Vodafone and CityFibre agree partnership on FTTP broadband

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The deal will see Vodafone investing in the expansion of CityFibre's FTTP network in exchange for the exclusive right to sell broadband subscriptions to the expanding network.

This deal is for a limited time only, yet both providers have given themselves the option of extending it to an additional rollout that could bring another four million sites in touching distance of FTTP broadband by 2025.

Yet while it looks set to increase competition and choice in the area of ultrafast, FTTP broadband, its influence on the market for residential broadband may be slight, since only a portion of the million connections will be to homes.

Terms and conditions

The deal comes after Vodafone had previously announced their desire to move into FTTP broadband, and after it had been reported they might co-invest in Openreach's growing ultrafast network.

It finds Vodafone providing CityFibre with a "minimum volume-based commitment for 10 years which increases over the period to 20% of the initial one million premises".

More simply, it means that Vodafone have promised to pay for wholesale access to at least 20% of FTTP connections on the network CityFibre will be building.

This provides CityFibre with a guaranteed return in expanding their network, and conversely, it also assures Vodafone a period of exclusivity on selling the connections to retail customers.

Extensions and competition

After this period, either Vodafone's exclusivity will end and CityFibre will be able to sell wholesale network access to other providers, or both firms will decide to extend their deal to 2025, by which time they would expect to have extended the FTTP network to five million premises in total.

While it's not certain they'll make it to 2025 and five million premises, both providers are already talking as if this will happen, with CityFibre's CEO Greg Mesch proclaiming how it's set to improve the state of the UK's broadband.

"This agreement will unlock the UK's full fibre future and is a major step forward in delivering our vision for a Gigabit Britain," he said.

Competition

To some degree, the optimism of both CityFibre and Vodafone is well-founded. That's because, in delivering future-proofed FTTP broadband to at least one million premises, it will not only provide customers in the targeted cities with expanded choice, but may encourage their rivals to step up their own FTTP and ultrafast rollouts.

This at least seems to be Openreach's reaction. A spokesperson of theirs responded to the announcement by saying, "We welcome this news and the competition. As we've said consistently - investing in more fibre-to-the-premises technology across the UK will need commitment from the whole industry".

And while Virgin Media haven't released an official response to the news, it's interesting to note that, last April, they vowed to provide at least one million FTTP connections as part of their Project Lightning rollout.

However, given that they upgraded this target last November to at least two million FTTP connections, it's possible that the new competition from Vodafone and CityFibre could at some point encourage them to raise their targets yet again.

UFO sightings

Yet even though Vodafone and CityFibre's agreement will obviously increase competition and choice to some degree, it's worth noting that such an increase may remain limited.

To begin with, other triumphantly announced plans to roll out FTTP broadband nationwide have failed to successfully launch an actual rival to Openreach and Virgin Media.

For example, on the back of their York-based UFO Project with Sky Broadband (and CityFibre) in 2015, TalkTalk announced plans to build a "superior" FTTP network reaching as many as 10 million households.

Yet since this announcement in May 2015, TalkTalk have failed to go beyond York, and given their notorious hack later that year and resulting customer flight, it's unlikely they'll get any further.

1,000,000 premises = 200,000 homes?

Of course, neither Vodafone nor CityFibre may suffer an unexpected setback quite as disastrous as TalkTalk's, yet their announcement needs to be met with certain degree of caution.

While they plan to reach one million premises by 2021, these premises include homes and businesses. This kind of division is standard for all broadband networks, yet neither Vodafone nor CityFibre have made clear just what proportion of the one million will be residential.

As such, it's not entirely certain just how much of a threat the new network will be to Openreach and Virgin Media's dominance of the consumer market.

What's more, given that Vodafone have made a commitment to pay for only 20% of the initial million premises, it's possible that only 200,000 homes will be connected to the new FTTP network by 2021 - only 0.74% of total UK households.