Households risk being cut off from the internet as runaway inflation threatens to cause a wave of bankruptcies among broadband networks.
Ofcom is drawing up contingency plans with BT which could take on thousands of customers if a number of the smaller suppliers, so-called ‘alt-nets’, begin to fail.
More than 150 BT challengers backed with billions of pounds of private investment have entered the market to try and capitalise on the upgrade to ultrafast speeds.
Private equity, pension funds and sovereign wealth have been pouring money into broadband start-ups in the hope of securing steady, long-term returns from the shift to speedier connectivity.
However, concerns are mounting that the fierce levels of competition will begin pushing some firms to the brink, as they struggle to compete with the might of BT’s Openreach and Virgin Media O2.
An industry source said: “It seems to be a bit of a red flashing light that Ofcom is thinking about it at all. It cannot be entirely sustainable when you already have big network builders.”
The small network builder Swish Fibre snapped up rival People’s Fibre out of administration in December after the latter was squeezed by its competitors.
Analysts believe that a wave of consolidation will eventually sweep through the broadband industry to create a third network operator capable of competing with Openreach.
Lutz Schuler, the chief executive of Virgin Media O2, warned in November that the nation’s broadband plans were in line with a population triple the size of the UK.
Moving broadband customers can be more difficult compared to other utilities such as energy because they have to be physically switched over to a new network.
An Ofcom spokesman said: “We keep a close eye on the broadband market to make sure we know what’s happening on the ground, as part of our work to support fibre investment and protect customers.
“Usually, when a network company fails, it’s sold as a going concern and customers don’t experience a loss of service.
“In the unlikely event that a network suddenly failed and ceased to provide services, we would work with alternative suppliers to help customers get reconnected as quickly as possible.
“This could be through Openreach or an alternative provider, depending on the circumstances.”
BT declined to comment.