The recent partnership between CityFibre and Sky has sparked varied reactions about its implications for the UK’s broadband market, especially for the incumbent, BT. Following the announcement, BT’s share price took a significant hit, dropping 8% and leading to a £1 billion loss in its market value.
Despite the initial market reactions, some analysts argue that the deal may not drastically harm BT. According to the Financial Times, the arrangement with CityFibre will “complement rather than replace” Sky’s existing relationship with BT’s Openreach. The deal extends Sky’s services to areas not covered by Openreach but doesn’t appear to involve shifting many existing Sky customers to CityFibre’s network.
Graeme Oxby, Chief Executive of Community Fibre, echoed this perspective. Speaking to the Telegraph, he stated he doesn’t believe the deal will be “devastating” for BT. He noted that altnets’ market entry was partly due to BT’s “slowcoach approach to fibre rollout.” Quickline CEO Sean Royce added that BT’s focus on BT Sport and the acquisition of EE distracted it from its fibre build, allowing altnets to seize the opportunity.
However, it should be noted that Openreach has been catching up. Their full fibre rollout now covers 46% of UK premises, with plans to reach 76% by 2026. This development introduces more direct competition, putting pressure on altnets to become profitable. While altnets have collectively passed around 13 million premises with full fibre, Openreach has already reached 15 million. CityFibre, the largest altnet, has managed to cover 3.8 million premises.
Despite these challenges, the CityFibre–Sky deal signals confidence in altnets, especially larger ones. Oxby remarked, “We think there’s quite a lot of interest from the bigger ISPs to migrate from Openreach to other full-fibre providers when they can.” He emphasized that the desire for better service at a lower cost is a significant factor driving this shift. This dynamic allows these providers to offer competitive prices and higher margins.
In conclusion, while the new partnership between CityFibre and Sky is unlikely to pose a severe threat to BT and Openreach, it does emphasize the growing confidence in alternative networks. This development highlights the competitive landscape in the UK’s broadband market and sets the stage for further advancements in fibre connectivity.
