Altnets hit nearly 2M UK fiber connections but still lag Openreach – report

The UK's alternative fiber providers, also called altnets, had almost 2 million live connections in total at the end of 2023, up from 1.5 million the year before. Despite growing 33% year-over-year, altnets' connections are still behind the incumbent wholesale network Openreach, owned by BT. These are the findings of this year's edition of the State of the Altnets report by the Independent Networks Cooperative Association (INCA) – an organization representing altnets ­– and market research company Point Topic. 

The report states that altnets' networks have passed 12.9 million premises in aggregate, narrowly beating Openreach's footprint of 12.8 million at the end of 2023. INCA and Point Topic admit, however, that slightly fewer individual properties ­– between 11.3 million and 11.6 million ­– were passed by at least one altnet network. That would mean more premises had access to the Openreach network than an altnet one. Nevertheless, it may be worth noting that the definition of what counts as a premises passed can at times be a little bit vague.

The report also indicates there were 6.9 million premises in the UK that had access to fiber only through an altnet network at the end of 2023 (meaning no Openreach).

It adds that altnets' networks extend even to hard-to-reach rural areas, saying 30% of these have a fiber-to-the-premises (FTTP) connection from altnets available to them.

Altogether, altnets had 2 million live connections at the end of 2023, translating to a 15% take-up rate. Interestingly, this figure has dropped from 18% in the previous year, which the report attributes to a faster network build rate. Leaning on Ofcom data, INCA and Point Topic say it takes a few years for take-up to increase after fiber is installed in an area.

Both figures are well below the 4.4 million connections Openreach had at the end of the 2023 calendar year, translating to a 34% take-up rate. The report, nevertheless, argues that altnets have a more complex job given they need to attract new customers, rather than convert existing customers to a new product.

For context, Nokia, one of the world's biggest vendors of fiber network products, considers 30% as the threshold for achieving long-term payback. 

Investment woes

It is worth noting that while the report refers to altnets as a whole, they come in many different sizes, and their take-up rates tend to vary. In a policy document from March, UK regulator Ofcom argued that while there are likely to be over 100 altnets rolling out fiber in the country, only a few players are responsible for most of the deployment.

By the end of 2024, INCA and Point Topic expect the total altnet footprint to extend to 16.7 million premises and 3 million live connections. Nevertheless, they also admit challenges are likely ahead, especially when it comes to bankrolling this network expansion.

Investment in the sector "will seemingly reduce in scale compared to the past few years," the report states. It goes on to identify tightening credit markets and what it calls "concerns about the strength of regulatory support for infrastructure competition" as the main reasons. Access to finance topped the list of concerns identified in a survey by INCA and Point Topic, shooting up eight places since last year.  

The altnets' second largest concern was the One Touch Switching process, which was created to make it easier to switch providers but the adoption of which has taken longer than the altnets – or Ofcom – would like.

Fears of being overbuilt by other providers have, meanwhile, eased somewhat since last year, falling by six places into ninth spot among altnet concerns. This, the study's authors suggest, shows that altnets' appetite has shifted from building to securing subscribers. 

Strategic mergers and acquisitions have, meanwhile, come in fifth place on the list, reflecting an overall sentiment in the market that consolidation is inevitable.