The State of UK Fibre

This report unravels specific market characteristics that are making it challenging for some alternative network operators to create sustainable business models. We highlight the need for consolidation and the importance of avoiding overbuild in rural areas, given the economics of the UK fibre business case.

Key takeaways:

• While builds and business models vary, achieving a return on capital employed of 10% typically requires over 40% take-up for a wholesale operator in urban areas, rising with cost of build towards 100% take-up in rural areas, with some also needing public funding support.
• Consolidation is needed to drive economies of scale though our scenario analysis shows that there remain many moving parts to the M&A trajectory. We can still envisage a range of long-term outcomes on a 10-year view of the market.
• Ofcom’s proposals for Openreach’s copper switchover programme risk uneconomic overbuild in rural areas by setting a fixed percentage of fibre coverage that Openreach must achieve for each switchover exchange. We estimate there could be up to 1m premises in rural areas with a risk of uneconomic overbuild through this framework.
• Copper switchover solutions could include alternative networks or technologies in Openreach’s coverage thresholds or to refocus the regulatory framework onto solutions for remaining copper customers rather than coverage.

This report includes:

• UK fibre footprints, overbuild and take-up
• ISP market shares and retail pricing
• Alternative network fibre economics with sensitivity analysis
• Key events historic timeline
• Recent M&A and outlook scenarios
• Analysis of fibre coverage in rural areas and overbuild risk
• Alternative solutions and scenarios for copper switchover

This report was commissioned by Gigaclear Limited. Cartesian retained full editorial and analytical independence; the analysis, opinions and recommendations are those of Cartesian alone and do not necessarily represent the views of Gigaclear. Nothing in this report should be attributed to Gigaclear.