Summary Bullets:

• UK infrastructure provider Neos Networks has published research into 100 UK alternative network (altnet) fiber providers, giving insight into altnet challenges and strategic plans.

• Altnet strategies look naïve and often unachievable. For long-term relevance, rapid consolidation cannot come soon enough – they know this and need to act fast.

UK-wide connectivity provider Neos Networks has published results of a survey of 100 decision-makers at UK altnet companies. The findings not only underline challenges faced in an overcrowded and competitive market, but also a lack of imagination when it comes to establishing differentiated market propositions.

Unsurprisingly, 96% of altnets are considering mergers, acquisitions, and partnerships. The remaining 4% are an anomaly; it is certain that consolidation is inevitable, and partnerships are key to altnet go-to-market strategies.

With 55% complaining about customers being locked into existing contracts, and 47% blaming a lack of awareness, their concerns are obvious and should have been factored into business plans. In GlobalData’s opinion, 30% penetration of covered premises is where altnets become viable. This explains why many are scaling back roll-out plans (often competing with BT/Openreach, Virgin Media O2/nexfibre, and other altnets), and focusing on customer acquisition. However, apart from new customers, churn rates are low and slow, with many customers on two-year contracts and recently converted to faster fiber. This has been a known fact, so it is astonishing that it was not taken into consideration in business plans which seem to have been predicated on infrastructure roll-out with little thought to customer acquisition.

It is telling that altnets complain about lack of awareness. Few have brands that are familiar to target customers – often any coverage they get is complaints about digging up roads and pavements. How can they possibly compete against the strength of brands like BT, Vodafone, or Virgin Media O2?

This commercial underperformance explains why 48% of altnets find it difficult to access funding. There are far too many altnets in the UK and consolidation is inevitable. However, they need money to execute their roll-out plans. With high expenditures and low revenues investors will either write down their holdings or hope that consolidation will work in their favor over time.

Finally, we come to altnets’ strategic ambitions – which again underline a lack of imagination:

• 46% plan to launch smart home technology. Really? Based on what? With whom?

• 43% will offer enterprise connectivity. Was that not already part of the plan?

• 42% will launch security solutions and packages. There’s lots of demand for security, but you need a commercial connectivity relationship first.

• 35% will start offering multi-service solutions (TV and entertainment). How? With whom?

The level of naivete in altnets’ strategies is astonishing. Building out infrastructure is their competence, but there are too many of them struggling individually. The longer they leave it to full consolidation (as per cable companies in the past), the harder it will be to compete with BT/Openreach and Virgin Media O2/nexfibre.