Part I – the infrastructure builders
A report from UK Plus
This report provides an update to our October 2022 publication, Gigabit-capable UK: transformation through regulation and reform. It covers the latest announcements and activities of the country’s three largest broadband players, Openreach, Virgin Media O2 and CityFibre, and looks at developments and progress made by several independent infrastructure providers.
Further details of UK full fibre network availability and take-up rates and forecasts until 2030 can be accessed via our Free Analysis website where reports are published on a quarterly basis. Further information regarding the developments in terms of Government broadband policy and local authority activity will be published in our January 2024 report.
In Summary
Openreach continued its FTTP deployment at pace and at the close of Q3 2023 had passed 11.5m (including 3.7m in hard-to-reach areas) premises; demand for its FTTP services was up 34% year-on-year with a total of 3.5m connections at the close of June 2023.
On 5 September 2023, Openreach announced its UK-wide Stop Sell of new WLR (Wholesale Line Rental) and related broadband ISP products.
nexfibre passed 500k premises on 3 October 2023 toward its aim to cover up to 7m homes in the UK by 2027.
CityFibre’s (CF’s) nationwide full fibre network reached 3m premises in August, with more than 2.7m ready for service to ISPs; we estimate CF to have around 350k connections at the close of Q3 2023.
At the end of Q2 2023, the overall FTTP network coverage was just over 16.3m premises (51%), up from 12.2m (38%) year-on-year.
If all network deployments are realised as planned, the number of UK properties with full fibre broadband will increase to 27m in May 2026, according to Ofcom’s latest Connected Nations report.
Planned full fibre network investment by BT, VMO2, BDUK, nexfibre, and AltNets until 2030 will reach an estimated £49bn with AltNets contributing a combined total investment of £24.8bn.
At the close of Q2 2023, AltNets FTTP networks covered just over 8m premises with over 2m (25%) of this total being in what Ofcom define as Area 3; AltNet connections reached 1.5m representing around a 20% take-up rate.
Twelve BDUK Project Gigabit local/regional contracts worth £590.6m have been awarded to AltNets (CityFibre, Fibrus, Freedom Fibre, GoFibre, Wildanet, and Wessex Internet) covering around 376,400 premises.
Consolidation of the independent FTTP network supplier sector ramped up throughout the year with Fern Trading restructuring Jurassic Fibre, Swish Fibre, Giganet and AllPoints Fibre; Voneus acquired ailing Broadway Partners and merges SWS Broadband and Cadence Networks into its operations.
On 3 October 2023, Basalt Infrastructure Partners LLP (Basalt) announced it is bringing FullFibre and Digital Infrastructure (DI) together in a move that will create a single wholesale platform and will integrate DI’s and FullFibre’s existing footprint (250k premises).
Netomnia (resells via YouFibre) passed 500k premises building at a run rate of c.50k premises per month, aiming to hit 1m in early 2024; YouFibre reached 50k subscribers milestone.
Hyperoptic announced it had passed 1.4m premises (mostly MDUs) hitting the 300k connections milestone, representing a healthy 21.4% take-up rate to its full fibre services.
Gigaclear passed 500k homes and businesses - with 430k ready for service (RFS) and secured an equity investment from Equitix worth up to £420m.
At the close of Q3 2023, Fibrus reached the 50k connections milestone having passed 300k premises; received an additional £35m tranche of equity funding.
The Scottish Government announced its £600m Reaching 100% (R100) project reached 20% completion rate of c.24k of 115k hard-to-reach premises.
The Welsh Government sees the completion of £52.5m Phase 2 Superfast Cymru programme - delivered by Openreach - with 37,500 out of the original 39k contracted premises being covered.
Northern Ireland maintains the lead for gigabit-capable broadband across the UK with over 90% coverage; the initial scope of Project Stratum has increased by 8,400 premises to a new total of 85k premises, being delivered by Fibrus.
Overview
As of September 2023, 78% of UK homes and businesses had access to ultrafast gigabit-capable broadband up from 71% year-on-year. Full fibre network coverage reached 57% up from 42% at the close of Q3 2022.[1]
Since mid-2020, full fibre network suppliers have been building at scale and pace. However, this trend has been slowing over the past few quarters as independent (AltNet) providers have shifted their focus onto take-up of services as opposed to further network expansion. Openreach passed a further 3.03m premises from Q3 2022 – Q3 2023 bringing its total coverage to 11.5m premises.
Virgin Media O2 (VMO2) announced the completion of its FTTP Project Lightning build at the close of December 2022. At this time, nexfibre was launched - a joint venture between InfraVia Capital Partners, Liberty Global and Telefónica and is financed with £4.5bn of equity and debt investment. It will initially roll out fibre to 5 million homes not currently served by VMO2’s network by 2026, with the opportunity to expand to an additional 2m homes.
On 29 August, CityFibre’s (CF), the UK’s largest independent supplier, announced its nationwide full fibre network passed over 3m premises with more than 2.6m ready for service (RFS) to ISPs. It is on course to deliver 1m RFS homes this year, matching 2022’s performance. We estimate CF to have an average penetration rate of ~20% with it increasing to 30% in mature locations, such as Aberdeen, Bournemouth, Coventry, Edinburgh, Glasgow, Milton Keynes, Peterborough, and York.
Independent (AltNet) operators have been increasing their full fibre footprints as the sector has seen unprecedented investment over the past several years, with an estimated £24.8bn being committed until 2030. In Q2 2022, AltNets covered 3.8m premises which increased to just under 8m premises year-on-year.
In Q2 2023, 96 local authorities (LAs) had overlapping networks from three independent fibre providers, compared to 98 in Q1 2023. This figure has gone down slightly because there was an increase in areas covered by 4 and 5 networks. Across the UK, more than 1.7m premises in 76K postcodes could choose between three independent fibre ISPs.
Some 153 local authorities had two independent fibre providers overlapping, up from 134 in Q1 2023. We expect this list of LAs to grow further as more networks and ISPs start competing for the same customers. At the same time, some LAs will move up to the category of 3+ fibre providers, while inevitable market consolidation will push others down the ranks. Table 1 outlines the top 10 LAs with two AltNet FTTP providers as of June 2023.
At the national level, 2.65m UK premises had access to two or more independent fibre providers at the end of June 2023, compared to 2.46m in March 2023.
The government has recognised the importance of barrier-busting and has been proactive over the past year in implementing schemes to reduce the obstacles and inefficiencies of gigabit-capable network deployment. Some initiatives include the introduction of the Product Security and Telecommunications Infrastructure (PSTI) Act 2022. The PSTI Act makes amendments to the Electronic Communications Code, the legislation that governs the rights of operators to access land for the purpose of building and maintaining telecommunications networks. Tax relief for suppliers through the Super Deduction scheme[2] was replaced by the 2023 Spring Budget’s new policy, Full Expensing; which allows companies to claim a deduction on their taxable profits equal to their expenditure on qualifying investments. The Department for Science, Innovation & Technology (DSIT) and the Department for Transport continue to work closely on trialling a more flexible system for street works permits.
BT and Openreach
Openreach nearly at halfway point of full fibre build target and sees strong take-up rates
As expected Openreach’s Full Fibre Ultrafast FTTP deployment programme has been accelerating over the past year at breakneck speed. At the close of Q3 2023, Openreach announced it had passed 11.5m premises[3] up 31% from the previous year’s 8.7m. Of the 11.5m premises around 3.7m are in the hardest to serve ‘final third’ of the country.
At the time of this report’s publication, BT Group had yet to announce its Q3 23 subscriber figures, however, we estimate the total to be around 3.8m up from 3.5m in the previous quarter and 2.4m year-on-year. We also estimate its FTTP penetration rate to have reached 33% up from 31.9% and up from 27.4% at the close of Q3 22 (see Figure 1 below).
The infrastructure provider no longer reports on LLU, FTTC, G.Fast, or GEA (including SO) connections, but has opted to classify technology splits by ADSL, VDSL, and FTTP. Table 2 represents the historical figures for technology splits from Q3 2021.
Openreach Full Fibre Broadband Plan nears 3,000 locations
On 12 September 2023, Openreach announced that a total of 2,829 towns, cities, boroughs, villages and hamlets are now included in the Company’s build programme.
In December 2022, Openreach updated its website to include more information about when the build will start in each exchange location and it’s now aiming to update this build information at a minimum of every three months to adjust timings and add new locations as necessary.
Its most current version (September 2023) which lists all the exchanges and locations currently announced as part of its Ultrafast Full Fibre Broadband Build Plan is now available for download.
Accelerating migration from copper to full fibre
BT Group announced in 2017 that the PSTN (Public Switched Telephone Network) would be closed down in 2025.
As Wholesale Line Rental (WLR) relies on the PSTN, that means Openreach will no longer offer or support WLR products (that enable own-brand phone service on its network using its copper cables and networking equipment) by the end of 2025, as it moves to new digital, internet-based (All IP) services such as FTTP, SOG.fast and SOGEA.
Openreach stopped selling new WLR across the UK on 5 September 2023. And as it continues its full fibre rollout, it is also winding down the range of copper-based services it supplies.
To date, 846 exchanges in Tranches 1 – 14, along with Salisbury and Mildenhall trial areas covering 7.9m premises have been announced as Stop Sell locations.
Openreach in the devolved nations
The supplier has government-sponsored FTTP build programmes in all three devolved countries of the UK – Northern Ireland, Scotland, and Wales. BT Group provided an update on its build progress in the devolved nations in its 2022-2023 Annual Review.
In Northern Ireland, the supplier reported that it had covered more than 85% of homes and businesses in the province, and during the 2022/23 financial year Openreach passed an additional 59,440 homes and businesses.
Openreach Northern Ireland in numbers:
FTTP rollout reached an additional 59,440 premises in 2022/23
At close of Q1 2023 over 772,500 premises had access to its FTTP network
Over £85m to be invested in its network during 2023/24
104 exchanges where stop sell has been activated with 8 more to be added by the end of March 2024, taking its stop sell footprint to 85% of total premises enabled for FTTP.
In Scotland, full fibre broadband was rolled out to more than 263k additional homes and businesses across Scottish cities, towns and villages. During the summer of 2022, Openreach deployed 16 new R100 subsea cables connecting 15 Scottish islands to superfast broadband as part of the Scottish Government's Reaching 100% (R100) North contract. In August 2022, a further £36m expansion of its R100 contracts was announced. The extra investment from the Scottish and UK Governments will help another 2,637 rural properties across Scotland to access FTTP broadband. By the end of February 2023, the supplier reached 20k of Scotland’s most remote homes and businesses through the R100 programme.
Openreach Scotland in numbers:
FTTP rollout reached an additional 263k premises in 2022/23
At close of Q1 2023 over 866k premises had access to its FTTP network and on 10 October 2023 it announced that it had passed the 1 million premises passed milestone
Over £79m to be invested in its network during 2023/24 bringing the total to £300m
Around 30% of the Scottish homes and businesses now passed by its new FTTP network have upgraded to full fibre.
In Wales, Openreach worked in partnership with the Welsh Government on the deployment of the Superfast Cymru programme, using a mixture of public and private funding, including funding from the EU. In early September 2023, the Welsh Government announced that the £52.5m Superfast Cymru Phase 2 contract (for FTTP connectivity) with Openreach had concluded the building phase resulting in 37,497 additional premises being passed by full fibre.
Openreach Wales in numbers:
FTTP rollout reached an additional 206k premises in 2022/23
At close of Q1 2023 over 662k premises had access to its FTTP network and on 7 July 2023 it announced that it had passed 700k premises with full fibre
Over £62m to be invested in its network during 2023/24 bringing the total to £210m.
Fibre Community Partnership (FCP) programme sees soaring demand
On 2 March 2022, Openreach announced that the FCP programme would be “temporarily” suspended and would not accept new FCP registrations in Great Britain while it worked through the backlog of requests.
The FCP programme is helping to connect people all over the country. The supplier offers this option to communities that are outside of its own build plans or the plans of other companies and publicly subsidised projects. At the time of the announcement, Openreach had connected 2,050 communities nationwide.
On 6 February 2023, Openreach quietly re-opened the programme but amended the application process. In its 2022-2023 Annual Review, Openreach stated that through its FCP programme 2,400 communities and 230k homes and businesses had been upgraded to full fibre.
Virgin Media O2 (VMO2)
VMO2 reduces staff and shifts focus to nexfibre Joint Venture
In July, VMO2 confirmed plans to cut 2,000 jobs by the end of the year, representing 12% of its workforce. The operator announced that the reduction in staff will coincide with its shift for the remainder of the year to focus on building commercial momentum, realising the synergies of the nexfibre Joint Venture and future proofing its networks.
VMO2’s Project Lightning rollout, mostly using FTTP (with a mixture of RFoG and XGS-PON) drew to a close at the end of 2022. In its Q4 2022 results it VMO2 stated that it had passed 188k premises with 24k of those being subsequently transferred to nexfibre at the close of the year.
In Q1 2023, the supplier reported that it had expanded its full fibre network by 107,800 premises primarily from rollout on behalf of nexfibre increasing this to 175,500 premises at the end of Q2. The expansion extended its FTTP footprint to 3m premises and total gigabit-capable (including DOCSIS 3.1 technology) to 16.449m.
On 2 October, nexfibre announced its network passed 500k premises with the deployment being carried out by nexfibre’s anchor tenant, VMO2.
nexfibre investment and expansion
nexfibre secured a £250m commitment to support the rollout of its FTTP network. This debt investment comes from the UK Infrastructure Bank and forms part of nexfibre’s £3.1bn fully underwritten and fully syndicated debt financing, which is the second largest seen in the UK digital infrastructure market to date.
In addition, nexfibre had previously secured £1.4bn in equity commitments from Joint Venture partners InfraVia Capital Partners, Liberty Global and Telefónica, and aims to expand its FTTP network coverage to 5m by 2026.
On 5 September 2023 nexfibre, in partnership with VMO2, reached an agreement with fibre operator, Upp, to acquire the provider. The acquisition will efficiently boost the fibre footprint of nexfibre by 175k premises in the East of England.
The all-cash deal sees Virgin Media O2 initially purchase the provider and carry out integration work, but nexfibre will ultimately fund the acquisition through a back-to-back agreement to buy Upp’s network assets.
As a result of the transaction, nexfibre will gain a regional fibre network with low overlap of the existing Virgin Media O2 footprint and a build engine that will continue expansion in the region.
CityFibre
CityFibre deployment update, 2023
CityFibre’s (CF) network footprint increased 83% in 2022 with rollout underway in 75 metropolitan areas. At year-end, the network exceeded 2.5m premises passed, 2.2m of which were ready for service, enabling ISPs to serve new customers immediately in those locations.
In August 2023, CF announced it had passed over 3m premises with more than 2.6m ready for service. CF reported that its penetration rate is on target across locations with mature locations now approaching 30%.
A complete list of CF’s key rollout announcements throughout 2023 can be found in Table 4.
CityFibre has challenging year, but doesn’t alter build plan targets
CityFibre began the year announcing that it would be undergoing a restructure in order to meet the challenging UK economic conditions and rising costs of supplies and services. It was reported that the supplier could see a loss of up to 200 of its 2,300-strong workforce.
Throughout the remainder of the year, the supplier had put several builds on hold as it had withdrawn from numerous contracts with its civil engineering firms. Notably, over the summer, CF exited contracts with Kier Group who were responsible for some of CF’s larger builds (amounting to around £82m) in several parts of the country including Bath, Cheltenham, Gloucester, Weston-Super-Mare, and Worcester.
Telec Networks, who were awarded build contracts with CF (Norwich) and County Broadband (Suffolk and Lincolnshire) appointed an administrator in August resulting in CF’s Norfolk build being put on hold in September.
Obviously, having to find and appoint new contractors will slow down deployment, however, CF could look at acquiring smaller regional full fibre suppliers to supplement its footprint. With the sector facing a period of consolidation, this could be a viable, yet expensive option going forward. CF still remain confident that it will continue to meet last year’s build rate and is certainly not the only supplier facing a challenging operational environment.
Despite staff redundancies and project pauses being announced, the supplier stated that its network rollout was fully financed and remained optimistic about hitting its 8m premises passed by 2026 build target.
CityFibre awarded Project Gigabit contracts
On 21 March 2023, CityFibre was awarded the BDUK’s Project Gigabit contract for Cambridgeshire. The £69m contract awarded will subsidise a £122m rollout of CF’s wholesale full fibre platform to up to 45k rural homes and businesses in Cambridgeshire. The remaining £53m will be funded by an additional private investment from CF.
This was followed by the 1 July announcement that the supplier was awarded a further three Project Gigabit contracts which will subsidise the rollout of gigabit-capable infrastructure to 218k rural properties in Norfolk, Suffolk and Hampshire, that would otherwise be excluded from commercial rollouts.
The three new Project Gigabit contracts totalling £318m of government subsidy, will be supported by an additional private investment from CF of £170m, delivering a combined total investment in the project of £488m.
On 21 September, CF appointed Granemore Group in Cambridgeshire, OCU Group and CCN Communications in Hampshire, OCU Group in Norfolk, and Telelink, OCU Group and Granemore Group in Suffolk. The appointment of build partners will enable CityFibre to begin the first phase of construction in each location. The first homes passed by the rollout will be in Cambridgeshire and are expected in late October.
Other independent network operators
Independent (AltNet) networks have been rolling out at pace in the UK for more than five years. However, as inflation, increase in the cost of supplies, challenging market conditions, and lower than expected take-up rates to full fibre products, operators have started to shift their focus from deployments to service uptake.
Our latest report on fixed broadband availability in the UK, tracking the progress between the end of March 2023 and the end of June 2023 shows AltNets are pushing ahead with their fibre rollouts. As an increasing number of AltNets are exceeding 100K fibre premises passed, we are now focusing on this cohort. The report is based on the ThinkPoint broadband availability dataset which includes 1.7m postcodes.[4] Figure 3 provides a snapshot of AltNets footprints and expansion from Q1 to Q2 2023.
On 17 October 2023, Ofcom published its forward-looking Connected Nations Supplementary report on Planned Network Deployments 2023 and noted that full fibre deployment plans up to 2025 are lower when compared to the figures stated in 2022. The report further stated that “Comparing the planned network deployments with those received last year, as well as the actual deployment achieved in the intervening 12 months, shows that deployment has been lower (by around 3 percentage points), and providers have also revised their future plans downwards (by around 4 percentage points).”[5]
This trend is going to continue over the next couple of years as market consolidation will change the network supplier landscape from dozens of players to a handful of larger operators with national full fibre networks.
Community Fibre pass one million premises in London
As of July 2023, it has passed 1m homes across the capital, with more than 212k London-based businesses within 100 meters of Community Fibre’s network footprint. The operator aims to pass 2.2m premises by the end of 2024.
In June 2023, Community Fibre confirmed that it has build plans outside of London and will stretch into parts of Hertfordshire, Essex and Surrey. Box Broadbrand is a subsidiary of Community Fibre and operates in Surrey and Sussex and announced that an additional 50k additional homes had been passed at the time. However, the aforementioned build plans are separate from Box Broadband, which aims to pass 250k premises by the end of 2024.
Netomnia deploying at breakneck speeds
Netomnia announced in July that it had passed, and made ready for service, more than 500k homes and businesses as part of its XGS-PON full fibre rollout. The supplier rolled out its network to more than 125k properties in Q2 2023 alone. It is now building at a rate of 500k homes and businesses per year, with ambitions of reaching 1m premises by early 2024. At the time of reaching the 500k milestone, Netomnia reported that it had 40k connections.
Netomnia’s sister company, YouFibre, resells broadband services predominantly over Netomnia’s network (although it also utilises CityFibre’s network), announced in September 2023 that it had a customer base of 50k up from 22k at the start of the year.
In March 2023, Netomnia successfully completed its latest fundraise of £230m in committed debt financing from a group of six bank lenders.
Fibrus finding its stride, secures Project Gigabit contract and hits key milestones
In August, rural-focused provider Fibrus announced it had now over 50k customers on its network in Northern Ireland and Northern England. The company also confirmed it had reached 300k homes of which 273k are ready to be connected to full fibre broadband. This is up from a quarter of a million homes back in March.
During the same month, it received an additional £35m tranche of equity funding from its shareholder Infracapital bringing its total investment in Fibrus to £150m.
Fibrus was awarded the £160m Project Gigabit contract for Cumbria in November 2022, with a remit for the provision of full fibre broadband to around 60k premises in the area. On 31 May, the first residents in Staveley were connected as part of the programme.
In Northern Ireland, Fibrus is well over halfway through Project Stratum, a £197m contract to deliver gigabit-capable broadband to some 85k hard-to-reach homes and businesses in the region. The collaboration, which was part-financed by the UK Government and NI Executive, means that already over 61k premises have access to full fibre gigabit-capable broadband.
AltNets awarded all Project Gigabit contracts to date
BDUK’s Project Gigabit progress update September 2023 reported a total of 27 live procurements, covering a total of over 780k premises. Combined with the existing 12 live contracts covering 376,400 premises amounting to £590.6m of funding. This represents over £2bn of investment to support the deployment of gigabit-capable broadband to over 1.1m premises in hard-to-reach areas across the UK.
In addition to CityFibre and Fibrus being awarded several contracts, smaller local AltNets have also been awarded multi-million-pound awards (Table 5).
Taking procurements and builds currently underway, BDUK has provided the UK gigabit-capable coverage trajectory chart outlining its progress towards the Government’s goal of 85% of the UK having access to gigabit-capable speeds by 2025.
Market consolidation and shift of focus to take-up
The increase in government support, unprecedented investment, and regulatory changes have led to a robust competitive broadband market with consumers – some in remote areas – finally gaining access to gigabit-capable broadband. AltNets have undeniably added to the UK’s critical infrastructure and digital economy, however, the proliferation of over one hundred suppliers competing against major players and the increasing threat of overbuild has raised questions over their sustainability.
Announcements from smaller players receiving further investment capital have been trickling through over the past 12-18 months, however, financial institutions seem to be backing the larger players as they are perceived as the long-term winners capable of challenging Openreach and VMO2.
As reported above, some local operators are slowing down their deployments and shifting their focus onto securing connections to boost revenue and see a return on investment. Throughout the year several operators such as Hyperoptic, G.Network, Truespeed, and Zzoomm have been reducing their engineering workforce and have announced job cuts in the hundreds.
Key merger and acquisition announcements in the AltNet sector over the past several months are below.
Wholesale market overview
Wholesale connections remain static in challenging conditions
In our latest UK retail and wholesale fixed line broadband analysis covering Q2 2023 metrics we estimated wholesale connections to have reached 29.078m, down from 29.204m in the previous quarter.
Overall net broadband connections reduced by -0.4% quarter-on-quarter and grew a meagre 0.1% year-on-year. Despite the increase in FTTP network coverage by major and independent suppliers, this small level of annual growth is indicative that the market is reaching saturation point along with AltNet suppliers not gaining as much traction as expected within their footprints.
DSL lines are on the wane and dipped to 2.423m during the quarter down from 2.654m during the previous quarter. FTTC connections decreased to 15.409m compared to 15.690m in Q1 and 16.406m the previous year. FTTP lines are progressing and have risen to around 5.090m up from 4.694m and up from 3.402m at the close of Q2 2022 (Figure 5 below).
We estimated CityFibre, the largest independent wholesale supplier, to have a connection base of around 245k at the close of Q2 2023, up from 243k in Q1 and 94k year-on-year, respectively. We also estimated OFNL connections to have decreased to 98k from 100,350. This was due to reseller ISPs Air Broadband and Zybre ceasing operations and transferring customers from CityFibre and OFNL networks to other suppliers.
A supplementary spreadsheet has been provided in addition to this report for paid subscribers, entitled Wholesale Suppliers Q2 2023. It provides a detailed overview of CityFibre’s wholesale activities, resellers, and locations as compared with Openreach.
UK Plus subscribers can download the full report along with the supplementary Wholesale Suppliers Q2 2023 spreadsheet by logging into our subscribers site.
For further information about our services or to gain access to the report please contact info@point-topic.com
[1] Thinkbroadband, September update on broadband availability across the UK, 7 October 2023. [2] The scheme allowed companies investing in qualifying new plant and machinery assets to benefit from a 130% first-year capital allowance from April 2021 to the end of March 2023. The Government allowed companies to “cut their tax bill by up to 25p for every £1 they invest”. BT said the super deduction freed up around £650m allowing it to raise investment in Openreach and FTTP deployments. [3] Openreach, Openreach publishes latest Full Fibre build plans, 12 September 2023. [4] Note: There will generally be a lag to the operator announcements for premises passed at the time since it takes us time to properly track and audit any new deployments, unless the operators tell us about them. Also, we report RFS (ready for service) premises, while some operators and ISPs include premises where customers can pre-order a broadband service. [5] Ofcom, Connected Nations Supplementary report on Planned Network Deployments 2023, 17 October 2023, p.4.