BT Faces Customer Exodus as Sky Partners with CityFibre, Warns Rival CEO

The UK broadband landscape is undergoing significant changes, with BT potentially facing a substantial loss of customers following Sky's partnership with CityFibre, according to Graeme Oxby, CEO of Community Fibre. This development highlights the growing competition in the telecommunications sector and the increasing importance of alternative network providers.

Oxby anticipates that more Internet Service Providers (ISPs) will seek partnerships with alternative networks, particularly in rural areas, as they look for options beyond BT's Openreach network. He stated, > "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."

[[Community Fibre CEO's perspective]]

The Sky-CityFibre deal, set to commence in 2025, has been viewed as a significant blow to BT, which considers Sky its largest wholesale customer. The announcement resulted in a £1 billion reduction in BT's market value. However, industry analysts have adopted a more cautious stance, noting that the commercial impact on BT may be limited, as Sky plans to utilize CityFibre's network primarily in remote rural areas not currently served by Openreach.

While Oxby does not believe the deal will be "devastating" for BT, he emphasizes the growing willingness of major ISPs to diversify their provider options. This trend could lead to increased competition and potentially better services for consumers.

The UK government has set an ambitious target for nationwide gigabit-capable broadband by 2030, highlighting the importance of expanding high-speed internet access across the country. This goal has spurred the growth of alternative network providers, or "alt nets," which are challenging established telecoms companies.

Virgin Media O2, the UK's second-largest broadband network, is also facing challenges. Oxby noted that dissatisfied Virgin Media O2 customers have been relatively easy to attract, citing high prices and poor service as common complaints.

The alt net industry, despite its growth, is grappling with its own difficulties. Rising interest rates have put pressure on the debt-funded business model common in the sector. This financial strain has led to predictions of consolidation within the industry, as larger players may look to acquire struggling competitors.

Community Fibre, which is approaching 300,000 customers on its London network as of August 2024, has taken a cautious approach to consolidation. Oxby emphasized the importance of strategic decision-making in this area, stating, > "Our view of consolidation is that you don't want to rush into it. You want to do consolidation that's strategically correct. Just being big for the sake of it isn't necessarily the right thing."

As the UK broadband market continues to evolve, the competition between established players like BT and Virgin Media O2 and emerging alt nets is likely to intensify. This rivalry could potentially lead to improved services and more options for consumers, particularly in underserved rural areas.