From Strategic Steer to investment reality: Real competition depends on challengers that can scale
Rajiv Datta, CEO
| nexfibre
The Government wants the UK to become the world’s leading “innovation nation”. But that ambition will remain a slogan unless competition policy allows challengers to scale and recognises the financial reality of Britain’s fragile fibre market.
The Prime Minister recently argued that barriers should not stop promising businesses from scaling. That principle must apply to infrastructure too.
In UK fibre, policymakers risk confusing the number of companies with the strength of competition. A crowded field may look healthy on a spreadsheet. But if its players lack the capital, reach and resilience to challenge the incumbent, more networks do not necessarily mean more competition.
Openreach still accounts for around 92% of wholesale broadband demand from third-party internet service providers. Altnets have invested billions in upgrading the UK’s connectivity, yet the sector remains fragmented and no challenger has achieved comparable scale.
Competitionis not to preserve the longest possible list of operators. It is to build a challenger with the reach and financial firepower to compete. Consolidation is not the enemy of competition. In a capital-intensive infrastructure market, it is the enabler of it.
Left to wither, market turmoil will continue, and the only beneficiary will be Openreach. Ultimately it will be consumers that pay the price.
The warning lights are flashing red
The fibre market is fragile, and the warning lights have been flashing red for more than a year. Building networks requires huge amounts of patient capital, often financed by debt, with returns built over decades. That capital is becoming harder to secure. Investors are retreating, build plans are all but halted, and balance sheets are under immense pressure. This year alone, lenders have taken control of two businesses, and another was sold out of administration. Across the sector, reported investor and lender losses already run well into the hundreds of millions.
Against that backdrop, there is a deal on the table that would unlock £3.5 billion of international investment, create a full-fibre network expected to reach around eight million premises by the end of 2027, and bring stability and long-term commitment to the market.
Yet that investment is at risk following the CMA’s Interim Report. Its counterfactual rests on CityFibre, the country’s most indebted altnet, emerging as the alternative buyer and continuing to attract the capital needed to consolidate the sector.
That is a heroic assumption. CityFibre is carrying £3.8 billion of debt; its finance costs reached almost £400 million last year, more than twice its £170 million revenue; and it recorded a £545 million pre-tax loss. Its own accounts warned of a “material uncertainty” over its ability to continue as a going concern. Yet the CMA’s counterfactual assumes this business can raise still more capital to fund further consolidation.
Competition policy cannot be built around a magical money tree. In a fragile market, an alternative future is only credible if it can actually be financed and sustained.
Investment has a postcode
These decisions are not theoretical. They determine whether communities receive better networks, businesses gain new opportunities and households benefit from faster, more resilient services.
More than 300 constituencies stand to receive investment and upgrades through the proposed transaction. In Greater Manchester alone, more than £44 million of planned investment would replace legacy HFC infrastructure with XGS-PON, benefiting up to 318,000 homes and businesses. Youth centres in the region are also set to receive free connectivity through our partnership with UK Youth.
That is what scale looks like on the ground: the capacity to invest, modernise networks and support communities.
A wider test of investor confidence
The stakes reach far beyond fibre. The Government’s Strategic Steer asks the CMA to enhance the UK’s attractiveness to international investment. Investors will judge that ambition by decisions, not documents.
Global capital has options. Investors will ask whether UK regulators recognise market realities, value committed funding and offer a credible route to sustainable returns. If investment ready to be deployed is held back for uncertain theoretical alternatives, the warning will travel well beyond telecoms.
Confidence is hard to build, easy to lose and difficult to regain. The UK cannot ask investors to renew national infrastructure while treating scale as a problem and capital as limitless.
Competition policy must judge markets by the strength and sustainability of the challenge they create, not the number of names on a list. If the UK is serious about becoming an innovation nation, it must let challengers emerge, scale and compete.
That is how the Strategic Steer becomes investment reality. The time to act is now.
