Wednesday, July 06, 2011

Joining the Rainbow Revolution

In a recent post, I alluded vaguely to my involvement in activities which aim to speed the delivery of fiber access in a couple of countries. One of those is the UK, where I am happy to say that over the past two months I have become a foot soldier in what I am tempted to call the UK's Rainbow Revolution.

Beyond the most obvious evocation of the visible light spectrum as conveyed by optical fiber, the name also highlights the sad truth that many in the country have long been dreaming, mostly in vain, of a place, somewhere over the rainbow, where we someday find ourselves with broadband infrastructure which is something more than "just good enough."

Most pertinently, I like the name because, just as the rainbow is a spectrum of different colors, each with its own character and place in the broader palette, what I see taking shape in the UK fiber market (at long last) is a range of players, all broadly in pursuit of the same goals, but operating in very different parts of the spectrum.

For my own part, I am now devoting pretty much all my time to corporate development work with CityFibre Holdings. The term "corporate development" is probably overly vague to most people, but my role involves a number of aspects, including business and commercial strategy, service provider relations, vendor relations, financial market relations, as well as collaboration with pretty much every part of the business. It is fascinating and enjoyable, and Greg and Mark have assembled a team and investor group which is a genuine pleasure to work with. We are currently in the middle of a re-branding process, but suffice it to say that we will be much more visible in the coming months as we unveil our plans.

In the course of analyzing the market and how it is (finally) changing, I have been fortunate to come into contact with some of the other emerging players in the space. I have met Boris and Dana from Hyperoptic, who are hugely impressive and have a really interesting business model for deploying fiber in high-density MDUs, which I guess I would describe as "hyper-local." At the other end of the rural-urban spectrum is Matthew Hare and his equally impressive, equally hyper-local Gigaclear. I think both of these companies are very well-placed to succeed in their respective market segments. What has surprised me in studying their approaches, and it speaks volumes about the early state of development of the UK market, is that there are no visible competitors to them in their chosen niches.

And just this morning, we see the arrival of a new entity to the market, BroadwayPartners. Led by the tireless and talented Adrian Wooster and supported by an equally-talented team (each of whom I have met in various contexts), it looks to me, as a total outsider, as though they are harnessing the network of interest built around INCA's important demand aggregation efforts to a corporate structure which can plan, finance and implement projects in conjunction with local (presumably rural) communities. Based on my observations, this is a critical element which has been missing at the local level, and I think the market can only benefit from the arrival of such an entity.

I am also keen to learn more about their plans for a national investment fund. This is the sort of development I have discussed with people in a number of countries, but so far this concept has remained just that, with one notable exception. I'm more than pleased to see someone rising to the challenge in the UK, and this alone is a pretty good measure of how things are changing. The gauntlet is now being laid at the feet of the investment community, and I think the opportunity is huge.

INCA's Malcolm Corbett has a graphic he uses in presentations, which we have appropriated (with his blessing) for our own slide deck, which shows a "fund-raising thermometer" of the kind you might see on the wall of a church or in the hall of a school, to track progress towards a funding goal. Taking the "worst case" (which I think might still be on the optimistic side) from Analysys-Mason's work on behalf of the Broadband Stakeholder Group, and mapping this against the total of investment publicly "committed" by BT, Fujitsu and BDUK, we only have visibility on perhaps 1/6 of the capital required to take us "over the rainbow."

To quote the Chancellor of the Exchequer (as inspired by "High School Musical," apparently), "We're all in this together." BT's balance sheet can't carry the entire project. Virgin Media is 3.7x levered on an LQA basis, suggesting it will remain constrained, at least in terms of major infrastructure projects such as required here. There is a yawning funding gap to be bridged, and the only response I can see, apart from giving up and resigning ourselves and our descendants to inferior infrastructure, is for the investment community and the talented people capable of successfully deploying infrastructure to get busy and get on with realizing this opportunity.

Which is what I finally, after years of frustration, see happening around me and in my own working life.

None of this is to denigrate or ignore in any way the early efforts of local entrepreneurs, activists and visionaries across the country. To the contrary, in my view, it is only pressure from the edge which promotes awareness of the opportunity and catalyses broader action. So, thanks to all of you. I've seen many false dawns in my long involvement in telecom, but this feels like something new and positive. I'm tempted to say that the train is ready for departure.


David H. Deans said...

Thanks for sharing this detailed summary of the FTTx activities in the UK.

I'm curious, James, do you have any insight on the latest BT fibre infrastructure deployment in the East London Tech City area -- as part of the preparations for the London 2012 Olympics?

James Enck said...

Hi David. Don't have any specific information at the moment, though you can look at this very helpful map which plots current and announced exchange areas for the FTTC deployment. This definitely gives the appearance that plenty is happening over the next year in the area, though how specifically it ties in with "Tech City" is undetermined.

Andy said...

I heard from a neighbour that BT were pulling fibre to our tiny village a couple of months ago - to the primary school up the road.

Now wouldn't that have been a good time to make the service available to people living there as well?

James do you have any insight into the different funding schemes used for schools connectivity in the UK? I expect the schools and public projects are completely separate and don't talk, but I can dream...

SAK said...

Thanks for this excellent analysis of the FTTx space in the UK.
Your comments and analysis would be v useful input for the forthcoming examination of the topic of broadband in the UK, to be conducted by the House of Lords Committee on Communications, which is expected to begin its work on BB in December 2011 or January 2012.