The telecoms landscape has been dominated in the past few months by calls from the likes of Sky, TalkTalk and Vodafone for Ofcom to force BT to turn its wholesale Openreach division into a separate entity.
The companies have argued that competition in the broadband market will never occur if BT has control over the infrastructure they have to use to sell broadband services. Ofcom, though, fell short of recommending this course of action in its recent Digital Communications Review.
But an alternative to Openreach could be on hand in the form of CityFibre, which is clearly up for the challenge.
"I can become a full blown competitor to BT Openreach," CityFibre CEO Greg Mesch (pictured) told V3.
That's fighting talk, especially given the size and scale of Openreach, which passes over 24 million homes and businesses with its UK-wide network.
Indeed, even as recently as a few months ago, Mesch's comments would have seemed tinged with hubris as the company, formed in 2011, had a presence in just 15 cities. It's a respectable position but unlikely to have Openreach worried.
But CityFibre announced a major acquisition of network assets from Kcom for £90m in December. This more than doubled its network reach into 35 towns, including Exeter, Leeds, Plymouth and Reading (see map below).
CityFibre claimed that the firm is now on track to reach 50 towns by 2020 that will provide a potential customer base of five million homes for fibre-to-the-premises (FTTP) deployments, some 20 percent of the UK market.
Senior IDC broadband analyst Fiona Vanier told V3 that the Kcom purchase was a huge moment for the firm and the wider broadband market. "The purchase of Kcom's networks has catapulted CityFibre to the forefront of this market and made it a real adversary to Openreach," she said.
Fibre is the future
CityFibre's proposition is simple: fibre. The company's networks are nothing but fibre, which gives it the speed and capacity to offer services that start from 100Mbps and go as high as 10Gbps, upload and download.
The firm sells access to these networks to commercial internet service providers (ISPs), public sector organisations and mobile phone operators for cell site backhaul.
CityFibre is also testing the viability of consumer offerings, most notably with a trial in York as part of a joint venture with TalkTalk and Sky. 900Mbps services are on offer, and TalkTalk is looking to provide this at prices lower than Openreach's (see below).
Residents in York have been understandably keen to show off their frankly obscene internet speeds.
FAST INTERNET! pic.twitter.com/EOZYTbOXSN— Sam Stow (@stowgood) January 12, 2016
Mesch said the speeds in York are examples of what 'real fibre deployments' can deliver, and as further proof the firm can challenge BT Openreach.
"Most of the population has been hoodwinked into thinking that BT is rolling out fibre when what they're really doing is rolling out fibre-to-the-cabinet and then copper to the last mile, so speeds are limited," he said.
For the time being, however, BT Openreach can boast the biggest FTTP network in the UK at around 240,000 premises, the majority of which are in Cornwall, while the firm recently announced an FTTP deployment in Bradford.
Bill Murphy, Managing Director of Next Generation Access told V3: "Far from hoodwinking people, we've been shouting from the rooftops that BT's word-leading R&D teams have pioneered G.fast, a technology which uses a mixture of fibre and copper to deliver ultrafast speeds."
Nevertheless, at 900Mbps CityFibre's offering is still faster than G.fast and if the trials in York prove viable, its offering could well become a real competitor, especially as the likes of Sky and TalkTalk are keen to pay anyone but BT.
Of course, rolling out FTTP is not cheap and the York project has involved financial input from Sky and TalkTalk as well as CityFibre to get the project up and running. It remains to be seen whether the project reaches other cities.
But the rest of CityFibre's rollouts are paid for by the company. Mesch explained that it does this by "anchoring" builds on pre-agreed commercial deals, such as in Edinburgh, to make them financially viable.
"We went into Edinburgh with two customers, one a business ISP that moved 200 of its highest use customers to our network, and the other a council with 300 schools. So this gave us 500 end points on which to anchor the build," he said.
"That's £20m worth of contracted value for between five and 20 years, against a total network build of £9m. And I'm only using a fraction of the capacity I'm installing."
Another, more recent, example of this was in Bristol where CityFibre secured a 100-customer deal with Bristol ISP Triangle Networks ahead of a rollout.
Triangle Networks managing director Paul Anslow explained that using CityFibre will have huge benefits for customers.
"As this is a pure fibre network, Triangle will launch services that are ‘Gigabit-speed-as-standard', far faster than those possible on fibre-to-the-cabinet networks that are still restricted by the limitations of copper wires," he said.
"This enables businesses to stop concerning themselves with bandwidth restrictions and start to make the most of new ways of working that will improve their experience and drive the bottom line."
Vanier from IDC believes that this wholesale model gives CityFibre major potential, especially with rival ISPs to BT crying out for an alternative to Openreach, especially in the consumer space.
"CityFibre is specifically concentrating on creating gigabit cities and in the next few years it is going to be a big player and change the market because it behaves like a wholesaler," she told V3.
"The wholesale model is the key because it means that the likes of Sky, Vodafone and TalkTalk can choose which provider they use."
All of this is likely to be welcome news to Ofcom, which has focused for years on encouraging innovation and investment in new broadband networks.
The regulator's recently published Digital Communications Review covered this issue by noting that it wants to "encourage large-scale deployment of new ultrafast networks", especially if they can be an alternative to the "copper-based technologies" being used by BT.
It wants to do this by requiring BT Openreach to open up its infrastructure to allow firms to install kit more easily than having to build entire new networks themselves.
This may not be what Sky, TalkTalk and the rest wanted, but it's ideal for CityFibre.
"With the Ofcom review forcing BT to give us rights to its infrastructure I can jump from 50 to maybe 100 cities and take the customers I have now and grow the footprint to ensure we have the scale they want," said Mesch.
This isn't a done deal yet but it could well be the fillip that CityFibre needs to scale out its ambitions once again, and would mark an impressive leap from having just 15 cities on its network to eyeing 100 in under three months.
"We are doing exactly what [Ofcom] wants in this industry: we are nimble, innovative and using private capital," added Mesch.
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