Building the future of Digital Connectivity in the UK

We previously considered the key role of digital infrastructure and connectivity as the foundation for economic growth in the UK, focusing on the opportunities to capitalise on this connectivity and the continued coverage, collaboration and commitment required. The Connected North 2025 conference considered the current lay of the land within the UK telecommunications sector. In this blog, we set out the key themes and our takeaways.

1. Coverage

The focus of the 2024 Connected Britain conference was to capitalise on the construction of the upgraded connectivity coverage from the rapid expansion by altnets and operators, propelled by industry, government subsidy and innovation.

Widespread adoption of high-quality standalone 5G remains a key issue and the Government's target for gigabit fibre for 2025 is 85%, with Ofcom predicting 97% coverage by May 2027. Innovation will continue to be the key for the remaining connection and to ensure digital inclusion in the most challenging rural communities.

While 5G coverage has been slower to advance, this continues in earnest, facilitated by the £36 million 5G Regional Programme fund and £40 million UK Telecom Network fund. Project Gigabit continues to be rolled out in England and with the first Scottish lot now awarded, progress is well underway.

It was reaffirmed that substantial progress has been made towards these goals, with other schemes (such as the R100) also being deployed to deliver faster broadband, supporting Gigabit objectives across rural communities. There is an appetite to achieve this through both fibre and more innovative solutions such as satellite and fixed wireless access. This will help to achieve connectivity in more rural, hard to reach areas, where fibre is typically more expensive and challenging to deploy.

Also on the agenda is access to infrastructure and OFCOM's ongoing Telecoms Access Review, which is aimed at promoting competition and investment in gigabit capable broadband, which in turn should deliver more consumer choice and better services.

Other challenges remain as builds move into areas that present specific geographic challenges, whether that's building in national parks or SSSIs, the cost of build or explaining to local communities why operators need to use poles, rather than burying fibre below ground.

The impact on competition in the telecoms market and consolidation risks over the next 12-24 months, continue to create challenges for conversion and continuity within the altnet market.

2. Conversion and continuity of coverage

With the rapid expansion of the fixed fibre network, overbuild, competitive tension and challenging investment environment means that conversion and continuity has lagged behind.

Moving forwards, operators will need to consider several strategies to convert network build to wholesale and retail sales. Maintaining robust network quality and reliability is crucial to retaining existing customers and attracting new ones amongst a consolidating market. INCA's State of the Altnets report indicates that altnets have grown their customer base by 35% year on year, but conversion of premises passed to customers remains the big challenge.

Focused consumer strategies that promote adoption through tailored offerings (such as hyper locality) and advanced services may drive user engagement and satisfaction. Consumer strategies (for example which focus on a niche role, investing in customer services and community projects), open access and collaboration on network infrastructure with other providers can be used to expand network reach, improve scalability and leverage shared resources.

In rural areas, conversion is often easier, as operators are often deploying fibre for the first time. Access to gigabit broadband can help to tackle place-based inequality and bring real tangible benefits to communities. The trick is to capitalise on awareness and interest at the point of build – not waiting until months later to start marketing.

Embracing the national digital switchover (with copper landline and 2G decommissioning scheduled to start in Spring 2025 and end by January 2027) also presents an opportunity for operators to gain greater insight into consumer needs and market trends, positioning their networks to meet future demands effectively. Understanding where the gaps are, engagement with key stakeholders is necessary to stimulate growth and sustainability of connectivity.

3. Challenges to conversion and roll-out

While the approach over the last 24 months has been to "make hay while the sun shines", the existence of a network does not necessarily mean competitive power or market share.

As the market consolidates there is a concern that the market remains competitive. Clarity from Ofcom regarding what levels of competition may trigger deregulation and flexibility of pricing would be helpful to better understand the parameters within the market and to ensure that the progress to date is not undermined.

The key challenges remain: consolidation and challenging investment markets. With 32 contracts awarded to altnets under Project Gigabit , they have contributed to rapid expansion of the fixed fibre network and alternative connectivity in local areas. While this may challenge incumbents and improve customer choice, overbuild, competitive tension, a challenging investment environment means that consolidation will continue to be an inevitable within the sector. Consolidation in the market is therefore continuing, most recently with CityFibre acquiring the fibre network assets of Hull based altnet Connexin, which may give an indication of the deal structure for future market consolidation.

Consequently, we were interested to hear investor insights about opportunities within the market but also how consolidation may be presenting new challenges, such as overcoming operational integration challenges, IT challenges (eg. operational blind spots, data silos and scalability constraints for operators and altnets post consolidation).

Other challenges facing alnets include: the risks from Ofcom's Telecoms Access Review, the regulatory framework (such as network security, resilience and online harms), overbuild, acquiring new consumer or wholesale subscribers, sharing infrastructure, one touch switching, planning street works, obtaining planning consents, securing wayleaves and accessing land.

4. Consumer focus

As we have discussed previously, collaboration has been fundamental to the strides taken to ensure continued and consistent connectivity and that customers concerns are addressed. Consumer focused initiatives include one touch switching, terminology and pricing transparency and banning inflation linked pricing. Social value, accessibility and affordability are ongoing issues and we look forward to hearing the role of regulation in the wake of political change and how this may affect competition and consumer protection.

With the switch off of copper lines and 3G/2G, addressing the knowledge gap will be vital in ensuring the most vulnerable and remote communities are not disadvantaged. Awareness of the technology available and connectivity, a skilled workforce that understands and is engaged with their customer will assist the delivery of this objective. A comprehensive community-focused approach that promotes inclusion and ensures fairness and equality for everyone across all regions of the UK is required.

Especially in the health and social care sectors, where the dependency on connected devices is high, providers will need to consider the impact of the switchover on consumers. Identifying vulnerable users and adopting a similar approach to other utilities providers (eg. vulnerable user registers) should be considered by regulators and operators. For example, finding out who will be affected, communicating the impact and what will and will not be included in the service going forwards (eg. battery back-ups) will be increasingly important as those legacy networks are switched off. This will require collaboration between the industry, regulators, local authorities and care providers.

How this information is shared and accessed, whether this is achieved via cross industry database on vulnerable customers, who will manage such data and ensure only necessary data is shared will be a key consideration. Priority services register is well established in energy. Telecoms is way behind but if that could be utilised then that would have made a substantial difference - ensuring only necessary data issues shared.

5. Collaboration and creativity to tackle digital divides

Collaboration and innovation are essential in addressing the digital divide in the UK.

From grass roots to local authority to the private sector operators, collaboration is required to develop, deploy and maintain connectivity. Collaborative initiatives aimed at fostering inclusive skill development within businesses and communities are crucial for reducing digital poverty and empowering individuals to participate fully in the digital economy. It also ensures the Government's digital strategy is not a "mission without a flight plan".

Collaboration is an antidote to consolidation: access to assets, granular data and AI providing technical and socio-economic benefits. The development of critical infrastructure such as data centres, digital councils, smart cities, smart transport and other ways the Government, local authorities, and both wholesale and retail operators can work together to commoditise stackable use cases and allow more effective and sustainable digital deployment and other connectivity innovation.

If you would like to discuss any of the themes at this year's conference or any other matters in the telecoms sector, please contact Jennifer Murphy, Martin Sloan, Scott Logan, Lucie Barnes or Lisa Stratford of our dedicated Telecoms Team.