One of three in a series of blogs dedicated to the AltNet space.
AltNets must move fast for FTTP gains
Help from commercial and infrastructure partners to scale their fibre networks quickly in line with industry standards is critical to long term success
The telecommunications industry has always favoured scale. Its most successful practitioners have tended to be companies which have been able to quickly expand their network infrastructure and coverage to reach as many potential customers as possible in a short space of time.
The rule is just as relevant for alternative network providers (AltNets) as it is for incumbents, perhaps more so given their comparative lack of fibre optic cabling in the ground. But a favourable outcome also relies on sourcing large amounts of cash needed to transform Tier 3 start-ups into Tier 2 scale ups, either from private equity funding or government grants, or a combination of both, and working with infrastructure partners which can help them on their journey over the long term.
CityFibre delivers benchmark
A prime example is CityFibre, the wholesale only, carrier neutral operator handsomely backed by private equity funding from some of the world’s largest investment houses, including Goldman Sachs’ West Street Infrastructure Partners and Antin Infrastructure Partners. Its latest £300m cash injection came from existing shareholder Mubadala Investment Company just last month [March 2022], taking the total CityFibre has raised in just the last six months to over £1.4bn.
It is that sort of money which is needed to finance CityFibre’s ongoing £4bn UK investment programme, designed to deliver full fibre infrastructure covering 8m homes by 2025, with deployments underway across 60 metropolitan areas spanning 285 UK cities, towns and villages. And the company’s wholesale only focus is key to the pace of that expansion.
CityFibre works with a multitude of retail fibre broadband providers and Internet service providers (ISPs) which offer business and consumer services of their own using its underlying infrastructure – its partners include everyone from national carriers like Vodafone, Zayo and TalkTalk Business and SW Comms to managed service providers like Exponential-E, Redcentric, Daisy Communications and ITPS.
Housing partnerships aid scale ups
Other Tier 2 AltNets do offer broadband services of their own, but like CityFibre have also forged astute partnerships with property owners/developers and local government bodies which help them quickly scale up their proposition to reach large volumes of potential customers. Community Fibre took seven years to become the largest fibre-only network in London for example, aided by a close collaboration with the capital’s landlords which saw the AltNet gain access to nearly half of the city’s multi dwelling unit (MDU) properties.
Reports suggest Community Fibre has already upgraded 300k homes and is on track to pass 1m consumer and business premises by 2023. The acquisition of Box Broadband in August 2021 extended the provider’s coverage into Greater London, Surrey, West Sussex and other parts of Southern England, with up to £500m of funding provided by backers Warburg Pincus and DTCP which brought a controlling stake in the company the previous year.
Another tier 2 AltNet – Hyperoptic – offers fibre broadband in 57 towns and cities across the UK and has plans to reach 5m homes by 2024. In January 2021, it inked a deal with Barratt Homes to install gigabit fibre broadband at all of the housebuilder’s new homes, having forged similar arrangements with over 250 developers and 50 local councils in the last decade. Hyperoptic is backed by Kohlberg Kravis Roberts & Co (KKR) after the global private equity group took a majority stake back in 2019. KKR has a proven track record in backing European telcos, owning German fibre broadband provider Deutsche Glasfaser and having worked with Telxius (Spain), Altice (France).
Support the move to XGS.PON
Ready access to funding and partnerships that ease fibre infrastructure deployments are not the only pre-requisites for Tier 2 AltNets. They also have to work with the right equipment suppliers, particularly those that can support an inevitable upgrade from GPON optical technology to higher capacity versions such as XG.GPON and XGS.GPON which can help them quickly reach more customers by enabling longer transmission distances (100km vs 60km).
XGS.XPON for example offers 10Gbit/s of symmetric bandwidth that provides greater headroom for ISP partner aggregation and future data traffic growth. Declining equipment costs for optical line terminal (OLT) cards and optical network terminal/optical network unit (ONT/ONU) devices is also boosting the technology’s return on investment (ROI) appeal amongst AltNets – Dell’Oro Group estimates that while XGS-PON accounted for 15% of the overall PON market in 2021, that figure will swell to 55% by 2026 as more with North America and parts of Europe seeing widespread adoption.
Working with suppliers which can help integrate those fibre networks with wireless technologies like fifth generation (5G) mobile is also important for many Tier 2 AltNets. CityFibre for example does a roaring trade offering wholesale backbone fibre connectivity for mobile network operators (MNOs) rolling out 5th generation (5G) infrastructure. Networking specialists like Adva can help an AltNet make the best use of available capacity and wireless frequency spectrum by synchronising their transport networks to deliver high speed, low latency mobile bandwidth to much larger numbers of mobile devices concurrently.
It’s crucial that infrastructure partners have the resources to take an AltNet on its intended journey over the longer term. And that also includes helping them make greater use of virtualisation, software defined network access, automation and artificial intelligence (AI) in the network to simplify provisioning, management and maintenance and reduce administration costs essential to the business model and ROI strategy.
Adherence to industry standards when in it comes to designing, building network infrastructure also make AltNets easy for their retail and telco partners to deal with, a must when it comes to quickly finding and onboarding customers to their networks. Competing against the scale of the FTTH/FTTP infrastructure already in the ground from the likes of BT Openreach and Virgin Media is no easy challenge for Tier 2 AltNets, so working with partners able to provide the network engineers, support staff and consultants to even up the contest is paramount.