By Niall Looney, Divisional Director, Fibre Services, Indigo
Assessing Fibre networks across the UK
The rise of alternative network (altnet) operators in the UK is a direct consequence of the government’s commitment to deliver nationwide gigabit-broadband by 2025. A vibrant market exploded around fibre to the home (FTTH) with different providers jostling for position and a piece of the consumer spend.
As a network infrastructure design and build specialist, Indigo has partnered with altnets on some of the projects that sprung up around the country. We are also being recruited by large telecom incumbents and investors looking to buy up smaller players and extend their fibre footprints. Essentially we are being asked to assess M&A (merger and acquisition) targets in a sector that is going through unprecedented change.
Bridging the digital divide
The UK is almost alone in Europe in the way it looked to achieve full-fibre national coverage. As the scale of the challenge became clearer, the government revised its target to a minimum of 85% of premises by 2025 and relied on investor-backed altnets to connect parts of the country not considered commercially viable by incumbents.
It has certainly stimulated competition. With voucher schemes and grant subsidies for bridging the digital divide in the remotest corners of the country, there is plenty of opportunity for new entrants with new business models to grow a footprint. But there are challenges, too. Competition may be sustainable in urban areas but profitability is less assured in sparsely populated parts of the country.
Even in towns, a big return on infrastructure investment is not guaranteed. Altnets plan to cover 29.9 million premises by the end of 2025, according to INCA (Independent Networks Co-operative Association), which has led to significant levels of overbuild. Some regional towns having as many as seven providers competing to connect the same households.
Watching it all are big telecoms incumbents who have a track record in successfully squeezing profits out of saturated markets. Altnets are scouts in areas they had previously neglected, showing them where demand and pricing are high enough to warrant an overbuild or an acquisition.
The decision will be influenced by many factors. Skills shortages in the telecoms industry make it hard to find the resources to build something from scratch, but buying a pre-built network is not always a guarantee of success. This is where Indigo comes in.
Not all networks are equal
We are being asked by infrastructure providers and investors to take a close look at the infrastructure of prospective takeover targets, to perform due diligence and give them independent, expert opinion on the network’s state of health and resilience.
Why us? Because we’ve spent 20 years at the coalface, designing, building and supporting fibre and wireless network infrastructure, delving into every detail, developing a granular understanding of what constitutes leading-edge infrastructure. We know there is a willingness across the industry to embrace best practice; the problem is there’s been such a mushrooming in demand that’s it hard to keep up.
In the race to rollout fibre and be the first to connect towns, there is always a risk of poorly built infrastructure. Because of current constraints on resources and training, the quality isn’t necessarily where it needs to be. There is geographical disparity with different standards in different places and varying competency levels. It’s a pinch point that the industry is doing its best to resolve with training and apprenticeship schemes, but the reality is that not all networks are equal.
Survival of the fastest
Our job is to evaluate the infrastructure and understand what has or hasn’t been done. That means looking at everything from build records and backfill materials to surface dressing. We want to see the right boxes have been ticked on compliance and a complete permit history, with rejections as well as approvals. We look at granular contract details, from the defects liability period and the length of the materials guarantee to ongoing maintenance and inspection requirements.
Network tests and connectivity checks evaluate current performance while duct space and fibre counts are used to assess future contingency. Where relevant, we looks to see if guidelines for shared infrastructure have been adhered to and if the architecture has been designed to best practice standards. We look at rollout strategies of the altnet and carry out competitor analysis to determine network penetration and uptake effectiveness.
All of this is important to an incumbent telecoms company with an M&A strategy.
Purchasing managers and investors will want to know what infrastructure they’re buying into and it’s our job to answer perhaps the single biggest question: buy or build? Will it require further investment to bring the network up to standard or is the snag list so long that an overbuild makes more sense?
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