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Vodafone will launch consumer fibre-to-the-premises (FTTP) broadband services over a greatly expanded CityFibre backhaul network for a period of exclusivity as soon as December 2018, after the two businesses signed an extensive partnership agreement.
Vodafone and CityFibre said their collaboration would deliver a gigabit broadband service to up to five million homes and businesses by 2025 – half of the government’s current target of 10 million properties.
Nick Jeffery, Vodafone UK chief executive, said the deal enabled the company to build on is existing position as one of the fastest-growing internet service providers (ISPs) in the UK.
Vodafone has already established itself as one of the largest providers of ultrafast fixed line broadband services in Europe, but the UK has fallen substantially behind in terms of ultrafast provision, he added.
“FTTP needs to happen now, not later. Only with gigabit fibre direct to the doors of homes and businesses will the UK be able to compete with other advanced economies,” said Jeffery.
“With this commitment from Vodafone, we have a partner with whom we can transform the digital capabilities of millions of homes and businesses and establish an unassailable wholesale infrastructure position across 20% of the UK broadband market,” added CityFibre chief executive Greg Mesch.
Jeffery said the proposed exclusivity period could be as long as three years in some cases, but this would be decided on a city-by-city basis, with smaller cities potentially opening up to wider commercial competition sooner.
Mesch said giving Vodafone exclusivity in exchange for a long-term customer volume commitment – 10 years increasing over the period to 20% of the initial minimum premises – made it the “ideal model” to help fund the expansion of its network, which already touches 42 towns and cities across the country.
CityFibre has not touched residential properties before, preferring instead to focus its services on companies in the city centres and business parks where its network reaches, with services deployed through local business-to-business (B2B) ISPs.
However, following the success of a joint venture network build in York that it undertook with TalkTalk, it revealed earlier in 2017 that it would soon start targeting consumers.
Construction of the first phase of deployment, covering the first million properties, is scheduled to begin before June 2018 and should be completed in 2021, at which point the parties have the option to extend.
The network will be built, operated and owned entirely by CityFibre, with Vodafone – and eventually others – getting access on a wholesale basis. The first locations will be announced in the coming months.
CityFibre has estimated the initial build could be worth up to £500m through to 2037, assuming the 10-year 20% minimum volume commitment is maintained through the second decade.
Vodafone said the deal it has cut with CityFibre will allow it access to a superior product at lower cost and with better terms and conditions than if it tried to establish such a relationship with Openreach for access to its network.
The deal is also consistent with Vodafone’s established fixed infrastructure strategy that aims for a mix of build-partnership-wholesale-buy approaches to broadband. The company believes it is this strategy that has made it so successful on the continent.
While welcoming the investment, Rob Hilborn, head of strategy at comparison service Broadband Genie, said: “While the focus for this investment is likely to be on cities, in the long term we will need a plan for the rest of the country as to not leave it behind and risk widening the digital divide further.”