Why fiber utilities must evolve or risk obsolescence in today's competitive telecom market

In the early 2020s, Europe saw a surge in fiber wholesale-only operators (“fiber utilities”), driven by challenger alternative network providers (Altnets) and the formation ofnumerous fiber joint ventures (JVs). The trend has also spread to South America and North America, fueled by favorable conditions such as low fiber penetration, government subsidies, and low interest rates. However, as markets matured, rollout costs increased, and fiber penetration rose; many fiber utilities are grappling with profitability challenges and are far off the expected take-up rates. These developments raise critical questions about the long-term sustainability of the fiber utility model - questions that Omdia's new report, Assessing and Rethinking the Telecom Utility Model to Improve Profitability in Fiber, addresses by exploring the future of fiber utilities and potential solutions to these emerging challenges.

The telecom industry is undergoing a significant transformation and is reorganizing itself around new archetypes. One prominent model is the infrastructure-focused utility operator. These wholesale-only operators specialize in building and managing networks without directly selling to end users under a capex-heavy business model. This telecom utility model has become particularly popular in the fiber market, with many examples of challenger Altnets, fiber JVs, and legally or structurally separated telco divisions.

Most fiber utilities struggle to become profitable yet, with costs outpacing revenue

Fiber utilities face challenges in achieving profitability due to high upfront costs during the long fiber rollout period, and it takes many years for operators to see returns. However, market dynamics have shifted - competition has intensified, capital has become more expensive, and investors now expect faster returns than in the past. Most fiber utilities launched over the last five years still record negative earnings before interest and taxes (EBIT) levels, as their revenue growth is outpaced by costs. To improve their financial outlook, fiber utilities must focus on reducing costs and generating more revenue.

On the cost-side, AI-driven network-defined software can help to optimize the fibre to the premises (FTTP) planning, installation, and operation. It is also crucial for fiber utilities to select profitable deployment areas, considering factors such as labor expenses, legacy infrastructure, population density, regulatory requirements, and technology choices. Areas with higher deployment costs require correspondingly high utilization rates to achieve a sustainable return on investment (ROI), but this can be difficult to realize given that fiber utilities often depend on retail internet service providers (ISPs) for customer acquisition.

On the revenue-side, take-up rates are critical. One of the key advantages of fiber utilities is the potential for better network utilization and higher take-up rates by hosting multiple ISPs. There are some well-established wholesale-only players that have reached very high take-up rates, such as Chorus in New Zealand (72% in 2024) and Míla in Iceland (44% in 2023). However, many fiber utilities face challenges in reaching higher take-up rates and are not performing significantly better than integrated or retail operators in the market. This is particularly true in countries where incumbents offer competitive options or operate their own wholesale divisions, such as BT’s Openreach in the UK or Telkom’s Openserve in South Africa. There are some examples in which the government is heavily subsidizing fiber deployment in which independent wholesale players have achieved higher take-up rates than the incumbents, such as Poland.

Fiber utilities need to adapt to changed market conditions

Fiber utilities face growing pressure to adapt to evolving market dynamics, particularly in highly competitive environments. Infrastructure competition is becoming intense and has led to challenges such as overbuild and market saturation. Some of the key priorities for fiber utilities should be to gain scale, improve take-up rates by evaluating their anchor to secondary tenant ratio, and diversifying into adjacent sectors such as towers or data centers.

In response to growing sovereignty concerns, some telco operators are reassessing the strategic value of their infrastructure assets. Telefónica, for instance, re-acquired its previously spun-off fiber joint venture, FiBrasil, in 2025. For telcos lacking a significant fiber footprint or seeking to expand their infrastructure capabilities, the challenges faced by struggling fiber utilities present a unique opportunity to acquire valuable assets and strengthen their market position.

Further reading:

Delayering: Opportunities in fixed infrastructure separation

Asset-Light Service Provider Strategies

FTTP Subscription Conversion in Europe: Assessing Current and Future Trends

The Road to 2030: A new identity for telecom service providers