nets he has analysed remain stuck in the red.
"Some of them may start to run out of money. They will all have a certain amount of debt funding, and there will be covenants on that debt, which will be the trigger point,” he says."
""There is also an issue with consolidation. We are talking about companies that have got significantly less than 300,000 homes passed - some of them less than 50,000.
"Is it worth doing an acquisition for a company that is just a few weeks build time [for bigger players]? Some of them are just too small to be worth the bother.""
So Ofcom have regulated Openreach to such an extent Altnet investors think they can profit in a big way, but scale matters in Telecoms. When it comes to the isolated rural Altnets, if they fail there's only Openreach to step in since backbone connectivity costs will make them even more uneconomical. To run a network you need to either buy, or rent, building space; You need Engineering resource to monitor and maintain the network; There are Equipment costs, as well as power/aircon/etc costs. Churn would be a problem for small Altnets as competition grows and Openreach overbuild their areas, since the popular CP's, like Sky, may tempt customers away from the Altnets.
CityFibre are building to scale up as quickly as they can, and they need to, as a successful wholesale business will require a good geographic coverage, and a large pool of premises passed. The problem for CityFibre is that Openreach are fighting back with offerings like Equinox; Cityfibre are awaiting judgement on the court case against Ofcom, attempting to stop the Equinox offering, but Openreach are arguing that Equinox is required to encourage CP's to move from FTTC onto FTTP, and Ofcom have accepted Openreach's view. Clearly the Altnets are skating on thin Ice, and relying on the regulators to stop Openreach competing in a meaningful way, but they'll only get away with that for so long.
BT/Openreach are building out FTTP faster than anyone else; As the build progresses, and customers migrate, it allows BT to make incremental cost savings, and by the early 2030's BT will be much leaner with less debt and a healthier bottom line; I'm talking about the PSTN switch off, exchange closure program, less lease liabilities, and the associated cost savings from a converged network with a much smaller building footprint. There's a lot to like about BT, i'm not so sure about the competition.
An industry source says an operator could buy a failed broadband builder out of administration and run the network without the need to make immediate changes.
One executive says such is the market's confidence in the sector that it was more likely greater sums of money would flow into so-called alt-nets in the coming months, shielding them from the impact of commercial pressures.
An Ofcom spokesman said the regulator was keeping a close eye on the broadband market: "In the unlikely event that a network suddenly failed and ceased to provide services, we would work with alternative suppliers to help customers get reconnected as quickly as possible.
"This could be through Openreach or an alternative provider, depending on the circumstances.”
Jarlath Finnegan, the chief executive of Giganet, which is attempting to connect 500,000 homes and businesses through its own fibre build and selling access to CityFibre and Openreach's network, remains confident of his company's prospects.
"There will always be winners and losers, but in the main these investments are built on sound principles," he adds. "The regulator must ensure the market continues to support a more diverse and competitive sector which drives up standards and benefits the consumer."
However, James Barford, of Enders Analysis, gives a more sombre assessment. The large alt-nets he has analysed remain stuck in the red.
"Some of them may start to run out of money. They will all have a certain amount of debt funding, and there will be covenants on that debt, which will be the trigger point,” he says.
"There is also an issue with consolidation. We are talking about companies that have got significantly less than 300,000 homes passed - some of them less than 50,000.
"Is it worth doing an acquisition for a company that is just a few weeks build time [for bigger players]? Some of them are just too small to be worth the bother."
A spokeswoman for the Independent Networks Cooperative Association (INCA), the body representing alt-nets, says the industry is going through a land grab.
"The regulation has created a window of opportunity that companies are maximising," she adds. "It just means people get fibre more quickly than they otherwise would.
"There may be operators that will not succeed - that is the nature of business, but at the moment there is almost no overlap by networks and these assets are really valuable."
She adds that INCA has approached Ofcom about creating contingency measures among alt nets should a network provider fail.
Like all gold-rushes of old, there is always the risk that some fortune-seekers will be left nursing losses - the question remains as to how many broadband builders might fall.
While Ofcom's measures to stoke competition have proved successful, building blocks must now be put in place to ensure customers benefit from rich rewards of full-fibre, without an over-reaching broadband network taking them offline.
https://www.telegraph.co.uk/business/2022/05/28/broadband-push-lays-ground-modern-day-gold-rush/
After declaring war on Britain's sluggish broadband speeds, Boris Johnson has had no shortage of corporate crusaders taking up his fight.
The Prime Minister's mission to upgrade most of the nation to gigabit connectivity by 2025 has prompted a modern day gold-rush led by some of the world's wealthiest institutions.
Private equity, sovereign wealth and pension funds have furnished as many as 100 broadband network builders with billions of pounds of investment in their hunt for financial returns that could span generations.
Freedom Fibre became the latest smaller supplier backed by infrastructure investors, announcing a £100m funding boost last Tuesday ahead of plans to upgrade 2m premises in the North West to faster full-fibre broadband.
After decades of market domination by BT's Openreach, the competition has never been stronger. But after helping to open up the market to a wave of telecoms minnows, Ofcom is preparing to protect customers from those network builders that reach breaking point.
The Telegraph revealed last week that the regulator approached BT to understand how it might shoulder thousands of customers if broadband builders collapse under competitive pressure.
There is a growing sense of unease that the odd failure among small suppliers may multiply and prompt consolidation across the industry. Such concerns come amid a souring commercial backdrop for all companies, as surging inflation makes the costs of labour and equipment more expensive.
Some anticipate a repeat among broadband builders of the merger spree that swept through cable operators in the nineties, leading to the creation of Virgin Media.
Already, there are examples of stress. In December, small network builder Swish Fibre picked People's Fibre out of administration after it succumbed to pressure from competitors.
Such is the level of competition that Lutz Schuler, the chief executive of Virgin Media O2, warned in November that the nation's broadband plans were close to a population three times as big as the UK.
Insiders have eased fears that bankruptcies would lead to internet blackouts, however, as physically switching customers from a failed provider may not have to take place.