The UK broadband market is shrinking

It’s often hard to notice the absence of something.

From traffic noise to headaches, you’re a lot more likely to identify a new presence than the disappearance of an older one.

In a similar vein, you might not have noticed the shrinking UK broadband market yet, but the slow disappearance of familiar brands is set to accelerate in the coming years.

The causes are varied – too many ISPs, consumer spending reductions, acquisitive actions by bigger companies – but the consequences could include diminished consumer choice.

So what’s behind our shrinking UK broadband market? And should we be concerned that there are likely to be less firms offering us connectivity in the years ahead?

What’s happening in the market?

Back in 2020, we highlighted the imminent takeover of Post Office Broadband by Shell Energy.

At the time, it seemed like a one-off. Yet with hindsight, it was a hint of things to come.

Earlier this month, Plusnet announced that its John Lewis Broadband division is to be closed, with customers transferred to the Plusnet brand.

We’ve previously reported that John Lewis Broadband received the worst customer service score in a Which? Survey.

Such poor standards were in stark contrast to the customer service standards of the wider John Lewis & Partners brand, so rebranding it as a Plusnet service makes sense.

Nor will John Lewis Broadband be the last brand to disappear, as a landmark report from the Internet Services Providers’ Association (ISPA) made clear a fortnight ago.

Association rules

The ISPA report was rather underwhelmingly titled What Lies Ahead: ISPA Altnet Gigabit Broadband Investor Report, but its findings were far more interesting.

Extensive up-front investment has been required to build today’s patchwork quilt of full fibre connectivity across the UK.

Those infrastructure costs have been borne mainly by Openreach and Virgin Media, but also by a disruptive army of hyperfast, hyperlocal altnet ISPs.

These firms typically fund their cable rollouts by borrowing against projected future income, making them vulnerable to takeover offers.

The ISPA argues that the number of full fibre firms building their own local infrastructures has become unsustainable, and the UK market may be saturated.

“A period of consolidation is now widely expected”, its report concludes.

The Financial Times concurs, having recently reported that none of the UK’s altnet startups has made a profit yet.

Building brands

On top of all this, we can expect further consolidation of multiple brands into a single entity, with all the cost-saving and simplification that follows.

John Lewis Broadband has been subsumed into Plusnet, itself part of the BT/EE empire. In time, Plusnet customers are themselves likely to transferred to BT Broadband or EE-branded services.

There shouldn’t be any adverse impact on quality or service from this round of mergers and acquisitions, but we’ll all have fewer ISPs to choose from in future.