Altnets: The Unsung Hero of Fiber Connectivity in the UK

The UK fixed broadband market is among the most competitive and significant worldwide. While incumbents BT and Virgin Media have invested significantly to broaden their fiber networks, they have perhaps overshadowed an arguably far more important development: the emergence of smaller ‘alternative networks’ (altnets).

As early as 2012, Ofcom, the UK’s telecommunications regulator, mentions over a dozen ‘altnet’ operators in one of its annual infrastructure reports, describing them as ‘ambitious’. Since then, both their number and ambitions have grown. According to INCA, there are now around 100 such companies that will invest almost £11 billion by the end of 2025 to roll out their networks past 30 million premises. By the end of 2023, altnets collectively passed nearly 13 million premises and had two million customers.

How Has the Market Accommodated Such Growth?

Table 1 summarizes the expansionary approach adopted by four different altnets. These four companies have been chosen to illustrate the diversity evident among altnets, often characterized by their size, geographical focus, and business models.

	CityFibre	Hyperoptic	Netomnia	Zzoomm
Business model	Wholesale	Network developer working with third parties (housing associations, developers and so forth)	Network developer, with retail via YouFibre	Network development with direct retailing to consumers
Geographical focus	2nd tier cities, larger towns	Scattered national footprint	Largely scattered national footprint	Scattered national footprint
Coverage (premises)	3.37 million (Dec 23)	1.4 million (Oct 23)	1 million (July 24)	200,000 (Jun 24)
Customers	35 ISP (July 24)	300,000 (Oct 23)	100,000 (Jun 24)	30,000 (Jun 24)
Funding	Initially, equity but debt is increasingly playing a larger role	Debt funding	Debt funding to support existing coverage targets	Debt funding to expand coverage
Ownership	Established by entrepreneurs and then listed on the stock exchange. It was taken private in 2018 and is now owned by Antin, West Street Infrastructure Partners, Mubadala, and Interogo.	Established by entrepreneurs, then acquired by investors. It is now majority-owned by KKR.	Privately owned	Oaktree Capital Management, ING Bank, Hamburg Commerical Bank, Kommunalkredit Austria.

CityFibre has adopted a wholesale approach, rolling out its network in smaller cities and larger towns where its customers are Internet Service Providers (ISPs). Funded by considerable investment and supported by a strategic partnership with Vodafone, CityFibre has grown to become the largest altnet in the UK.

Hyperoptic, in contrast, has worked with third parties like housing associations and property developers to roll out its network. Although Hyperoptic has struggled to meet its own ambitious targets, its network passed 1.4 million premises in October 2023. However, as it has expanded its footprint, Hyperoptic’s adoption rate – the number of customers as a proportion of the premises passed – has fallen.

Zzoomm, which directly retails to customers, has a much lower adoption rate than Hyperoptic. This has contributed to Zzoomm’s decision to halt its network expansion and instead prioritize revenue generation over connecting more premises.

Netomnia has adopted quite a different approach to the others. It has extensively used BT’s existing infrastructure (ducts, poles, and exchanges), enabling it to quickly roll out its network at a relatively low average connection cost. However, Netomnia does not sell its services to consumers; it does so through YouFibre, a sister company. In other words, Netomnia is focusing on building the network while YouFibre concentrates on attracting subscribers.

Has the Market Become Over Saturated?

As altnets have expanded their networks and more have entered the market, many are increasingly targeting the same markets, resulting in multiple fiber networks passing each premise.

In a report from 2024, Point Topic stated that two or more fiber networks pass 7.6 million premises.

Not only does this raise questions about whether such duplicated investment is wasteful, but also about how altnets position themselves in the market to attract customers. Many compete on a combination of price and speed, with altnets being cheaper and faster than other companies. However, being cheaper impacts their revenues and profitability. At the same time, the speed advantage that many altnets have enjoyed over rivals is being eroded through overbuilding and BT and Virgin Media investing in their geographically extensive networks.

Consolidation Has Already Started

Discussions of the challenges many altnets face have increasingly touched on the consolidation issue.

So far in 2024, Netomnia merged with Brsk, and CityFibre acquired Lit Fibre. Both deals expanded the footprint of the acquiring altnet.

While similar deals are likely, it is not clear what market structure will ultimately emerge. An altnet with a presence across the UK may emerge, perhaps accompanied by several regionally focused altnets. And many altnets will likely focus on urban or rural areas, with few being present in both types of markets.

Alternatively, the threat of overbuilding may decline as altnets in the same markets consolidate, reducing the number of networks in primarily urban markets.

Regardless of the emerging market structure, one thing is certain: altnets have transformed the UK’s broadband market. Fiber is widely available across the UK; consumers have greater choice when picking their broadband providers, and operators compete on price and speed.

Jason Whalley is a telecommunications researcher and Professor at Newcastle Business School.

The views expressed by the authors of this blog are their own and do not necessarily reflect the views of the Internet Society.

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Photo by Cory Doctorow VIA Flickr