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Vodafone has broadened its fibre footprint to Birmingham, Bristol and Liverpool after signing a new wholesale agreement with Openreach.
The Vodafone business might be primarily known as a mobile business to most, though it has been making strides into the broadband world after signing an agreement with CityFibre last year. What this wholesale agreement with Openreach looks like is an effort by Vodafone to expand its fibre footprint in areas where its primary partner, CityFibre, does not have a presence.
With this wholesale agreement in place, Vodafone will soon be able to offer fibre broadband services in 15 locations throughout the UK.
“Vodafone is committed to a full fibre future and to creating the infrastructure Britain needs to compete and win in the digital era,” said Vodafone UK CEO Nick Jeffery.
“This initiative with Openreach builds on our existing commitments with CityFibre and underlines our belief in the power of digital technology to connect people for a better future and unlock economic growth for the UK.”
As part of the agreement, Vodafone’s Gigafast Broadband service will be available to customers in Birmingham, Bristol and Liverpool on the Fibre-to-the-Premises (FTTP) network from 2021. The first phase of the Openreach rollout is currently underway and the team plans to be able to reach as many as 500,000 customers on this network by mid-2021.
For Vodafone, this is a wholesale agreement which makes sense. The partnership with CityFibre looks to be one where the terms and conditions are very favourable to both parties, however Vodafone will want to be a service provider which can offer broadband to everyone. The CityFibre deployment strategy means secondary partners will have to be sought.
As part of the CityFibre agreement, Vodafone has made a minimum volume-based commitment for 10 years which increases over the period to 20% of the initial one million premises. In return, Vodafone has a period of exclusivity for consumer fibre-to-the-home services from CityFibre for 12 months, though the time-period is nuanced depending on location and the phase of network construction.
The CityFibre deployment strategy is also a point to consider here. CityFibre is targeting small and medium sized cities, as well as larger towns. These are areas which are generally not being targeted by the likes of Openreach or Virgin Media for fibre deployment. The idea is to create a scaled challenger, and targeting areas where rivals aren’t is a perfectly reasonable strategy.
In short, Vodafone will use CityFibre infrastructure as default, and Openreach in locations where it is not available.
For Vodafone, this partnership demonstrates something which many will see as a plus; ambition. The team is seemingly attempting to expand the fibre service offering to more regions across the country, which should add greater confidence in its pursuit of making a meaningful impact on the segment.
Telefonica’s Brazilian brands Vivo and Terra have launched a franchise model for its fibre rollout plans seemingly to ease the financial demands of the digital economy.
Working with local partners, the initiative will focus on cities with populations between 20,000 and 50,000. The aim will be to add an additional 1 million households to the fibre footprint by 2021, taking the total north of 15 million.
“Population demand is for the internet, and Vivo is the only company in Latin America to invest heavily in a fiber project, promoting a unique experience for its customers,” said Fernando Duschitz, Senior Franchise Manager at Vivo.
“This new business model from Vivo is an opportunity for companies and investors who want to enter this market, as well as for those already acting as providers, to benefit from the strength of the Terra brand, with Telefonica scale, and Vivo quality, as well as of all our experience in expanding fiber, present today in 154 cities across the country.”
Just to paint a bit of context to the situation, Telefonica is a company which is not in the most comfortable position when it comes to debt. While debt had been reduced to €41.785 billion, this is still seemed too steep for investors. Various other strategies have been introduced, such as a new business model for the tower division, though this franchise idea also aids the pursuit of a future-proofed network.
This is the conundrum being faced by Telefonica. The management team does need to reduce debt, though it also needs to find investment for fibre and 5G deployments. Without these investments, rivals would gain the upper hand and potentially erode profits as customers elect for better services. Franchising certain localities in Brazil is a compromise, lessening the financial impact to fuel the mission for future-proofed networks, but weakening control.
Franchisees will be responsible for developing all necessary network infrastructure, as well as managing the operation, including sales, service and installation. On the other side of the deal, Vivo will offer agile processes, managerial and technical training, access to tiered qualified suppliers, unique central call centre, network topology ensuring stability and scalability.
Although not many telcos are facing the same debt challenges as Telefonica, finding cash to fuel network upgrades and deployment is an industry-wide conundrum. Compromises will need to be made, and this is certainly an interesting idea.
Independent UK ISP Zen Internet wants to take on the big operators and has secured £20 million in credit from the NatWest bank to help with that.
The announcement is full of fairly vague, generic pledges to invest the money in growth and that sort of thing. Among those investments will be Zen’s network infrastructure, but no specifics were offered. Zen’s ‘independent network’ currently covers less than a third of the country, so the most obvious area of investment would be to increase that coverage, although even £20 mil won’t get you that far.
“This is a very exciting time for everyone at Zen, including our customers and partners,” said Paul Stobart, CEO of Zen Internet. “As an organisation we will continue to focus on sustainable growth, rather than short term profit, ensuring that we do the right thing by our people, customers and partners.
“A portion of the funding will be used to refinance debt, whilst the balance will be reinvested into our network infrastructure, people and product offerings. We believe that through our exceptionally dedicated people, award-winning services and leadership, we are in a great place to do things differently and achieve our ambitious business targets over the next few years.”
Zen also got a few city types to say how great it is that it can now borrow more cash. Around half of it is apparently earmarked to install Zen gear in 250 exchanges, which will bring its total number of exchanges to 700. Some reports have said that will cover 80% of the country but Zen itself only claims to cover 500,000 of the 1.7 million postcodes. Either way it’s good to see indies giving the big four a run for their money.
While the investment climate for connectivity infrastructure has certainly been improving in recent years, a proactive and prioritised government is critical to ensure rapid evolution to the digital economy.
Across the world, the climate for investment in connectivity infrastructure is improving. There is plenty of demand from both the consumer and governments to build the business case for deployment of fibre infrastructure, though more could still be done in certain markets.
“The digital economy does not work without the government, especially in the rural areas,” said Dick Van Schooneveld of Mahler Corporate Finance at Total Telecom Congress this week.
This is the challenge which some telcos and governments are facing when it comes to attracting investment; the political and regulatory environment is not always very helpful. There are some bright spots across the world, Portugal for example as well as Sweden or South Africa, but some are lagging considerably.
According to Mikael Sandberg, Chairman of VX Fiber, the political and regulatory climate in some nations, such as the UK, has been a point of suffocation when it comes to investments in connectivity infrastructure. This has allowed other nations to leap-frog the UK in pursuit of the riches promised by the digital economy.
The difference between these nations which have made strong progress and those who are lagging, is the ambition of the governments involved and the ability to see the bigger picture. In Portugal or Sweden for example, public/private partnerships to invest in full-fibre infrastructure might expensive but it is very attractive in the long-run.
Sandberg suggested more than 50% of Swedish enterprise organizations have adopted full-fibre connectivity products and the benefits are significant from a productivity perspective. The more successful these businesses are, the more jobs which are brought into the economy and the more tax which is contributed back to the government.
The gains are quite clear both in terms of revenue for the public coffers and political capital gained in the eyes of voting citizens.
And while there are clear and measurable benefits through prioritising such investments, the likes of the UK and Germany have suffered. There have been policies in play which have steered the government away from such lavish spending, austerity measures in the UK for example, though the repercussions of these decisions are perhaps being felt now.
There are still many questions which need to be addressed to fully understand and appreciate the impact of the digital economy, and of course many areas which need to be tackled to mitigate the risks. However, will the right political climate, connectivity infrastructure is looking like an attractive investment to the money men. Unfortunately, there are still countries which haven’t balanced the equation.
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One of the more interesting developments in the UK telco field has been the rise to power of the alt-nets, though with more emerging each month, how many can the market tolerate?
The concept of ‘alternative network’ providers is an attractive one. These are companies which secure funding through one means or another, with the ambition to challenge the status quo. In some instances, this means deploying fibre infrastructure in regions which have largely been ignored as a result of being commercially unattractive, or a lower priority for the network operators.
The latest to emerge is a North Yorkshire County Council wholly-owned subsidiary named NYnet. Supported by the county’s seven district councils, NYnet was one of the winners of the Department of Digital, Culture, Media and Sport’s Local Full Fibre Networks Challenge Fund. With investment from central government to bolster the bank accounts, the £15.1 million project is underway.
“We are very excited to be entering the delivery phase of our new full fibre network, which we are delivering in partnership with SCD Group,” said Scott Walters, CEO of NYnet. “This new network will improve speeds and user experience for many public sector bodies in North Yorkshire including schools, GP surgeries, hospitals and libraries.”
The initial focus of the project to begin with will be Selby and Easingwold, with Malton and Pickering to follow later this month. Other areas, such as Scarborough and Ripton, have also been slated for deployment, as the team sets out to connect 370 public sector health and education building with full-fibre broadband over the next 18 months.
For the less urbanised areas of the UK, the rise of the alt-nets is a welcome development. How long would it have taken for the traditional players in the telco world to connect these sites with full-fibre infrastructure? Some might say it is on the horizon, but with the majority of the UK to ‘fibre-up’, priorities might lie elsewhere.
However, you have to wonder about the long-term health and sustainability of these companies. The telecommunications industry is one which thrives on scale, such are the CAPEX and OPEX demands on the spreadsheets, and the very nature of some of these alt-nets prevents them from scaling. NYnet is an example, as the North Yorkshire County Council is unlikely to greenlight funds for expansion beyond its borders.
Another interesting element is the patch-work of connectivity options is emerging throughout the country. When talking to connectivity service providers, enterprise customers want scale. They want to be able to rely on the smallest number of suppliers to remove complications and reduce the risk of anything going wrong.
You do have to wonder how many alt-nets the UK can tolerate to ensure high levels of maintenance and upgrade investments without the price to the end-user rising too much. The number of alt-nets spread throughout the UK is starting to become quite large.
To start with, you have the larger players such as CityFibre, HyperOptic and Gigaclear. These are all players with national ambitions, and generally have the backing of private investors. The deep pockets of these companies should be a concern to traditional providers as there are very aggressive deployment plans in place. The difficulty with the emerging alt-net segment is the smaller players.
B4RN, is an alt-net in the North, Community Fibre focuses on London, County Broadband is a FWA specialist for the rural communities, Fibrus is based in North Ireland, Full Fibre serves customers in the South West and Wessex Internet is focused on, funnily enough, Wessex.
This is only a snap-shot of the dozens of regionalised players who are running networks, or play to deploy infrastructure, across the UK. And while customers who are located within the limited coverage area might be thrilled with these networks, we doubt this hot-potch of competition is sustainable in the long-run. These companies do help prevent overbuild in the urbanised areas, though we suspect they are acquisition targets of the bigger players.
The UK Government is currently happy with the way alt-nets are springing up. These are companies which do of course focus on the areas which are largely ignored by the bigger telcos and provide alternatives to drive investment and competition across the market, though once the networks have been deployed it could be viewed as mission complete. If the objective is to fibre-up the nation, once the infrastructure is in the ground, it doesn’t largely matter who is running them.
There will have to be attention paid to ensure localised monopolies are managed responsibly from a pricing perspective, but consolidation can help drive the telco industry forward. We suspect the likes of CityFibre, Virgin Media and Gigaclear might be keeping an eye on the development of the smaller alt-nets. These could be very attractive acquisition targets to sustain a challenge to the dominance of Openreach.
The most difficult part of the telco business is network deployment. Not only do you have to source materials, find a work-force and foot the bill, you have to deal with the red-tape mazes for planning permission and impact to the local economy, such as road closures. The bureaucracy can be a nightmare for telcos, especially when you are dealing with multiple layers of public sector authorities.
The majority of these hurdles and potholes have already been negotiated by the dozens of alt-nets spread across the country. For a company like CityFibre, which is attempting to be an alternative wholesaler of fibre connectivity to Openreach, spending a couple of hundred million to acquire several of these smaller players could be a simpler means to expanding its geographical footprint.
The emergence of the alt-nets is driving UK infrastructure forward. The digital divide is being addressed in some rural communities, but by no means all, and the presence of fibre is driving the status quo into its own investments in gigabit-capable infrastructure. This is a development which can only be viewed as a positive.
However, in a small market like the UK, we question whether it is sustainable to have this many providers. We suspect there might be a consolidation wave on the horizon, and it might well be the larger alt-nets who are signing the cheques.
Following the initial launch in Southampton, Virgin Media has announced Manchester is the second city in the UK which will be offered ‘gigabit’ speed broadband services.
The overarching plan is to bring gigabit speed broadband services to 15 million homes by the end of 2021, and starting today, 500,000 homes in the Manchester region will be able to sign-up to the eye-watering download speeds.
“Manchester is a major centre for Virgin Media and the place our Project Lightning network expansion first started, so switching on our hyper fast gigabit services will help to once again transform connectivity across the city and surrounding areas,” said Jeff Dodds, Chief Operating Officer at Virgin Media.
“The Government has called for nationwide gigabit connectivity and we’re helping them leap forward to reach this ambition by turning on our next-generation Gig1 broadband across our entire network over the next 24 months – a speed and scale unmatched by anyone else.”
Starting at £62 a month for an 18-month contract, with prices frozen for 24 months, this certainly isn’t a broadband package for everyone. How many people feel they need the 1,104 Mbps peak speed which is being promised is another dubious question, though it won’t be long before services emerge which create the demand. It might sound ridiculous, but when the networks have been created, someone always comes up with a way to use the speed headroom.
While it all sounds very promising, there is a big difference to the speeds down the pipe and what is experienced in the home.
Speaking at Broadband World Forum in Amsterdam, Ramón Garcia of semiconductor firm KDPOF highlighted that the router is the main problem for many consumers. After conducting research, Garcia highlighted that many homes are not set-up to experience gigabit speeds, suggesting not enough work has been done by telcos to spread the connectivity euphoria away from the router.
Although there has been a lot of work done to develop wifi mesh systems to improve connectivity throughout the home, there are circumstances where a wired backbone would have to be introduced to improve coverage. This is something which has largely been ignored by the telcos, as the main concern is to improve speeds down the pipe while little attention has been paid to the router and beyond.
This might be a stumbling block for Virgin Media, though it did introduce ‘intelligent wifi’ earlier this year which aims to improve the allocation of connectivity in the home. The software will not only choose the least congesting channel but will also allocate bandwidth to devices depending on what applications are being run.
With this launch, Virgin Media are offering another upgraded router, the Hub 4, which boasts more antennae than its predecessor. This does not necessarily address the issues of the far away corners of the home, but it is certainly another incremental upgrade to improve customer experience.
Whether the Mancs are able to experience the same speeds promised by Virgin Media remains to be seen, though we remain hopeful as this is further evidence the UK is sorting itself out when it comes to fixed connectivity. For years, the UK has languished in the ‘also ran’ category when it comes to broadband connectivity and fibre-to-the-home deployment, though there is gathering momentum.
Australia’s NBN is a company which has taken its fair share of criticism over the last few years, but it is difficult to argue with the concept as well as the progress which is being made.
Having laid 216,000 km of optical cables, build 27,000 street cabinets and deployed 2,200 fixed-wireless towers across the country, the construction phase of the project is drawing to a close.
“In less than nine months, the major construction component of the NBN network will be complete, on-time and actually on budget,” said NBN CEO Stephen Rue at Broadband World Forum in Amsterdam.
Founded in 2009, the National Broadband Network is a government-funded infrastructure project designed to a deploy nationwide, future-proofed broadband network. Despite being a very logical and worthwhile project, it has attracted considerable criticism both politically and from the media.
Some of the critics will be quietened by Rue’s statement there will be no overrun or overspend, though questions will remain as to whether this was the best way to allocate tax dollars in the first place.
That said, perhaps the answer to this question is the very concept of the initiative in the first place. If private industry was offering the government confidence that connectivity infrastructure would be taken to every corner of the country, the scheme would not have gathered pace in the first place.
And from Rue’s perspective, in a decade this criticism will be completely forgotten. Over the years to come, Australian’s in the less commercially attractive regions of the country will benefit from the infrastructure. Rural locations will be afforded the opportunity to participate in the digital economy, while healthcare and education can also be revolutionised.
This is one of the interesting aspects of Australia as a country. At 7.692 million km², it is the sixth largest country in the world, but with a population of 24.6 million, it is one of the most sparse. Rue pointed to the complications of delivering connectivity across the country when population density is 3 people per km², creating the digital divide which NBN is attempting to bridge.
Some around the world might turn up their noses at the remote healthcare or education usecases which have been championed by the digital enthusiasts, but in a country as vast and sparse as Australia there is genuine potential. However, the network has to be there in the first place.
Many critics of this initiative will point to download speeds which do not match-up with other countries, Ookla ranks Australia as 59th in the world, however Rue has issue with these rankings. According to research which commissioned by NBN, which it claims is a representation of the population on the whole not just those who have access, NBN ranks Australia as having the 17th best connectivity worldwide.
These results have to be taken with a pinch of salt, but perhaps the research will help calm the waves of criticism which are flowing around the country. NBN might be expensive, but in 10 years’ time, Australians will realise this was a very sensible and forward-looking investment.
Perhaps a few other countries will take note, maybe even the US. Although such an initiative conflicts with the capitalist nature of the US, public-funded infrastructure looks like the most realistic means to close the digital divide.