CityFibre CEO Greg Mesch said this week that alternative network providers (altnets) have sparked the UK's fiber push.

Mesch made the comments during the Connected Britain held in London, where he also took jabs at industry incumbents Openreach and Virgin Media O2.

Founded in 2011, CityFibre is a fiber-only provider. The company's network passes 3.9 million premises, according to Mesch, which is slightly behind Virgin Media O2's 5.3 million. Both trail Openreach, a subsidiary of BT Group, which has passed around 14 million premises.

"We are the true challenger. The altnets are the true challenger, they spark this industry," said Mesch, before taking a swipe at the two companies.

"It's not regulation that made Openreach invest like crazy, it's fear. They were scared to death that CityFibre was going to roll out fast, it's the same for Virgin. They're [Virgin Media O2] investing because they're scared we're going to roll out our network across their path, and we're going to provide better service."

He said the two companies have been "lazy" and called them a "cozy cartel."

"The spark of competition has instilled fear into the two incumbents because it was by definition a lazy duopoly that we had, and that fear has now sparked a massive amount of investment in fiber," he said.

"Now, what the government needs to do is turn that spark into a sustained flame and keep competition at the forefront, because what we have delivered is for the consumers. Consumers have now got access to gigabit lines for £30, where five years ago, it was over £100."

Last month, CityFibre struck a long-term partnership with Sky, one of the UK's biggest broadband providers. The agreement will see Sky provide broadband services on CityFibre’s full fiber network.

This led Mesch to state that CityFibre serves all of the major Internet service providers in the UK except BT and Virgin Media O2.

Consolidation is unavoidable

Discussion around consolidation within the altnet space was heavy during the event.

Mesch said that CityFibre was founded on consolidation. The company acquired Lit Fibre in May, a move that added 300,000 premises to its footprint.

CityFibre has also previously acquired other altnets, notably that of FibreNation's network from TalkTalk for £206m ($261m) back in 2020. That particular deal saw CityFibre increase its targeted rollout from five million premises to the current target of eight million premises.

One of its rivals, Virgin Media O2, has been keen to push consolidation in this market, mainly in an effort to beef up its own fiber footprint to rival Openreach.

According to Lutz Schüler, CEO of Virgin Media O2, the market is too crowded.

"There are far too many altnets out there. The business cases are not working. A lot have run out of money already and you can see that builds have slowed down," said Schüler.

He likens the market to musical chairs; the music is still playing, but once it stops there's not enough space for everyone to remain.

Virgin Media O2 was linked with a potential takeover of CityFibre last year, and through
Nexfibre, an independent fiber joint venture between Liberty Global, Telefónica, and Infravia, has sought to acquire altnets as part of plans to scale up.

Nexfibre notably completed the acquisition of UK altnet Upp last year, and plans to invest more than £350m ($440m) in Eastern England by 2026.

"Consolidation is required and the current market structure is not healthy," said Rajiv Datta, chief executive officer, Nexfibre. "I think, frankly, everyone's a bit surprised that it's taking as long as it's taking for some of that consolidation to take place.

"I think that's related in some part, through the process of financial investors and of the many altnets that are out there reconciling their value expectations versus realities that they see in the execution of their business plan."

Datta agrees that the fiber build-out has slowed down, noting that eventually, altnets will need to invest further Capex to drive penetration.

"I do think that those times are going to come where you see an acceleration of activity around consolidation," he added.