Alternative network providers (altnets) are facing tough competition from the big players in the UK broadband market, with consolidation likely in the face of slowing growth in fiber internet uptake.
So claims Neos Networks, which itself operates a fiber network spanning much of mainland UK. Its report says that almost all altnets are considering mergers or partnerships with other service providers, and looking to diversify their businesses to offer other services such as smart home technology or security packages.
Its report is based on a survey of 100 senior decision-makers at UK-based altnet providers, commissioned in January 2025.
Typically much smaller firms than the big network operators like BT Openreach or Virgin Media O2 (VMO2), altnets have nevertheless been a “positive disruptive force,” according to the report, attracting billions in investment to speed the rollout of fiber broadband across the country.
But with incentives from the government, the incumbents have also doubled down on their own efforts to deploy fiber-to-the-premises (FTTP), according to Neos, which has put the squeeze on many smaller operators, which are now struggling to generate the revenue needed for longer-term sustainability.
Competition between the incumbents and newcomers has seen the UK become “a patchwork of network overbuild,” the report states, with premises in some areas being able to choose between three or even four providers.
In these decisions, incumbents have the upper hand, Neos claims, with 34 percent of altnets suggesting brand awareness is the greatest challenge getting in the way of their goals.
Over half of respondents (55 percent) said that customers being locked into an existing contract was a significant struggle for them, limiting their ability to generate subscribers where they’ve built their networks.
Many customers also have a bundle combining broadband with other services like TV and mobile, so switching to a broadband-only altnet provider seems like a step backwards, the report says, once again giving incumbents the upper hand.
Build costs have also been steadily rising as operators have continued expanding their footprints, while investors are increasingly using take-up as their key measure of return on investment, leading to a hesitancy to invest further. As a result, 46 percent of altnets say that it has become more challenging to access funding over the past year.
The main barriers to getting that funding, as ranked by respondents, are high interest rates, regulatory constraints, and strict lending criteria, but insufficient collateral and economic uncertainty were also cited.
Openreach overreach?
However, the regulatory concerns seem to refer mostly to a lack of sufficient regulatory intervention to counteract the “significant market power” of Openreach, the infrastructure arm of Britain’s former state-owned telecoms monopoly, BT.
The report cites claims that Openreach has purposefully overbuilt in areas where a smaller operator has been awarded Project Gigabit contracts, in order to take advantage of the attention to pick up customers.
“Our altnet partners have been very clear about some of the structural challenges that deter competition and limit private investment in key regions,” Neos Networks CEO Lee Myall stated.
“As an example, they’ve highlighted a tactic whereby Openreach announces FTTP expansion plans for specific areas without firm deployment timelines. This strategy discourages altnets and investors from committing to those areas, as they fear being undercut by Openreach’s rollout at a later stage.”