Vodafone has the fibre to challenge Openreach-Virgin duopoly
Competitor in full-fibre broadband race resorts to trench warfare
Laying much-needed fibre connections direct to Britain’s homes (FTTH) has been made a lot easier. A new vehicle, not unlike a very small tractor, can now roll along the side of the pavement and cut a small “microtrench” into the tarmac — removing the need to dig up the whole road. It can even go round corners, and cul-de-sacs.
Vodafone evidently approves of the principle. Because it seems to have found an equally efficient way of breaking up BT Openreach’s and Virgin Media’s near duopoly, without recourse to a regulatory pickaxe. It could even result in a U-turn in the way future infrastructure is funded.
On Thursday, Vodafone said it was entering a long-term strategic partnership with CityFibre — driver of those tiny tractors — to bring ultrafast full-fibre broadband to up to 5m UK homes and businesses by 2025. Under a capital expenditure programme of £500m-£700m, CityFibre will build a fibre network in 12 cities, which Vodafone will market and use on wholesale terms.
They described it as “one of the most significant developments in UK telecoms since the launch of ADSL broadband around 17 years ago. Its real significance, however, may be in how it challenges the dominance of BT Openreach in the next 17 years.
Vodafone and City Fibre are effectively parking their little tractors on Openreach and Virgin Media’s front lawn — by creating a third competitor network in second-tier cities across Britain. Openreach had been in talks with Vodafone and others about teaming up to deliver more fibre to the home — after much groundwork by regulator Ofcom. But, judging by the language used today, Vodafone does not exactly dig Openreach’s plans. Its UK chief executive Nick Jeffery said the country was “trapped by the limited choice available on legacy networks” and suggested CityFibre’s was the network Britain “needs and deserves.”
It seems to come down to copper — and brass. Vodafone wants Openreach to stop scraping as much cash as it can from its old copper wire assets and invest more heavily in fibre. Openreach has instead proposed that it fund a further FTTH buildout by raising wholesale prices for customers such as Vodafone.
With its CityFibre deal, Vodafone shows there is an alternative. However, it is not a complete alternative: even if it goes from 1m FTTH connections by 2021 to 5m by 2025, that is only 20 per cent of the country. Openreach has pointed out that it is well on the way to 2m connections already, and is actually investing £1.6bn a year. It will deliver its more detailed proposals for funding a wider fibre rollout before Christmas.
Still, if Vodafone and CityFibre’s little tractors gain traction, they may show the industry — and the regulator — that higher wholesale prices are not the only route to broadband customers’ doors. There are other ways to change the telecoms landscape.