Is Westminster’s ultrafast broadband roll-out about to hit a speed bump?

If the gov­ern­ment is ever to achieve its much-trum­pet­ed goal of “lev­el­ling up” the UK econ­o­my, the whole coun­try will need reli­able ultra­fast inter­net con­nec­tiv­i­ty. This is why West­min­ster is keen to roll out giga­bit-capa­ble broad­band nation­wide before the end of the decade. 

The aim is to enable busi­ness­es to com­pete on the same tech­no­log­i­cal play­ing field, whether they’re in a bustling city cen­tre or a remote rur­al out­post. A ful­ly fibre­op­tic cable net­work known as fibre to the premises/home (FTTP/H) is the way to achieve ultra­fast down­load speeds in the region of a giga­bit per sec­ond. To give some per­spec­tive, 1Gbps is rough­ly 17 times faster than the aver­age domes­tic super­fast con­nec­tion – about 60Mbps – which often uses cop­per cable over the last metres between a dis­tri­b­u­tion point on the street and the premis­es in a less effi­cient set-up known as fibre to the cab­i­net.

The government’s inter­me­di­ate tar­get is to pro­vide at least 85% of the nation’s premis­es with giga­bit con­nec­tiv­i­ty by 2025. The pace of the full-fibre roll-out so far sug­gests that this is in reach. As of 7 July, 69.2% of homes in the UK were giga­bit-capa­ble, com­pared with 42.2% the pre­vi­ous July and only 22.6% the year before, accord­ing to com­par­i­son site thinkbroadband.com.

Kester Mann is direc­tor of con­sumer and con­nec­tiv­i­ty at research and advi­so­ry com­pa­ny CCS Insight. He notes that the roll-out’s rapid progress over the past two years has been aid­ed by “long-over­due invest­ment” from BT sub­sidiary Open­reach – the sector’s dom­i­nant play­er – and the arrival of dozens of alter­na­tive net­work providers, known in the sec­tor as alt­nets. 

“Many of these have back­ing from wealthy investors,” he adds. “It’s a far cry from years of non-com­mit­ment and inac­tiv­i­ty.”

Despite the encour­ag­ing signs, full-fibre deploy­ments in most oth­er Euro­pean coun­tries are fur­ther advanced. The lat­est data from indus­try body FTTH Coun­cil Europe shows that, as of Sep­tem­ber 2021, Ice­land, Spain and Swe­den were lead­ing the way, while only Aus­tria, Bel­gium, Ger­many and Greece had a low­er full-fibre pen­e­tra­tion than the UK. 

Openreach’s CEO, Clive Sel­l­ey, told the Finan­cial Times in June that Brex­it was mak­ing it hard­er for his com­pa­ny to hire skilled work­ers from the EU and there­by “con­strain­ing the rate of fibre build” in the UK.

These labour short­ages, com­bined with ener­gy price infla­tion, ris­ing inter­est rates, and sup­ply chain dis­rup­tion, are threat­en­ing to damp­en some of the recent momen­tum, accord­ing to Mann. 

It’s clear that more will need to be done to sup­port the roll-out, espe­cial­ly in rur­al areas, if the gov­ern­ment wants to pre­vent its 2030 tar­get from becom­ing noth­ing more than an ultra­fast pipe dream.

Matt Rees is chief net­work offi­cer at alt­net Neos Net­works, which pro­vides tele­coms ser­vices to the pub­lic and pri­vate sec­tors. He observes that “it is, of course, more eco­nom­i­cal­ly viable for new fibre to be laid in dense urban areas – which has been the focus of ear­ly deploy­ments. But that leaves ‘notspots’ in more rur­al areas, cre­at­ing big­ger dis­par­i­ties across the coun­try.”

One of the big chal­lenges of build­ing rur­al net­works is deal­ing with wayleaves. These are con­trac­tu­al agree­ments between tel­cos and land own­ers grant­i­ng the for­mer legal access to pri­vate prop­er­ty so that they can build and main­tain equip­ment. Secur­ing one can take sev­er­al months to a cou­ple of years. If a wayleave can­not be agreed, the tel­co may have to reroute its planned net­work. 

The indus­try is ask­ing the gov­ern­ment for more help with wayleaves as part of the Project Giga­bit, the latter’s £5bn pro­gramme to lev­el up the 20% hard­est-to-reach premis­es in rur­al areas. 

West­min­ster has com­mit­ted less than a quar­ter of the pledged fund­ing so far, accord­ing to Mikael Sand­berg, exec­u­tive chair­man at VX Fiber, a Swedish FTTP net­work provider. This slow dis­burse­ment, he says, “has left indus­try play­ers con­cerned that the 85% tar­get remains chal­leng­ing”.

Rees adds that oth­er ele­ments of the government’s plan leave much to be desired. “The strat­e­gy is great in prin­ci­ple, but in real­i­ty there isn’t a lev­el play­ing field when it comes to secur­ing pri­vate and pub­lic fund­ing to build fibre net­works,” he says. 

This has tend­ed to put alt­nets at a dis­ad­van­tage. For instance, Open­reach has hiked the prices they must pay to use its eth­er­net prod­ucts to feed their FTTP broad­band to cus­tomers. 

To com­pli­cate mat­ters, towards the end of 2021 Ofcom approved Openreach’s so-called Equinox offer to cut the price of its FTTP net­work for inter­net ser­vice providers in return for their long-term com­mit­ment to using it. This prompt­ed imme­di­ate protests from alt­nets that had been pump­ing bil­lions into rival FTTP net­works – most notably, City­Fi­bre. 

The con­cern is that the Equinox pric­ing scheme could weak­en full-fibre com­pe­ti­tion and infra­struc­ture deploy­ment and inno­va­tion by under­cut­ting alt­nets’ prices and lock­ing inter­net ser­vice providers into lengthy con­tracts. If alt­nets strug­gle to attract cus­tomers as a result, it could dri­ve some out of busi­ness.

Equinox has been described by ana­lysts at Bar­clays as a “land grab” that weak­ens the busi­ness case for alt­nets. The Inde­pen­dent Net­works Coop­er­a­tive Asso­ci­a­tion has pre­dict­ed that alt­nets will cov­er near­ly 30 mil­lion British homes by 2025, but that fore­cast has start­ed to look over-opti­mistic. 

What’s more, where alt­nets do deploy their net­works, there’s a real pos­si­bil­i­ty that Open­reach could sim­ply build over them. 

“Mul­ti­ple providers lay­ing fibre in the same area, all tar­get­ing the same house­holds, is an inef­fi­cient, cost­ly sce­nario,” Mann says. “That would do lit­tle to assist the government’s plans to bring more peo­ple online and nar­row the dig­i­tal divide.”

The race to be the first to lay fibre in an area risks frag­ment­ing the mar­ket, he warns. It means that some alt­nets are des­tined for com­mer­cial fail­ure. For many of the small­er play­ers, then, join­ing forces may be the only way to sur­vive.

Ulti­mate­ly, Openreach’s Equinox gam­bit and over­build­ing could result in full-fibre infra­struc­ture los­ing its val­ue alto­geth­er. 

As Rees observes: “Lev­el­ling up is required in the sup­ply chain too.”