Imagine you've found your perfect flat, ordered some custom shelving and a comfy couch, complete with matching cushions, but it turns out the landlord is about to sell the building. That seems to be the outlook for broadband providers in the UK relying on Openreach exchanges to deliver their services, as BT's networks unit gears up to shed around 4,500 of them by the early 2030s.

One of the firms affected is Neos Networks, a company selling a range of fiber, optical and Ethernet products to various business customers, including the residential-sector altnets, its CTOO Matt Rees has told Light Reading in an interview. For Neos, the cost of reclosing the network after leaving the exchanges could add up to a six to seven figure sum, he said.

At the moment, Neos has its optical equipment in around 550 Openreach exchanges to regenerate signals every 80 kilometers or so, Rees said. Each facility is used to house "a router where I sell Ethernet services, and I use Openreach predominantly to connect from the customer's premises back to my router," he explained.

"When I don't have an access network of my own, I always rely on somebody else for the last mile. So typically, I'm in an exchange, I pay Openreach for my space and power in that exchange, I then buy their products to connect from that exchange to the customer premises," he said.

Neos is not alone in this. The Independent Network Cooperative Association (INCA), which represents altnets, noted in 2022 that its members' fiber networks had often been built using Openreach products including physical infrastructure access (PIA), Ethernet access direct (EAD), optical spectrum access (OSA) and interexchange dark fiber (DFX), as well as space and power at exchange sites.

The tenacious tenant 

However, as Openreach works to go from roughly 5,500 exchanges now to 1,000 by the early 2030s, it seems these companies will be asked to remove any equipment housed at the sites selected for closure. 

This will likely poke some holes in the networks of companies reliant on Openreach. A Neos customer connected to a closing exchange may end up with a longer last-mile connection, potentially increasing risks. The last-mile connection is the segment most vulnerable to damage, for example from street works, Rees pointed out. 

"Or if it's one of those exchanges where I just have my device there because I need to get to the next exchange along to make the distances work, if that exchange closes, I just have a hole in my network," he added.

While in a city like London, there is a relatively dense network of exchanges, closures in less densely covered areas could be more problematic, according to Neos. "There are some physics problems to overcome" in terms of covering long distances, said Rees. Neos is still trying to get "the phased plan from Openreach as to which [exchanges] close when."

Light Reading reached out to Openreach for comment and its spokesperson replied via email:  "We've consulted with industry on the first 108 exchanges that will be closed by December 2030 and we've broken this down into four phases. In December 2022 we provided industry with a list of which exchanges will be in each phase alongside the exit date for those phases."

The spokesperson also said the intention to reduce the number of exchanges to around 1,000 "has been communicated to industry for some time," adding "we're still working on the details of which exchanges will close in which year beyond 2030." Openreach has provided a list of the 1,000 remaining sites, the spokesperson added. 

Some parties, however, found Openreach's initial consultation too narrow. In 2022, INCA published its response to it, saying among other things that Openreach should engage in a wider conversation to find an outcome that would allow its customers "to make informed investment and switching decisions." INCA also called for regulator Ofcom to be involved in the process.

INCA's CEO Malcolm Corbett said the following in response to Light Reading's request for comment: "INCA and its members are fully behind the transition from copper to full fiber networks so we have been disappointed in the lack of development since we responded to the exchange closures consultation in 2022. It is encouraging though to see that Ofcom has said the issue will be a priority as part of the Telecoms Access Review (TAR) process."

He went on to say: "INCA has identified the reduction in commercial backhaul and the uncertainty surrounding regulatory remedies as a key issue in relation to exchange closures. In our submission to TAR, which is publicly available on our website, we are also calling for a framework to ensure there is no harm to infrastructure competition, active engagement from Openreach towards altnets, and other recommendations to ensure fair treatment for all parties impacted by the closures."

Keeping the network going

To ensure Neos' network remains functional, it will have a choice to build or go to other providers like Virgin Media or CityFibre, Rees explained. The latter is an example of an altnet that has not relied on Openreach exchanges and has built its own facilities, although it still lacks the footprint of Openreach's network. 

"Most of my exchanges are connected on fiber that either I own or I bought from the open market," said Rees. "If I get moved out those exchanges, the fiber routes I currently have are probably not going to work anymore. I'm going to have to go to the market to buy it."

Only Openreach has widely available fiber and it does not offer a dark fiber product, he complains. "So I have to buy on OSA, which is a much more expensive product, a much less capable product for me. So my network capability is diminished, my costs go up," he said.

The incumbent has indicated "that there'll be some ability to claw back some of that cost from them," said Rees, pointing to the expense of leaving Openreach's exchanges. He added that he doesn't yet have details. 

Openreach confirmed to Light Reading that it issued "an initial commercial offer for wholesale customers to support them with some of these costs" in March and has been working with the industry to refine its commercial proposals. "We also expect to share a set of revised commercial offers with wholesale customers over the coming weeks," its spokesperson said.

The spokesperson acknowledged there will be some associated costs for wholesale customers, particularly Ethernet ones, while adding that "operating from fewer exchanges allows our wholesale customers to consolidate their equipment, saving costs on space and power and creating a more sustainable telecoms infrastructure."

Moving forward

This echoes Openreach's reasons for closing some of its exchanges. It is gearing up to turn off the public switched telephone network (PTSN) by 2027, while also working to migrate all customers to full-fiber networks, reducing the number of exchanges it needs. Apart from cutting costs, this move will reduce energy consumption and boost efficiency, it has said previously. 

Rees admitted that the program makes sense from Openreach's perspective. "Maintaining a 5,500-site estate must be super expensive," he said, while adding "it's going to be super destructive to the whole market."

Asked what the best-case-scenario solution for Neos would be, he said "as much as I understand that whole principle, going from 5,500 exchanges to 1,000 is radical." For Neos, the best possible outcome would be either keeping more of the exchanges open or making available to the market a dark fiber product, he elaborated. 

Openreach has told Light Reading that "the availability of dark fiber is regulated by Ofcom. Where we're required to make this available, we do."

As for keeping more sites open, its spokesperson said "as end customers migrate from copper onto fiber products, the number of customers served from the non-enduring exchanges will reduce which will ultimately make the cost of space and power at these exchanges – per circuit – unviable for wholesale customers. The c.1,000 remaining exchanges will serve all customers across the UK and increasing this number could result in additional costs for wholesale customers and ultimately end customers."

Exchange closures aren't the only issue for Openreach's customers. As Light Reading detailed in August, Openreach has recently called out the industry on poor compliance with its "whereabouts" rules. These mandate how and when companies accessing its telegraph poles and ducts should give notice.

Neos is reportedly one of the worst offenders at 0% compliance. Asked about the issue, Rees said that Openreach has "changed the rules on us, and they changed the rules consulting with a subset of the customers of which we were not included." 

Update: This story has been updated to include a comment from INCA's CEO Malcolm Corbett.