UK altnet CityFibre's boss on its hopes to capitalise on market churn as fibre broadband rolls out

Openreach out and touch a rival


Interview The news that so-called alternative network CityFibre has just received a £1.1bn cash injection isn't just a story for the pink pages of the Financial Times – it could mean a shift in the UK's communications landscape.

That's according to CityFibre, which has staked its claim as the UK's largest independent fibre network operator. (Both Openreach and Virgin Media are subsidiaries of larger firms.) And with the additional sovereign wealth funding now in the bank, the company claims it is now on course to roll out its full-fibre network to eight million premises – more than a third of the UK – by 2025.

The Goldman Sachs-backed telco snapped up TalkTalk's fibre-to-the-premises (FTTP) network for £200m last year in January.

Speaking to The Register, CityFibre chief chief exec Greg Mesch confirms the network infrastructure provider is also eyeing a potential extension to its planned network reach.

"We've already made a commitment to the prime minister… that if we participate [in the government's Gigabit Project] we'll raise our ambition to 10 million… 12 million [homes] across the UK, which then puts us at around 40-ish per cent of the UK market," he tells us. "Which means a third national infrastructure has arrived."

Back in March when the government announced Project Gigabit – the £5bn taxpayer-funded scheme to target homes and businesses in the UK's fibre "notspots" – PM Boris Johnson said it would provide "the rocket boost that we need to get lightning-fast broadband to all areas of the country."

The snag is all that talk of rocket boosters and "lightning speeds" is probably a tad premature when you're faced with getting your hands dirty and physically building a network.

"We've been mobilising contractors for four years to get us to the 25 [contractors] we have now," says Mesch. "When I mean mobilise, it takes a full year to pick a city, design the city, hire the contractor, train them, so that [they] can start producing units – to us that's serviceable properties that we call 'ready for service'. It takes us almost a full year from city selection to when we first get those done."

In May, BT's Openreach promised to bring full-fibre connectivity to 25 million premises by the end of 2026, an increase of five million against the previous target. To meet its target, the fibre plumber pledged to increase its FTTP build rate from three million premises each year to four million.

This, BT CEO Philip Jansen claimed at the time, would lead to the direct creation of some 7,000 new jobs. But as anyone knows, recruiting and training new staff takes time – sometimes longer than imagined.

Elsewhere, Virgin Media O2 is busy upgrading its network as it looks to upgrade its entire footprint of 15.5 million homes to full fibre by the end of 2028. Plus, Virgin also dangled the prospect of making its network available to other providers on a wholesale basis, something that's been off the menu until recently.

According to the latest data from comms regulator Ofcom, 24 per cent of the UK is plugged into full fibre, with numbers growing each month. As an indication, the latest data from Openreach suggests it's hooking up around 44,000 premises each week as it looks to target a total of 7.6 million premises by March 2022.

"The industry has shifted," says Mesch. "I get more complaints into my email inbox on why I'm not building down the road… that didn't happen in the cable days, and it didn't happen in our first days, but the pandemic has clearly made people say, 'Hey, I want better broadband'."

The wholesale cableco has already secured long-term volume commitments from Vodafone, TalkTalk and Zen, as well as mobile operator Three. And there are talks with others in the pipeline too.

But the big plus, as Mesch sees it, is that all this activity will lead to churn in the wholesale market as service providers look to sign up for better services at cheaper prices. And that's where Mesch hopes CityFibre has the edge.

"We believe we will get a majority of the churn lines because we're going to be more economical and better," he says.

Why?

"We have to be." ®

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