Virgin Media rumoured to be considering Openreach competitor

Virgin Media is sitting firmly in the middle of the rumour mill, with reports suggesting the team is considering opening-up its network as a wholesale connectivity competitor to Openreach.

For the majority of ISPs in the UK, there is very little option aside from working with Openreach. This position lead to a prolonged battle between Openreach parent company BT and the UK Government in an effort to separate the wholesale business from the group, and while the dust has settled, most feel the outcome is rather unsatisfactory. However, according to The Telegraph, Virgin Media is considering creating competition in this segment.

Should the move turn out to be true, it would be welcomed by many of the ISPs around the country. That said, Virgin Media and its parent company Liberty Media are keeping coy on the situation.

“We have the best broadband network in the UK and everyone knows it,” a spokesperson said. “We’re not surprised by this speculation but have no comment.”

While it is a slightly playful comment which will bring a smile to some faces, the firm has stopped short of out-rightly denying the report. This might lead some to believe there is an element of truth to the reports, others will simply suggest this is PR 101.

Although Openreach is still in an incredibly dominant position when it comes to the wholesale business, pockets of competition are emerging. CityFibre is leading the charge here, using an injection of funds from Goldman Sachs to built on its fibre footprint across the UK. CityFibre now has fibre infrastructure projects across 51 towns and cities, providing active and dark fibre services, most notably to Vodafone which is building its presence as an ISP.

The idea of emerging competition does seem to be spurring the sluggish Openreach into action, as the team has announced one million homes now fall into its fibre footprint. Openreach, and BT as the guiding hand, has often been criticised for lack of foresight when it comes to connectivity. For years, the team pursued fortunes via G.Fast while the industry was demanding fibre, with this inaction perhaps creating the fuel for the emerging competition.

While CityFibre still has the tag of a plucky outside bet, Virgin Media would certainly provide more food for thought. With 14.4 million homes passed throughout the UK, roughly 50% of households, it is a genuine alternative for ISPs who have nationwide ambitions.

We suspect such conversations are taking place behind closed doors in the Virgin Media offices. The UK infrastructure wholesale market is certainly primed for a shake-up, and Virgin Media has the footprint to capitalise.

FCC and Oval Office locking horns over 5G

The FCC originally looked like a diligent foot-soldier for the President, but with the nationalised 5G infrastructure argument seemingly emerging again, heads are set to butt.

Reports have been emerging in various corners that the White House is revisiting plans to develop a nationalised 5G network, a plan originally raised in January 2018 to keep the US at the front of the technology arms race. The plan was shot-down back then, and the FCC has already raised set the tone of resistance through social media over the last week or so.

Following the President’s twitter rant last month, which saw the Commander-in-Chief bemoan progress being made by the telcos, FCC chiefs set their position out quite firmly.

In the case of FCC Chairman Ajit Pai, a retweeted message from 2018 reiterates a point which was made when the plans were first suggested; hands-off from the government is the best stance. This seems to be one of the only positions the Democrat and Republican representatives on the board of the FCC seem to agree on; the telcos should build the US 5G network, not the government.

Although the White House has not released any official statement confirming its favour of a nationalised 5G infrastructure, the defensive position entrenched by Pai and Commissioner Jessica Rosenworcel suggest there have been conversations which neither like. These tweets could be viewed as in-direct opposition, with the pair attempting to get ahead of the game.

According to Politico, this isn’t the only conflict which is emerging either. The Trump 2020 re-election campaign team have been pushing the benefits of a government-owned, wholesale infrastructure, while the current Trump political administration are keen to avoid the topic. While the disagreement is hearsay and reports for the moment, it would not surprise us if the Trump campaign led with such a promise.

This sort of political manoeuvre fits perfectly into the Trump playbook from his first election campaign. It hits pain-points for US citizens in the politically less-attractive states, the very people Trump was able to mobilise in 2016. However, attacking the digital divide in rural communities is not a new trick, Hilary Clinton used this tactic in 2016 also, but a nationalised 5G infrastructure will appeal to those who feel ignored by corporates. Trump has shown he can communicate effectively to those who believe they are under-represented by mainstream politics, and this angle could prove to be an effective tool.

The idea which seems to have been raised here is to create a wholesale network in partnership with a private third-party. The government would fund the deployment of the network, while the third-party would manage the operations and wholesale business, creating a system which would operate like the electricity market, with parties ‘purchasing connectivity’ on a rolling basis.

Theoretically, this position sounds wonderful. The arguments for nationalisation are often very compelling, and it could be justified as an effective way to spend tax-payers money. However, nationalised businesses and infrastructure have been shown to be ineffective time and time again. The government is not equipped to manage such projects in the long-run and not savvy enough to compete against private entities when they emerge. It might sound very appealing to voters who are stuck in the chasm of the digital divide, but it will not help the US in the global technology arms race.

As Brenden Carr, a Republican FCC Commissioner, notes above, private industry is the best way to secure a leadership position in 5G. This is a lesson which has been learned numerous times over the years in the US; when you leave private industry alone, simply creating a legislative and regulatory framework to encourage growth, much can be gained. In the technology world, this is perfectly evident with the success of Silicon Valley.

The dominance of the US on the technology stage is being widely challenged, though it seems the ego of the Trump party is getting in the way of logic. First to market does not necessarily mean the best, but this seems to be the angle which the President’s team is taking.

The big question is what impact this will have on the future for the Republican party. Should these rumours of a nationalised network evolve into reality, a split may well appear in the rank and file. The Republican FCC representatives are clearly not happy about this position, and neither are the science and technology advisors in the White House. However, you can’t argue that such a campaign promise would be very attractive to those who currently reside on the wrong side of the digital divide.

Here is what the Trump 2020 electoral campaign team will have to assess; is the long-term detriment of communications infrastructure a fair trade-off for the lure of ‘Middle America’ votes in the 2020 election? We suspect they won’t be looking much further beyond 2024.

Infracapital secures SSE Enterprise Telecoms stake

Infracapital has become the latest investment firm to secure a stake in the increasingly popular connectivity industry with a £380 million investment in SSE Enterprise Telecoms.

The deal will see Infracapital secure a 50% stake in the SSE Enterprise Telecoms business, with £215 million to be paid on completion of the transaction, the end of June, and up to £16 million in a series of instalments depending on the performance of the business in the future.

“Infracapital’s investment in SSE Enterprise Telecoms shows the confidence it has in the future growth of the business,” said Colin Sempill, SSE Enterprise Telecoms MD. “It recognises the success we have achieved to date, building out a great network, winning notable contracts and being relentlessly focused on customer satisfaction. Both parties see this as an opportunity to help develop the network infrastructure that this country needs to turn the vision of the UK’s digital economy into reality.”

“High-speed connectivity is vital to economic growth and prosperity and we are delighted to announce this partnership with SSE plc.,” said James Harraway, Infracapital Director. “SSE Enterprise Telecoms is an established telecoms infrastructure provider and is well positioned to support growth in this critical sector. Infracapital has considerable expertise of investing in digital infrastructure and we look forward to working closely with our new partners as the business continues to grow, deliver new projects and expand its networks.”

While SSE Enterprise Telecoms is not necessarily a heavyweight on the UK’s connectivity scene, this investment is just another example of financial firms becoming increasingly interested in alternative network providers, or Alt-nets. Hyperoptic is another example, having secured £250 million from eight international banks to extend its full fibre optic network, while CityFibre secured a debt package of £1.12 billion last month, after being bought by a Wall Street investment consortium in April.

More than anything else, this is an indication that perhaps things are not going as badly in the telecommunications as some would have you think. It might be going through a rocky time competing with the OTTs, regulations might not be going all the right directions and revenues are not growing at a rate of knots, but such investments show there is confidence in future success. The industry has demonstrated consumers are willing to pay for larger data bundles and fibre connectivity, and now the financial industry is listening more acutely.

For the Alt-nets and the consumer, it is a great sign. Securing more investments in the business, especially from those organizations which are not necessarily chasing the short-term pay out, will provide more security around CAPEX and deployment plans. It might not be the most exciting news from today, but it perhaps some of the most reassuring.

CityFibre bags £1.1bn for nationwide fibre rollout

During yesteryear, CityFibre was known for moaning for the sake of moaning, but in securing a debt package of £1.12 billion, the firm’s ambitions are starting to look very real and very interesting.

Seven banks have financed the transaction, ABN AMRO, Deutsche Bank, Lloyds Bank plc, Natixis, NatWest, Santander and Société Générale, which will serve as the first installment of CityFibre’s £2.5 billion commitment for a nationwide fibre rollout. CityFibre has given itself a target of providing fibre to five million homes, a third of the Government’s target of 15 million, by 2025.

“The appetite from these institutions to support our financing is further evidence that CityFibre’s strategy is the right one for the UK,” said Terry Hart, CityFibre’s CFO.

“As our networks are rolled out, this will benefit everyone, driving innovation and increasing fibre penetration across the UK, providing the future-proof digital connectivity the UK needs. CityFibre’s target to reach five million homes by 2025, as well as thousands of businesses and public-sector sites, will catalyse huge economic growth in regional towns and cities across the country.”

CityFibre made it abundantly clear in its statement that this is an endorsement of the firm’s business model from heavy hitting financial institutions, and perhaps it does indicate a change in attitudes from investors.

Back in October, we attended an investor panel session at Broadband World Forum featuring the likes of the European Investment Bank and also Amber Infrastructure, a specialist venture capitalist firm. The message was clear from this panel session; investors are increasingly happy to fuel fibre rollouts as the business case has been justified and consumer demand has been validated.

This is where CityFibre sits. It doesn’t want to be a telco but become a serious infrastructure player. Owning the relationship with the consumer is of zero interest but creating a nationwide alternative to Openreach and becoming a connectivity wholesaler is the big picture. However, to be considered a viable alternative, there needs to be more of a presence than there is today.

Telcos don’t want to have a patchwork of relationships across a country to meet the connectivity demands. Multiple relationships create more overheads and more opportunity for something to go wrong. CityFibre has made good progress in rolling out fibre spines in numerous areas across the UK, but the gaps will have to be plugged if it wants to be a viable and realistic alternative to Openreach.

That said, CityFibre is looking like a business which has the right ingredients for a market which is primed for disruption. Aggressive ambitions, a head-strong CEO and the confidence of being owned by one of the world’s most powerful businesses. CityFibre is a very strong contender to make a genuine and permanent dent in the connectivity infrastructure game.

And a £1.1 billion investment from seven major financial institutions is a very good place to start.

Ofcom’s competitiveness quest continues with another ducts and poles assault

Ofcom has unveiled its latest edition of its business connectivity market review with an all too familiar feel; how can it force Openreach and BT to play nicer with competitors.

As with any former state-owned monopoly, BT/Openreach is in the enviable position of having the groundwork already laid for future-proof infrastructure. Of course it has not done enough across the years to meet the demands of tomorrow’s fibre-based diet, though one factor behind this is a lack of external pressure on the business. Without competition, the enforced need to invest and innovate is not there. This is ultimately Ofcom’s objective; create an environment which encourages other ISPs to lay their own connectivity foundations, decrease the reliance on Openreach and improve connectivity options for the consumer.

“We want to give companies greater flexibility to lay fibre networks that serve residential or business customers,” Ofcom said in a statement. “So today, we are consulting on proposals to allow access to Openreach’s ducts and poles to companies offering any type of telecoms services including high-speed lines for large businesses, networks carrying data for mobile operators and high capacity lines supporting broadband services. We intend to implement this unrestricted duct access from spring 2019.”

This review focuses on the areas where there is minimised or no competition for BT. Ofcom believes BT currently has almost 5,600 local exchanges, though at roughly 5,000 of these sites there is competition from fewer than two competitors. BT’s position has been deemed unacceptable in these areas.

Starting with the areas where there is evidence of potential competition, but BT still maintains ‘significant market position’, Ofcom will no longer impose a cost-based charge control or quality of service standards on BT’s wholesale services, which combined with access to BT’s ducts and poles, the theory is competitors will have a stronger incentive to build their networks.

In areas where network competition is unlikely to be a reality, Ofcom has proposed a price cap for services at 1 Gbps and below to protect customers and provide certainty and stability over the course of the review. What is worth noting is that this is a relatively short-review, as while the proposals could come into play next spring, 2021 would see a new review and therefore new proposals.

The final proposal comes at the 4,300 exchanges where BT faces no competition from rival operators for inter-exchange connectivity, and Ofcom has deemed opening up the ducts and poles will have little impact. Rival networks are too far from these exchanges to make it economically viable to serve these exchanges, therefore BT is the only choice as a supplier for backhaul. Ofcom is proposing a requirement for dark fibre at cost for inter-exchange circuits that connect to these locations.

This is of course not the first time the dark fibre suggestion has emerged from Ofcom. In April, Openreach officially launched a compromise between full dark fibre access and full managed service after months of bickering and reviews with BT attempting to resist the Ofcom intervention. Ofcom seemingly lost that battle, with fingers being pointed at suspect market definitions, though now it appears ready to restart the assault.

This is of course only the consultation stage of the process, though the plans are to get the new rules in place by next spring. Whether this timetable is realistic with the almost guaranteed legal challenge from BT remains to be seen, but this is just another step in the never ending Ofcom quest to improve connectivity and competition across the UK.

Orange goes submarine with Google cable partnership

Orange has been announced as the latest partner to join Google on its monstrous mission to bulk out its connectivity infrastructure maze.

The telco will act as the French ‘landing partner’ for Google’s Dunant transatlantic submarine cable, which is set to come into operation in 2020. As part of the partnership, Orange will provide backhaul services to Paris, while also benefiting from fibre-pairs with a capacity of more than 30 Tbps per pair.

“I am extremely proud to announce this collaboration with Google to build a new, cutting-edge cable between the USA and France,” said Stéphane Richard, CEO of Orange. “The role of submarine cables is often overlooked, despite their central role at the heart of our digital world. I am proud that Orange continues to be a global leader in investing, deploying, maintaining and managing such key infrastructure. Google is a major partner for Orange and this project reflects the spirit of our relationship.”

Announced back in July, Dunant (named after Nobel Peace Prize winner Henri Dunant) is Google’s first private investment across the Atlantic and supplements one of the busiest routes on the internet. The cable will be 6,600km long, connecting the west coast of France to North Virginia in the US. The cable is set to be the first to connect the two countries in 15 years.

While many organizations are investing in infrastructure through consortiums, Orange has invested in more than 40 submarine cables, few have taken Google’s approach in being the sole investor. It might be a more expensive approach, though Google will have more control over capacity and the route of the cable, perhaps giving it a bit of an edge over competitors. The weight of such investments have been putting some dents in the spreadsheets, the CAPEX column doubled during the latest quarterly earnings call, though it does put Google in a solid position.

From Orange’s perspective, the partnership will strengthen the telcos position to support the development of new uses for its consumer and enterprise customers in Europe and America. It will also be in a stronger position to provide services to wholesale market such as content-providers and third-party operators.

Telarix and Starhome Mach merge to offer global wholesale telecoms portfolio

A couple of companies involved in the areas of operator interconnectivity, roaming and general wholesale action have decided to merge.

The combination of Telarix and Starhome Mach inevitably claims to offer a full end-to-end set of wholesale solutions for operators, covering voice, SMS, clearing, settlement and fraud prevention. The new company has 450 customers in 130 countries. All this mucking about with telecoms plumbing also creates business opportunities in BSS, subscriber analytics and that sort of thing.

“CSPs must manage their complex partner ecosystem from negotiation to traffic management, to billing and settlement, while at the same time, providing differentiated services to consumers, businesses and IoT.,” said Telarix CEO Marco Limena. “This merger will enable the development of new  innovative solutions overcoming the complex challenges of today’s digital transformation era to drive desired business performance.”

“Our success in launching SaaS versions of our leading roaming and clearing platforms introduced a variety of other innovative solutions in real-time anti-fraud, Network Function Virtualization and the Internet of Things,” said Starhome Mach CEO, Itai Margalit. “Bringing our offerings together with Telarix’s solutions will bring new solutions to the market and we see a huge opportunity to accelerate company growth.”

“Telarix and Starhome Mach have been very successful in their respective markets,” said Steve Pusey, former Group CTO and Senior Board Advisor to Telarix. “The joining together of this expertise creates a unique opportunity to address the market demand for full spectrum solutions.”

While positioned as a merger this looks more like the acquisition of Starhome Mach by Telarix. Private equity is involved one both sides but only Vista Equity Partners, which is behand Telarix, will remain involved, it will be based in Telarix’s home of Vienna, Virginia, and Limena will be the CEO of the new company, with Margalit becoming President of the roaming silo. You can read further analysis of this move at Light Reading here.

3 + BT + SSE = 5G, FYI

UK MNO Three has announced a new deal that gives it access to a bunch of BT local exchanges to augment its backhaul. This will be handy for 5G, we’re told.

This move was made possible by a new project undertaken by SSE Enterprise telecoms to unbundle 177 BT exchanges over the next two years, thus enabling it to offer wholesale fibre services itself. Three is the first customer to seize this opportunity, which SSE is virtue-signalling as being a significant contribution to UK fibre access or something like that and Three seems to be adopting a similar position on 5G.

“By significantly increasing our access to fibre, we are putting our network on the best footing possible to take advantage of the benefits of 5G technology,” said Bryn Jones, CTO at Three UK. “Our customers use 3.5 times more data per month than the average UK consumer and this deal will help us maintain our leadership in providing a fantastic data service. Fibre is essential to the UK’s digital future and more needs to be done to improve its availability to ensure that the UK benefits from 5G at the earliest opportunity.”

“5G will allow Three UK to grow capacity on its network more than twenty-fold,” said Colin Sempill, MD at SSE Enterprise Telecoms. “But for 5G to live up to its potential, the right infrastructure must be in place. High capacity fibre connectivity is absolutely critical. We’re fully invested in supporting the UK’s digital ambitions, demonstrated in our recent investments in expanding our network, and it’s exciting for us to be playing such an important role in Three UK’s journey towards a 5G future for consumers and businesses.”

Three says this deal will allow it to increase its network capacity 20 times, which is pretty significant and necessary since it anticipates UK punters hoovering up 90GB per month by 2025. Oh, and in case you missed it, this will make it really good at 5G too. SSE, meanwhile, seems to be positioning itself as a major fibre backhaul provider thanks to this project.

BICS and Fastweb combine to link Europe and MEA

Connectivity vendor BICS has joined forces with Italian operator Fastweb to augment communications links between Europe, the Middle East and Africa.

The strategic partnership aims to combine BICS’ pan-European network with Fastweb’s fibre backbone in Italy and its access to submarine cable systems originating in Sicily. The point of this joint effort is to offer intercontinental connectivity services wholesale to other operators.

“We are highly satisfied with this partnership agreement with such a major international player as BICS, which highlights the strength of our network and the solid nature of our strategy,” said Fabrizio Casati, Chief Wholesale Officer at Fastweb. “The partnership with BICS adds further value to our investments, following on from our participation in the Open Hub Med consortium in Sicily and the development of an innovative and future-proof Flexible Optical Network all along Italy.”

“BICS has always been committed to providing its customers with first-class connectivity, and this partnership confirms our position as a bridging partner for operators expanding their capacity provision throughout Europe,” said Daniel Kurgan, CEO at BICS.

In case you’re wondering where else BICS connects here are a couple of maps for you. We couldn’t find any for Fastweb, sorry.

BICS Europe

BICS global

BT consolidates its B2B business units under Gerry McQuade

UK telco BT is merging a bunch of B2B business units into one – called BT Enterprise – that will be run by the current head of BT’s Wholesale and Ventures unit.

Gerry McQuade has run the wholesale unit, which offers services mainly to UK communication providers and broadcaster, for a couple of years. He will effectively swallow up BT’s Business and Public Sector unit to create one big part of the company that focuses on business all the way from SMBs to the public sector. The former head of the latter unit – Graham Sutherland – has decided this is a good time to call it a day at BT.

“Having brought together our Consumer and EE businesses, this is the next step in the simplification of BT’s operating model,” said BT Chief Exec Gavin Patterson. “Combining our enterprise businesses will allow us to strengthen the services and products we offer to businesses and sharpen our focus on customer service, through clear accountabilities and by introducing efficiencies. Gerry McQuade has successfully led the Wholesale and Ventures business since its inception in 2016 and is the right person to drive the new organisation forward.

“I’d like to thank Graham for all he has done for BT over the past 12 years. During his time as CEO of the businesses in Ireland and MD of BT Business, he materially improved the profitability and performance of those divisions. Most recently as CEO of BT Business and Public Sector he has successfully led the integration of EE business into BT and the turnaround of our Public Sector division. I wish him all the very best for the future.”

McQuade came into BT from the EE acquisition and, with EE boss Mac Allera now heading up the consolidated consumer business unit, it’s interesting to note the increasing prominence of EE people at the BT top table. The two companies have very different business cultures and trying to combine a former state monopoly with a relatively fast moving MNO will inevitably have created friction. Patterson seems to be saying the whole company needs to modernise its attitudes with these appointments.