The telecommunications industry, specifically fixed broadband, has experienced cyclical market trends over the past twenty years. These fluctuations have been marked by significant shifts in market share and the emergence of disruptive, smaller firms. This dynamic has been driven, in part, by four key stakeholders:
- Governing Bodies: Ensuring compliance of regulatory standards, and spurring competition where necessary.
- Network Builders: Organisations dedicated to building out the telecommunications infrastructure.
- Network Operators: Those that leverage this infrastructure to provide a service to consumers (Broadband, Roaming, Phone Signal)
- and End-users: whose demands shape the evolution of the infrastructure and services being rendered.
Efforts such as Project Gigabit highlight the governments’ role in combating structural challenges within the industry, especially regarding Barriers to Entry. With the aim of democratising access to fibre optic broadband across the UK, billions of pounds worth of investment was committed; This initiative, among others, has been a driving force in the doubling of market share held by ‘alternative networks’ since the 2008 financial crash, a period since characterised by its near-zero interest rate policies (ZIRP).
Such economic conditions gave smaller network builders the activation energy required to roll out new lines rivalling those of incumbents. However, as of 2024, the landscape has shifted, with a resurgence of the adage ‘cash is king’, amid uncertainties in capital markets. Investors, previously eager to support new entrants, are now more cautious of burn to build businesses, instead now favouring those with positive cash flows. A key metric during this period was ‘premises passed’, which served as a north star and public demonstration of progress. However, with the recent shift, growth-led metrics have become less relevant with companies now prioritising the number of active network subscribers, demonstrating their commercial viability.
This change leaves smaller network builders, previously reliant on ZIRP-era investments, at a crucial juncture: Either start generating revenue through a consumer-facing business model; or exit, selling their assets to entities capable of doing so. This pivotal moment underscores the evolving nature of the telecommunications industry. With countless roll-out projects being paused or scrapped altogether many are calling for further consolidation within the market.
The repercussions of these industry shifts are increasingly impacting end-users, who are finally feeling the brunt of the levered burn-to-build approach. The government-led Gigabit Broadband Voucher Service, initially established to offer vouchers to consumers in areas not yet reached by Gigabit networks, has started to scale back its support. This reduction not only diminishes the financial incentives for smaller firms but also restricts consumer choice, preventing them from using vouchers to support their preferred providers. As this initiative retracts, it symbolises a broader trend of recalibration within the telecommunications sector, where the balance between innovation, investment, and consumer empowerment is cycling back to a period reminiscent of that pre-2008.
