Who is Building – UK Summary of Full Fibre Broadband Plans and Investment UPDATE18

The past 24 months have been awash with announcements about “full fibre” (FTTP/H) broadband network builds across the United Kingdom, which can sometimes make it a little bit difficult to keep track of all the developments (nice problem to have). So here’s a quick summary of the key plans.

Most of the major ISPs and network operators, including Openreach (BT), now appear to agree that pure fibre optic (“full fibre“) broadband cables are the way forward for fixed line connectivity. These Fibre-to-the-Premises / Home (FTTP/H) networks transmit their data using laser light, which mercifully doesn’t suffer from the same reliability or performance problems as older copper lines.

On top of that FTTP/H networks can carry a ridiculous amount of data down even a single optical fibre (multi-Gigabit and possibly even Terabits in the distant future), which should mean that there’s plenty of capacity available for when we need it. But a combination of issues with market regulation, competition, high deployment costs and the slow pace of rollout can still make it very difficult to do.

In fact until very recently there had been precious little FTTP/H progress in the UK, but it was almost a very different story. Back in 2009 BT had initially pledged to deliver FTTP services to 2.5 million UK premises, although a combination of problems (e.g. it took far too long to install) meant that their aspiration was put on ice and by the end of 2012 the UK only had around 100,000 premises passed.

At around the same time as BT seemed to be scaling back, others were diving head long towards a full fibre future. Smaller players like Hyperoptic, IFNL (GTC / BU-UK) and B4RN sprang up, while others like Gigaclear and Cityfibre would soon follow. Many of these new alternative networks (altnets) had very different deployment models and weren’t burdened by the same regulation as Openreach, but they all shared a desire to capitalise on BT’s hesitation

Since then the market has continued to change, with many rules being relaxed and new investment flooding in. At the same time new deployment methods (narrow trenching, overhead fibre etc.) have also helped to bring the cost down further and we’ve seen both Openreach (BT) and Virgin Media set healthy rollout plans. The Government has also stepped in with new investment and a business rates holiday (here).

Last year ISPreview.co.uk estimated that around 1.1 million UK premises had access to FTTP/H and this figure seems set for a meteoric rise (here). So here’s a quick summary of the progress so far from each of the main operators, although there are quite a few smaller projects that we don’t have enough data to include. Where possible we’ll also try to cover investment figures.

* Openreach

After somewhat sitting out the first round, Openreach announced in May 2016 that they intend to rollout FTTP to 2 million UK premises by the end of 2020 (here). Most of this initial deployment would focus on catering for new build home developments and businesses. Sadly getting a clear costing for this expansion isn’t easy, although some estimates suggest that it would probably cost somewhere around £1bn.

In 2018 the operator went much further by proposing a hypothetical scenario where they could conduct a “large-scale” rollout to 10 million premises by around 2025 (here), which they say would cost £300-600 per premises passed (total of between £3bn to £6bn); plus £175 – £200 to connect. This is roughly in keeping with their current deployment and would largely target the low hanging fruit of urban areas.

At present 10 million premises is still just an aspiration and one that Openreach argues would require co-investment support from ISPs, as well as favourable regulatory conditions in order to make the risk worthwhile. But Openreach’s game of hard ball risks leaving them vulnerable to the rise of competitors, who often require no such concessions and don’t suffer from the same enforced regulatory baggage or the presence of an ageing copper network.

Standing still by relying on hybrid fibre upgrades, such as G.fast, is perhaps not the best long-term strategy. However we suspect that they will win some, if not all, of their desired concessions, although finding a co-investment partner in this market of frequent disputes and alternative models could be difficult.

At present we understand that Openreach has around 631,000 premises passed and they have been aiming to hit 650,000 by the end of March 2018 (here). Most recently they’ve also ramped-up their FTTP plan by aiming to reach 3 million premises with FTTP by the same date of 2020 (here), which points to the start of a serious long-term commitment.

UPDATE 9th May 2019

After reducing their rollout plan for G.fast last year, Openreach has now ramped-up their FTTP plans by aiming for 4 million premises by March 2021 and then 15 million by around 2025 (here). Openreach said they continue to deliver FTTP at the “lower end” of its £300 – £400 per premises passed cost range and believes that it can “pass around 50% of UK premises within this range of costs“.

The 15 million target remains an ambition and Openreach said they first want to see support for wayleaves and business rates relief on fibre.

* Virgin Media

The vast majority of Virgin Media’s network, which serves over half of the UK (mostly urban areas), is based on a Hybrid Fibre Coax (HFC) cable network that uses EuroDOCSIS technology. The nature of this network means they’re already able to deliver “ultrafast broadband” (100Mbps+) speeds and have been doing so for several years, with performance likely to reach into Gigabit territory once they upgrade to DOCSIS 3.1.

However Virgin Media has also moved to keep pace with Openreach and as a result their current network expansion aims to reach 2 million premises with FTTP by the end of 2019 (here), although recent hiccups with their rollout progress have cast some doubt over their ability to meet this target (here) and we think the original target of 2020 may now be more viable.

Meanwhile their HFC network is also being expanded to reach another 2 million premises by the same date and the total cost for all this (Project Lightning) has been pegged at about £3bn (i.e. 4 million extra premises via HFC/FTTP). Once complete their network should be able to cover around 60-65% of UK premises but there are now doubts about whether the 4 million goal will ever be hit (here).

* Hyperoptic

The team behind Hyperoptic know a thing or two about building a new ISP from the ground up, after all they already did it successfully once before with BE Unlimited (BE Broadband), before O2 acquired the provider and later sold that business on to Sky (Sky Broadband). Happily the same team came back to build a unique fibre optic focused start-up and they did so at a time when few others would even dare.

The ISP was able to succeed by finding a strong niche that focused on connecting their Fibre-to-the-Building (FTTB/P) network to larger residential (i.e. Multi-Dwelling Units with at least 50 units) and office blocks in dense urban areas (cheaper to serve), with the first going live around central London. Since then they’ve also expanded into many new cities, as well as some large social housing and new build home developments.

Under this approach the ISP’s network has already covered 500,000 homes (up from just 35,000 in Feb 2014) and this is being followed by an “ambitious plan” to cover 2 million urban premises by 2021 2022 and then 5 million by 2024 2025.

In terms of funding, Hyperoptic has been supported by investment in the form of £50m from Quantum Strategic Partners, a £21m eight year loan from the European Investment Bank and they recently secured £100m from a consortium of four major European banks (BNP Paribas, ING, RBS and Dutch investment bank NIBC). Plus in August 2018 they managed to complete a debt raise of £250m (here), which should get them to 2m premises.

UPDATE 7th Nov 2018: The ISP has increased their overall investment pot to nearly £500m thanks to a significant equity raise with the investment arm of the Government of Abu Dhabi (Mubadala Investment Company), which has also enabled them to bring their deployment targets forward by a full year (details).

* Cityfibre (inc. Vodafone, TalkTalk and Sky Broadband)

Until recently Cityfibre was primarily focused upon deploying their FTTP network, using a demand-led model, to serve businesses and public sector sites in 50 large UK towns and cities. The exception has been a legacy FTTH network in Bournemouth (c.20,000 homes) and a city-wide joint venture with TalkTalk (Sky Broadband use to invest in this too) to rollout across York (aiming for 54,000 homes by 2020; currently at c.14,000).

However they recently announced a deal with Vodafone to rollout a 1Gbps capable Fibre-to-the-Home (FTTH) broadband network to a “minimum” of 1 million homes in 12 of their existing cities and towns by around 2021, with the “potential to extend” this to up to 5 million (in many of their 50 towns and cities) by 2025 (here and here). This is expected to cost about £350 to £480 per home passed (excluding the customer connection).

Continued on page 2..