Insights

Fibre: The fourth utility

08 Jan 2024

Our world is rapidly becoming more digital, and the amount of data we generate reflects this shift.

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Data generation in 2020

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1 zettabyte = 1 trillion gigabytes

Data generation in 2022

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at a growth rate of +23% from 2020

Predicted data generation by 2035¹

0,0 ZB

Data generation grew from 64 zettabytes (1 ZB = 1 trillion GB) in 2020 to 97 zettabytes in 2022, demonstrating a staggering 23% yearly growth rate. Looking ahead, predictions suggest this number will skyrocket to 2,140 zettabytes by 2035, equivalent to Netflix uploading more than 100 billion hours of new 4K high-definition content to their platform.¹

If properly managed, digital technologies such as fibre, can help create a climate- neutral resource-efficient economy and society, and save resources in vital economic sectors, particularly through digitalising energy systems, unlocking green transport and driving efficiency in the economy.

Dan Watson

Head of ESG

- Amber Infrastructure

To manage this explosion of data use, the ability to effectively capture, store, process, and transfer data is in demand. This need underlines the importance of robust digital infrastructure. Here, fibre networks stand out for their critical role. They connect homes and businesses to the network, allowing for seamless data flow and making them an essential component of our modern lives. So essential, in fact, that fibre networks are quickly being viewed as the ‘fourth utility,’ joining the ranks of water, electricity, and gas in terms of importance.

But the advantages of fibre go far beyond faster connectivity and reliability. Fibre is also a more sustainable solution than traditional copper alternatives, which are less energy efficient and typically require cooling systems to prevent overheating. Through fibre, you can meet the future data requirements and directly contribute to a more climate- neutral, resource-efficient economy at the same time.

Despite the current economic climate creating some headwinds for ongoing fibre rollouts, the fundamental, growing demand for data, together with the focus on developing a cleaner and more sustainable economy, provides a strong argument for continued long-term investment in fibre infrastructure.

Fibre in Europe

Historically, Europe has struggled to achieve full fibre coverage. This has mainly been due to a mix of hesitancy and conservatism on part of key operators to invest new capital as well as limited support from government agents. However, things have been changing.

As shown below, the growing appetite for faster, more reliable broadband, coupled with a favourable shift in the regulatory landscape as well as a preference for more sustainable infrastructure, kick-started a wave of both public and private investments in FTTH/B.

Fibre coverage across Europe – Sept 2022

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increase from 35% in 2014

The market's response to these changes has been varied, but overall highly beneficial. Some operators are forming joint ventures for greenfield rollouts, while others are leaning into sponsor-backed upgrades of legacy networks. This has created a powerful, although inconsistent, momentum.

Fibre coverage across Europe has leapt from 35% in 2014 to 55% as of September 2022. However, this coverage is uneven, with countries like Spain and Sweden nearing full coverage while others, such as Austria and Greece, are still catching up.

European leaderboards – EU27 + UK

	Country	EU39	EU27 + UK
Latvia	91.5
Portugal	90.9
Romania	88.5
Spain	87.4
Bulgaria	87
Sweden	84.5
Slovenia	78.4
Denmark	78.2
France	76.7
Luxembourg	76.2
Estonia	74
Netherlands	67.7
Malta	67.7
Ireland	67.6
Hungary	66.2
EU39		62.2
Slovakia	59.6
Lithuania	56.5
Italy	55.5
EU27 + UK			55.1
Poland	54.8
Finland	52
Cyprus	51.7
Croatia	44.6
United Kingdom	42
Austria	38.8
Czech Republic	36.8
Greece	29.7
Germany	23.6
Belgium	20.7

21/28 countries now exceeding 50% of total homes passed with fibre

Newly entered (>50%):

Netherlands
Italy
Poland
Finland
Cyprus

Source: FTTH Council Europe, European FTTH/B Market Panorama 2023

It is important to note that FTTH/B markets are shaped by local factors. Each region, and country presents its unique characteristics that must be factored in. Take the UK and Germany, for instance, they have historically had some of the lowest fibre coverage among the developed Western European economies, largely due to underinvestment by incumbent operators.

However, every challenge brings an opportunity. This landscape has fuelled the growth of independent fibre operators, or altnets, that saw potential in this underinvestment. As a result, FTTH/B fibre coverage has seen a notable uptick in recent years. The UK stands out as a prime example, recording the fastest growth rate in FTTH/B fibre coverage among European peers between 2021 and 2022, adding 4.2 million homes passed.²

The fibre market: Times are changing

While the demand for FTTH/B continues to grow robustly, it is reasonable to anticipate a stabilisation in the market over the coming years. Indeed, fibre is regarded as essential infrastructure, but the recently disrupted macro environment has created challenges for the altnets.

Many altnets have previously centred their strategies around fibre network roll-out, assuming that subscriber conversion (i.e., penetration) – the ultimate revenue generator – will naturally follow once they have established a firm footprint. This approach, while ambitious, comes with its own set of challenges. It is upfront capital intensive, with potential risks around delayed commercialisation and short-term liquidity constraints.

In today’s macro backdrop - high labour and material costs, soaring interest rates, and constrained capital markets - this strategy can become even more challenging. Coupled with a fragmented market structure, it is clear why some of the smaller altnets are facing intense operational and financial pressure. In some of the most severe cases, altnets in Germany and in the UK have found themselves stepping into administration.

toob has executed a strategy that focuses on delivering to customers all of the benefits of full fibre networks in a simple and compelling proposition. To deliver this strategy there is a focus on unit economics, maximising the use of existing infrastructure to minimise build cost, and automating processes to keep operating expense low. This comprehensive approach has meant we can disrupt the market, gaining share from the incumbents by delivering customers what they need at economics that are attractive to shareholders.

Nick Parbutt

CEO

- toob

In this light, the fibre story is not just about the pursuit of faster connectivity. It is a tale of resilience and adaptation in a rapidly changing landscape. Drawing from our experiences in scaling four UK altnets over a period of five years (Community Fibre, Airband, toob, & Nextgenaccess) and reviewing many more fibre opportunities across Europe, a successful altnet differentiates itself by showing a track-record of a balanced approach to roll-out and commercialisation, a keen discipline in capital deployment, and a clear trajectory to profitability and self-funding. These qualities are reflective of the operations run by an experienced management team with systematic processes in place, backed by a sponsor that has strong alignment to the business.

Ultimately, it is all about taking a customer-led approach and ensuring the right metrics are being tracked to best deliver this. These in turn, create a virtuous circle that opens up access to debt and equity financing options that can support continued and sustainable growth.

Community Fibre

Community Fibre (‘CFL’) is a Fibre to the Premise ("FTTP") network operator rolling out full-fibre broadband networks across London.

View case study

Looking to the future

Amber will continue to leverage its thematic investment approach and experience developed within UK altnet investments since 2018³ as well as continuing to review opportunities across European markets cautiously.

Amber will continue to seek opportunities which will benefit from the range of tailwinds that are driving the rapid growth in end-user data demand and the increased reliance on the connectivity infrastructure that supports it.

IDC annual global datasphere forecasts 2010-2035
FTTH Council Europe, European FTTH/B Market Panorama 2023
Amber Infrastructure has been investing in fibre transactions since 2018 through its National Digital Infrastructure Fund (“NDIF”)

Disclaimer
This document and the information contained herein is the proprietary information of Amber Infrastructure Limited (“Amber”). It may not be distributed, published, reproduced (in whole or in part) by any medium or in any form, or disclosed or made available by recipients, to any other person or used for any other purpose, without prior written permission from Amber. The information contained in this document is provided for general information only and should not be construed as a solicitation, offer, invitation, inducement or recommendation. The National Digital Infrastructure Fund (“NDIF”) is referenced within for illustrative purposes only and is not a personal recommendation to invest in, buy or sell any fund, security or investment company nor to adopt any particular investment strategy. Investments named are not recommendations, but are illustrative only to demonstrate the capabilities, skills and experience of Amber and its affiliates. Any views and opinions expressed are those of Amber. Information, statistics, and data within this communication is subject to change and should not be acted or relied upon by any person without obtaining specific and relevant legal, tax, securities or investment advice.

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Fibre: The fourth utility

Our world is rapidly becoming more digital, and the amount of data we generate reflects this shift.

Fibre in Europe

The fibre market: Times are changing

Looking to the future

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