Alternative Network Providers, or Altnets, are facing a difficult path ahead as they navigate multiple challenges in the market. With competition from large, more established competitors such as OpenReach, macroeconomic conditions, customer acquisition challenges, and new regulations from OFCOM, Altnets need to find ways to be more efficient in building and providing a differentiated customer experience.
The impact of competition and regulation on Altnets
In recent months, consolidation has been a major trend in the telecoms market, with the potential bid by VMO2 for CityFibre being a prime example of this movement.
Right now, some of the most immediate barriers to entry for Altnets include:
- Reduced fibre prices from BT
- The ongoing consultation with OFCOM on the Equinox 2 plan, a significant discount plan for gigabit-capable wholesale fibre to premise.
These barriers put pressure on Altnets to compete and may impact their ability to sustain their rollout acceleration.
How interest rates and inflation are impacting Altnets
Rising interest rates make it difficult for Altnets to raise more investment and growth capital at the stages when it’s needed most, and higher inflation means higher build costs for fibre. As a result, investors will start revisiting their business cases and consider how these changes have impacted their return on investment (ROI).
There is also a risk of overbuild in high-potential areas where multiple providers are trying to gain first-mover advantage. This may lead to more competition and make it more difficult for Altnets to identify opportunities for customer growth.
Altnets and customer acquisition challenges
Another major challenge for Altnets is customer acquisition, which requires extensive marketing spend and extensive coverage. However, Altnets are focused on rolling out fibre, which often diverts spending towards building a digital experience: aiming to improve customer acquisition and enhance customer experience.
New regulations and their impact on Altnet revenue
OFCOM has added new regulations, such as The One Touch Switching (TOTSCo) platform, which will be made available in the near future. The cost of switching will be borne by the Communication Service Providers (CSPs), which may impact smaller players who will either have to pass the cost to the customer or absorb it, leading to increased pricing or margin impact.
Scaling, simplifying, and securing the business with basic business and operational support platforms will also become challenging for some Altnets with minimum investments in these areas. Therefore, it will become necessary for Altnets to define their target architectural roadmap to address these challenges.
The path forward: efficiency, strategy, partnerships
In light of these challenges, Altnets should focus on finding more efficient ways to build, maintain, and provide a differentiated customer experience to improve their revenue and profitability. NTT DATA can help Altnets build secure, scalable, and efficient businesses with its expertise in building and transforming telecom businesses.
These are challenging times for Altnets and the industry. OFCOM will have to be prepared for any impact on the end customer if any of these companies fail in the coming months or years. However, with the right strategies and partners, Altnets can overcome these challenges and emerge stronger in the market.
Choose the right partner
While many of today’s challenges are common to all businesses, NTT DATA understands that every organisation is different. We work in close partnership with clients to design a digital approach that aligns with your unique business goals.
Your business could accelerate out of the recession ahead of the competition, and NTT DATA can help. As a first step, we’d like to set up a workshop to identify the best ways to support your objectives.
Please get in touch to find out more.