Competing for turf and talent drives out creative challengers
The rate of overbuilding by a duopoly of dominant UK telecoms providers is a threat to healthy competition and creates a suffocating atmosphere of sterility, warns the boss of challenger infrastructure builder CityFibre. CityFibre founder and CEO Greg Mesch said overbuilding, particularly by the dominant duo of Openreach and Virgin Media O2 (VMO2), might give the UK consumer more choice but there won’t be much differentiation. This ‘broadbland’ effect, AKA the commoditisation of fibre, will ultimately kill creativity in the networking industry, he warned.
It’s OK to Upgrade
Mesch told a Connected North 2022 conference that while it’s understandable that VMO2 and Openreach need to upgrade their network, their private battle for superiority will become the only game in town and the ‘pitches’ will eat up all available space. This domination will crush creativity and create a culture of un-nervation, Mesch said. According to a report by IT Pro, Mesch outlined a tit for tat war. “The only overbuilding is by Virgin,” said Mesch, but suddenly that provokes Openreach into a: ‘me too, I’m fibre first’ response. “Which is fantastic for you UK citizens,” said Mesch, “But to be very, very clear, the world will not look very good if it’s re-monopolised and the only providers are these two. It won’t look good again.” Mesch defined overbuilding as the practise of builders like Openreach and VMO2 flooding an already active market to spite the opposition. The increase in activity hoovers up all the available network building talent and makes it hard for challengers like CityFibre to compete on the labour market and the cost of network building is prohibitive.
“It’s not something that’s concerning us at the moment,” said Paul Kells, director of network strategy and engineering at VMO2. Kells said the network builder’s rate of overbuilding is currently at 30%, but the situation is being monitored “very closely”. CityFibre’s Mesch also claimed the incumbent broadband providers in the UK had no investment plans for fibre infrastructure before new entrants to the market shook them out of their complacency.
In answer to this charge, Openreach’s fibre and network delivery MD Matthew Hemmings claimed that his company had focused on delivering widely available superfast broadband before targeting fibre builds. “We’ve been investing billions in our network for years,” said Hemmings. “We focused on Openreach, not BT. Openreach has taken our network as fast as we can, and we delivered Superfast for over 95% of the UK.”
Hemmings claimed Openreach achieved one of the ‘fastest Superfast roll outs’ in the world. “We think it brought greater availability to a broader population as possible in a very quick timeframe. Now we agree the future is fibre and we’re getting on with building fibre across the UK as possible,” said Hemmings. Mesch said that Ofcom needs to ensure challenger providers survive “because as long as we survive, they will invest massively”. The UK’s service-based economy is reliant on internet delivered by pure fibre infrastructure and to maintain a strong digital economy, strong internet needs to be prioritised through the enabling of competition, said Mesch, who is CEO of a ‘pure fibre’ installation company.
Driving up wages
Mesch suggested that competition is also under threat given the prohibitive cost of building new networks. All panellists at the Connected North 2022 event – from Openreach VMO2, and CityFibre – agreed that a shortage of skilled labour is driving up the costs of building. “We definitely are competing with Virgin and Openreach all the time for labour resource, and we’re doing something that’s silly, which is: pay them a little more. We’re just chasing around the same labour pool and we’re driving up wages, and it’s, you know, nutty stuff,” said Mesch.
Openreach’s Hemmings said his company is trying to bring in 4,000 new workers every year. “We’ve got butchers, bakers and candlestick makers coming into our trading schools and 17 weeks later, they’re coming out and then we’re putting them in the field and turned them into fibre joiners and cablers,” said Hemmings.