Alternative network providers (altnets) are facing tough competition from the big players in the UK broadband market, with consolidation likely in the face of slowing growth in fiber internet uptake.

So claims Neos Networks, which itself operates a fiber network spanning much of mainland UK. Its report says that almost all altnets are considering mergers or partnerships with other service providers, and looking to diversify their businesses to offer other services such as smart home technology or security packages.

Its [1]report is based on a survey of 100 senior decision-makers at UK-based altnet providers, commissioned in January 2025.

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Typically much smaller firms than the big network operators like BT Openreach or Virgin Media O2 (VMO2), altnets have nevertheless been a "positive disruptive force," according to the report, attracting billions in investment to speed the rollout of fiber broadband across the country.

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But with [5]incentives from the government , the incumbents have also doubled down on their own efforts to deploy fiber-to-the-premises (FTTP), according to Neos, which has put the squeeze on many smaller operators, which are now struggling to generate the revenue needed for longer-term sustainability.

Competition between the incumbents and newcomers has seen the UK become "a patchwork of network overbuild," the report states, with premises in some areas being able to choose between three or even four providers.

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In these decisions, incumbents have the upper hand, Neos claims, with 34 percent of altnets suggesting brand awareness is the greatest challenge getting in the way of their goals.

Attacks on UK fiber networks mount: Operators beg govt to step in [7]FROM THE ARCHIVES

Over half of respondents (55 percent) said that customers being locked into an existing contract was a significant struggle for them, limiting their ability to generate subscribers where they've built their networks.

Many customers also have a bundle combining broadband with other services like TV and mobile, so switching to a broadband-only altnet provider seems like a step backwards, the report says, once again giving incumbents the upper hand.

Build costs have also been steadily rising as operators have continued expanding their footprints, while investors are increasingly using take-up as their key measure of return on investment, leading to a hesitancy to invest further. As a result, 46 percent of altnets say that it has become more challenging to access funding over the past year.

The main barriers to getting that funding, as ranked by respondents, are high interest rates, regulatory constraints, and strict lending criteria, but insufficient collateral and economic uncertainty were also cited.

Openreach overreach?

However, the regulatory concerns seem to refer mostly to a lack of sufficient regulatory intervention to counteract the "significant market power" of Openreach, the infrastructure arm of Britain's former state-owned telecoms monopoly, BT.

The report cites claims that Openreach has purposefully overbuilt in areas where a smaller operator has been awarded Project Gigabit contracts, in order to take advantage of the attention to pick up customers.

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"Our altnet partners have been very clear about some of the structural challenges that deter competition and limit private investment in key regions," Neos Networks CEO Lee Myall stated.

"As an example, they've highlighted a tactic whereby Openreach announces FTTP expansion plans for specific areas without firm deployment timelines. This strategy discourages altnets and investors from committing to those areas, as they fear being undercut by Openreach's rollout at a later stage."

[9]Altnets told to stop digging and start stuffing fiber through abandoned pipes

[10]Openreach tests 50 Gbps broadband – don’t expect it anytime soon

[11]Progress towards 'Gigabit Europe' is slow, with UK also lagging

[12]BT fiber rollout passes 17 million homes, altnet challenge grows

Many of the smaller operators have also been critical of regulator Ofcom for allowing Openreach to introduce a [13]discount pricing scheme that incentivized internet service providers (ISPs) to choose its fiber network over others.

One thorny problem altnets face is Openreach shuttering local exchanges over the next decade, as it shuts off its copper network and moves to full fiber, Neos claims. Operators reliant on these locations face finding gaps left in their networks, and fixing these will cost them £1.4 million ($1.85 million), it says.

According to the report, 96 percent of the altnets surveyed reported they were currently considering a merger, either to boost customer numbers, expand the geographic reach of their services, or to combine technologies.

However, partnering with external providers carries certain risks, Neos warns. Many altnets built their reputation as customer-focused providers, and they will need partners with the same dedication, or find they have extended their reach but at the expense of their reputation. For this reason, you might expect altnets to partner closely with their peers, yet only 36 percent plan to partner with another, the survey finds.

This is because a fiber network requires a take-up rate of 35 percent to be commercially viable long-term, according to Neos. With the average altnet take-up at just 15 percent, the math simply doesn't add up for this strategy, it says.

One industry observer who has been forecasting consolidation in the UK broadband market for some time is the Founder and Telecoms Analyst at PP Foresight, Paolo Pescatore.

Commenting on the findings of the report, Pescatore said it is "unsurprising and the longer they leave it, the worse it will be. They're all holding out for a big day!"

He added it is a "huge opportunity for CityFibre to come in and cement its position and put even greater pressure on VMO2's NetCo."

In order to survive, most are looking to differentiate themselves beyond their customer service credentials by offering additional products and services.

Smart home technology was cited by 46 percent of respondents, with enterprise connectivity a potential target for 43 percent, security services listed by 42 percent and 5G Fixed Wireless Access by 39 percent as the most common offerings they are looking to implement in the future.

The decisions made now will define the future of UK connectivity, the report claims. It states that altnet providers that evolve, integrate and innovate will not only endure but help shape the next era of digital infrastructure.

With intensifying competition, financial pressures and evolving regulatory frameworks, it's clear that these smaller providers need to adapt swiftly to secure their long term position. ®

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[1] https://neosnetworks.com/resources/blog/altnet-report-2025/

[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aBTsHkJ5ZU5Lj5W_81TiRAAAAMU&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0

[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aBTsHkJ5ZU5Lj5W_81TiRAAAAMU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0

[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aBTsHkJ5ZU5Lj5W_81TiRAAAAMU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0

[5] https://www.theregister.com/2021/03/19/uk_project_gigabit/

[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aBTsHkJ5ZU5Lj5W_81TiRAAAAMU&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0

[7] https://www.theregister.com/2024/03/12/uk_network_operators_want_government/

[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aBTsHkJ5ZU5Lj5W_81TiRAAAAMU&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0

[9] https://www.theregister.com/2025/03/03/altnet_abandoned_pipes/

[10] https://www.theregister.com/2025/02/06/openreach_tests_out_50gbps_broadband/

[11] https://www.theregister.com/2023/10/24/progress_towards_gigabit_europe_report/

[12] https://www.theregister.com/2025/01/31/bt_fiber_rollout_passes_17/

[13] https://www.theregister.com/2023/05/24/uk_regulator_openreach_discount/

[14] https://whitepapers.theregister.com/