Are bad bills and worse service driving UK fibre customers into the arms of altnets?
As customers face higher costs for worse connectivity services, do the UK’s big telcos have to worry about losing business to the altnets? And what can they learn from the smaller firms changing the face of fibre?
As millions of broadband customers face increases of around 15% or more for their connections, many are likely considering switching providers.
It’s a case of out of the frying pan and into the fire though, as recent research shows that the UK’s major telcos are lacking competition when it comes to quality of service.
Which?’s survey of 4,000 broadband customers found the UK’s biggest telcos to be lacking when it comes to speed, reliability, value, and customer / technical support.
With significant price hikes rolling in, Rocio Concha, Director of Policy and Advocacy at Which? says “It’s unacceptable that the major broadband firms are hiking prices for their mediocre services by such huge sums during this unrelenting cost of living crisis.”
The UK broadband market is dominated by four main providers – BT, Sky, Virgin Media and TalkTalk – who, combined, have over 25,000,000 subscribers, or about 85% of broadband customers.
Top 10 UK ISPs by subscribers
TalkTalk was rated the “worst major broadband provider,” with the lowest ratings for technical support, customer service and broadband speed (cited by one-fifth of former customers as the reason they switched); BT’s lack of value drove away nearly four in ten former customers; Sky’s customers were most likely to experience connection problems; and Virgin Media had low ratings for customer service, technical support, and value for money – though they allow unhappy customers to switch without penalty.
Are the major telcos exploiting a captive market?
Certainly, Which?’s data shows that 46% of broadband customers have never ever switched provider, but perhaps disillusioned customers will consider one of the roughly 100 smaller altnets across the country, offering FTTP broadband to consumers and enterprises. Combined, the 10 biggest altnets cover 5.4 million premises as of this year, compared with 4.2 million premises in June 2022.
Billions of pounds have been invested in full fibre networks since 2010 from a mixture of public and private investment. Now, over 75% of UK households can access gigabit speed connections, even in areas where it would otherwise be commercially unviable, such as rural areas. Altnets will spend a combined £12 billion by 2026 on new networks, equalling the amount pledged by BT for the same period.
Which?’s survey declared Zen Internet to be the darling of broadband customers for the third year in a row, and the only Which? Recommended Provider for Broadband in 2023. Despite its more expensive tariffs, Zen’s Contract Price Promise means no price increases for the duration of its broadband contracts – something that its customers are evidently more than happy to pay extra for.
Trailing in second place for Which? recommendations is Hyperoptic (named by USwitch as one of its Broadband Providers of the Year for 2023), which also boasts no mid-contract price hikes and a price match guarantee, two features they’re trumpeting in a new campaign enticing customers “stuck in contracts that often give them slow and poor-quality internet.”
These are just two of the many smaller altnets shaking up the broadband market, taking advantage of the crisis of confidence in larger providers. It’s estimated that, by 2027, the 10 biggest altnets in the UK combined will have connected around 30 million premises to full fibre, and alternative infrastructure provider CityFibre alone is on its way to reaching 8 million premises by 2024, putting it almost on equal footing with Openreach.
Rebel Internet, whose CEO, Tucker George, has called for a “rebellion” against the “broken” state of broadband in Britain, an issue “quite specific to the UK, because none of these companies specialise in home internet,” unlike the altnets.
Big telcos may have the clout to offer discounts and bundles on TV or landlines, but with a growing number of households shunning these relics, soon, their only differentiator versus the altnets will be vastly inferior service.
Rapid network overbuild has left the UK fibre market at saturation point though; according to Ofcom’s Connected Nations 2022 report, 6.4 million (21%) residential premises can access two or more gigabit-capable networks. Combined with the recent rise in interest rates, this means that there are unlikely to be many more new players on the altnet scene.
In fact, the market has entered a period of consolidation, as those unable to reach sufficient penetration on their own, or deployed into oversubscribed areas, will be gobbled up by larger altnets. It’s clear that many altnets have room for some fibre in their diet, with CityFibre acquiring Yorkshire-based FibreNation, and CommunityFibre acquiring Box Broadband to create two relative giants in the altnet space, and the consolidation of Jurassic Fibre, Swish Fibre, Giganet and AllPoints Fibre into a single entity.
Philip Jansen, chief executive of BT, has warned: “If you add up all of the activity… not many of these companies will make enough money to survive.”
Small altnets may be ripe for takeover, but predictions of a wave of altnet collapses as inflation picked up last year were vastly overstated. However, as global economic uncertainty continues, altnets (and their investors) might have to reconsider their plans.
Nonetheless, the government still has contingencies in place to name BT the Supplier of Last Resort for customers of any altnet that went bust, taking up the running until customers are migrated to its own network, as was the case with customers of collapsed energy firms being moved to E.ON.
However, BT has been accused of abusing its position and threatening wider competition in the broadband market with a new pricing scheme, Equinox 2, for providers using its Openreach network. This scheme had been “provisionally approved” by Ofcom, pending an extended review. But altnets fear that Equinox could reduce the amount of competition in the broadband sector, effectively locking in ISPs to BT’s network with major discounts.
CityFibre Chief Executive Officer Greg Mesc has accused BT of “exhibiting a series of behaviours straight out of the playbook of a dominant operator using its market power and advantages to maintain its dominance… [it] must not be allowed to strangle competition before the fibre market reaches maturity.”
No altnets have the geographic coverage or subscriber count – and certainly not the marketing – to truly challenge the incumbents, though with a combination of good service and a solid geographic concentration, altnets can certainly thrive, as is the case with KCOM, the tenth largest ISP in the country, despite only covering the Hull region.
However, it’s price, rather than speed or freebies, that will prove the key differentiator for providers – both big and small – looking to stand out from their competitors. As demand for fibre continues to grow and customers are increasingly squeezed financially, could an Open Access Network (OAN) model unleash new opportunities for altnets?
In Denmark, OpenNet acts as an open-access aggregator, bringing together multiple infrastructure owners and service providers through a single, wholesale platform.
This enables smaller service providers to offer coverage across multiple fibre networks without them needing to build or own the infrastructure far from their home turf, resulting in a faster time-to-market in new areas and without excessive overbuild, while the infrastructure owners benefit from increased use of their networks, funding further fibre rollouts in underserved areas.
For customers, this means increased network coverage, and a fair and transparent choice of service providers, driving down prices thanks to increased competition.
Can the UK’s monolithic national telcos shake off the cobwebs and keep up with nimbler altnets before they begin to lose custom? And could Open Access Networks keep the UK from becoming a fibre swamp?
Update [07/05/2024]: a recent Freedom of Information Request by Broadband Genie has revealed that, last year, complaints about UK telcos to Ofcom rose by 37% last year to 34,000, with altnets beating the Big Four telcos for customer satisfaction.
Update [25/07/2024]: Recent research from Moody’s says that the altnet sector is to face "headwinds" with more mergers likely, and that take-up remains low compared to across Europe.
Read our OpenNet case study to find out how Cerillion’s BSS/OSS suite is powering Denmark’s open access network model.