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Gigaclear CEO Mike Surrey on Building Full Fibre Beyond England

Saturday, August 25th, 2018 (12:01 am) - Score 7,550
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6. Cityfibre recently announced that they were seeking a Judicial Review of the advertising watchdog’s decision not to clamp down on ISPs that advertised slow hybrid fibre (FTTC / VDSL2 / Cable etc.) services as “fibre”, “fibre broadband” or “fibre optic broadband” etc.

Cityfibre described the ASA’s reasoning as being “fundamentally flawed” and to quote their CEO, Greg Mesch: “The time has come to do away with ‘fake fibre’. The ASA’s short-sighted decision to allow yesterday’s copper-based infrastructure to masquerade as the future-proof full fibre networks of tomorrow is a clear failure in its duty.”

No doubt you also have a viewpoint on this matter?

ANSWER:

We fully support CityFibre’s challenge of the ASA’s ruling and we’re pleased that CityFibre has been given permission at the High Court to move ahead with a judicial review.

All cars use electricity: not all cars are electric cars. The same applies to broadband. All broadband uses fibre (even if way, way back in the core network) but not all broadband is fibre. If we want to be able to clearly articulate to consumers the difference in terms of performance (reliability and speed) and its ability to offer a future-proof connection, then talking about the delivery technology is necessary.

The research we undertook in 2017, along with CityFibre and Hyperoptic, clearly showed that consumers typically felt it was misleading to describe part fibre networks as ‘fibre’. It impedes their ability to differentiate between the different capabilities of different technologies.

The government has communicated the importance of full fibre networks for our economic future. It’s time to educate consumers in a clear and concise way, to ensure they have the knowledge to choose the service they want.

7. The Government has proposed a 10Mbps Universal Service Obligation (USO), which should be introduced from 2020 and is likely to focus most of its efforts upon the final 2% of UK premises that won’t be covered by a superfast broadband network via the Broadband Delivery UK programme.

If you could design the USO, what criteria and timescale would you set to ensure that a good quality connection is constantly maintained to all those who request it and, perhaps most important of all, how would you fund it?

ANSWER:

Given our involvement in the discussions around the USO, how it might be delivered and funded, we are not in a position to answer this question. Sorry.

8. Ofcom will introduce a new voluntary Automatic Compensation system from early 2019, which will force UK ISPs to compensate consumers (cash or bill credits) for a total loss of broadband connectivity (e.g. when an outage lasts longer than 2 working days). Compensation will also be paid for missed engineer appointments and delayed service installs / activations.

At present only the largest providers have signed-up to the scheme and smaller operators have not joined. What are your thoughts on the usefulness of this scheme and is it something you would consider joining?

ANSWER:

Gigaclear builds brand new full fibre networks and as we bury the infrastructure underground to keep it safe and aesthetically invisible to rural communities, the majority of our builds are major construction projects.

Once a network is built, delivering the service over it is fairly straightforward. However, every day we see issues during the construction process which mean that it’s not always possible to meet the original planned dates and these are subject to change.

So, whilst the vast majority of what we do is new build, automatic compensation for late delivery is not an option for us. For extended outages, we would be happy to compensate customers for loss of service. Once the rate of our build programmes stabilises, I would expect Gigaclear to join.

9. In the past Gigaclear was much more demand-led in their deployments, while the newer state aid supported contracts tend to follow a more general deployment model over a wider / less specific area. How are you finding take-up in the state aid supported areas where you’ve deployed so far and are you able to share any figures? Is take-up meeting your expectations and models.

ANSWER:

We moved from pre-selling to demand forecasting once we had enough data to model our take-up accurately. Right now, we are doing well against forecast, although we can always do better! As for sharing the detail, that varies enormously by area. Of course, for our business to work, in areas that cost more to build, we need to achieve higher adoptions. And the converse is true too. The costs broadly relate to the average distance between properties. Our current average is 80m, around sixteen times more than a typical UK urban/suburban network.

10. Do all the state aid supported contracts that you’ve won include the same sort of gainshare / clawback clause as other Broadband Delivery UK linked contracts, which require operators to return some of their public investment once customer take-up in related areas goes beyond a certain level (20% in a lot of BT’s contracts)?

ANSWER:

Yes, all Gigaclear’s contracts include the gainshare clauses. However, the business case that we bid is always at far higher levels of take-up than the 20% level you refer to.

11. One other thing we’ve noticed about Gigaclear’s state aid supported contracts is that the level of private investment committed is often significantly more than the contributed level of public investment. This is the opposite of what we’ve seen with many BT centred BDUK contracts, where aside from some exceptions the public investment tended to be larger than the private.

Can you tell us a bit more about the rationale for this approach. For example, is it all about producing the most attractive FTTP centric bid vs rivals and does the heightened level of financial commitment create any bigger risks or challenges?

ANSWER:

Broadly, we invest £1000 per property passed and achieve our average adoption forecast over time. So, our BDUK county specific bids include our own investment as well as the subsidy available. And we iterate our network designs to see just how far we can reach with the total funding available. The relationship we have with the local bodies is based on a partnership. Frankly, we have a lot to lose financially if we get it wrong, far more than the subsidy that we might be receiving.

12. One year ago Gigaclear announced that they had secured an additional £111m of private investment and expected to reach 150,000 premises passed in UK rural areas by the end of 2020. How much progress have you made on this target (e.g. premises passed so far) and how big do you aspire for Gigaclear’s FTTP network coverage to be by 2025?

ANSWER:

We are about half way there now and have yet to announce where we plan to get to by 2025. Watch this space!

13. Infracapital (M&G Investment Management) recently announced that they were going to buy Gigaclear for £270m. In theory this should provide more flexibility to invest in future deployments, although others have speculated that it might one day result in Gigaclear having its network consolidated with other providers where Infracapital is a major investor (e.g. TalkTalk).

Making money from FTTP/H networks is obviously very challenging and deployment tends to attract an extremely long pay-back period (e.g. 10-20 years), especially when the focus is upon rural areas. What do you see as being the most likely short and longer-term result of the Infracapital move?

ANSWER:

Infracapital now own 80% of Gigaclear, and along with Railpen have committed another £150m of investment to help us achieve our goals this year and next. This is a long-term investment, but we believe that we have shown our investors that the build can be done to the right cost profile and that demand for fibre does grow over time. As a result, our investors will achieve the long-term returns they are looking for.

14. Finally, can you give us a rough idea of the private investment that Gigaclear has so far committed to its rollout and how much more you might need in order to achieve any coverage aspirations for 2025?

ANSWER:

Gigaclear has raised £184m of equity from its shareholders and has a commitment for a further £150m. In addition, we have access to £72m of subsidy and have raised £22m in loans from the EIB. When we announce our build target for 2025, we will be in a position to say how much additional investment we will need to achieve it.

End.

We’d like to thank Mike for taking the time to respond to our questions, particularly as this piece was originally due to be conducted with Matthew Hare but that was before we knew of his planned departure.

Leave a Comment
42 Responses
  1. Avatar A_Builder

    This is good work for rural communities and shows a costs model where rural and semi rural FTTP can work commercially.

    All subsidised broadband should be full fibre. The historical BDUCK nonsense of seeing copper wires upgraded over long distances to get ADSL working better was sickening. For the same effort of stringing cable on poles fibre could have been put on the same poles as an overlay.

    I’m sure an OR apologise willl pop up saying poles needed replacing etc. That would be true of either pathway. It is/was not a differentiator.

    Anyway Giga (and a lot of others) will be making many people happy with decent connections at sensible prices.

    And the nice thing is that hay have committed funds to do a lot of this form serious investors.

    • Avatar Croft

      “The historical BDUCK nonsense of seeing copper wires upgraded over long distances to get ADSL working better was sickening. For the same effort of stringing cable on poles fibre could have been put on the same poles as an overlay.”

      That’s not always true. Depending on what cables you are running you can need to renew poles.If they simultaneously converted to VoIP you might get away with it but running copper/fib on poles can push them over their limits.

    • Avatar Fastman

      All subsidised broadband should be full fibre. The historical BDUCK nonsense of seeing copper wires upgraded over long distances to get ADSL working better was sickening. For the same effort of stringing cable on poles fibre could have been put on the same poles as an overlay.

      BDUK has nothing to d o do with ADSL, . There are challenges around poles which are not easy to overcome !!!!!! ie whats the state of that pole, how long are the current spans, and also what current on it — but let not facts and reality get in the way

    • Avatar A_Builder

      @ Croft
      @ Fastman

      You are right: I mistyped over my cappuccino.

      Semantics apart there was, historically, some farcical upgrading of copper wire to improve BB performance.

      I do accept that there are a few occasions where loading might become an issue on poles. But other national ISP have produced mixed copper/fibre bundles. BT did until recently own their very own cable making firm.

      Fibre bundles weigh a lot less than multi pair copper, which is inevitably, very heavy. The tensile elements in the fibre bundles can be Kevlar or the like which has very low weight and as the yarn form is quite cheap.

  2. Avatar Simon

    Bugger beyond England – cover England first!

    • Avatar A_Builder

      @Simon

      This is commercial. They will go where they see the best profits.

      And this is great as they can try a number of different models and debunk the it_doesn’t_work/it_is_too_expensive spiel on each one.

    • Avatar AdamWales

      Yes, because England is the be all and end all. There are 3 other countries to think about also.

    • Avatar CarlT

      They’re a private business not a public sector one. Whether they deploy to a single nation, county or even village is entirely at their discretion.

      Wales, etc, are more than welcome to engage them in public sector procurements. Apart from BDUK agreements their focus is very specific. There are many English counties, including my own, they have no plans to touch.

    • Avatar AdamWales

      I agree with you Carl. Didn’t agree with his comment is all. They are a business after all and they will go where the money is.

  3. Avatar Graham Long

    Let’s hope the ASA Judicial Review gives Gigaclear, Hyperoptic, City Fibre, B4RN a level playing field to compete on with those who peddle “fake fibre” forced being to tell their customers that they only give them copper. May the march of the full fibre providers continue full pace; there are many more customers waiting for you!

    • Avatar Croft

      Common sense says they should win but this is JR and its a high bar to win.

    • Avatar TheFacts

      @GL – you missed Openreach FTTP off your list.

    • Avatar GNewton

      @TheFacts: “you missed Openreach FTTP off your list.”

      How much is BT paying you to post here? If not paid by it, why do you keep twisting forum threads in favor of this company?

      The fact is BT is the one of biggest promoter of false advertising, calling VDSL “fibre broadband” when it isn’t.

    • Avatar wireless pacman

      As I recall, Graham, it wasn’t BT that started to peddle this nonsense but Virgin. BT complained to the ASA but lost and so decided might as well join in.

    • Avatar un4h731x0rp3r0m

      “As I recall, Graham, it wasn’t BT that started to peddle this nonsense but Virgin. BT complained to the ASA but lost and so decided might as well join in.”

      Nothing like accusing others of what you feel is a crime and then committing it yourself. Idiocy at its finest.

      Perhaps BT could start stabbing people randomly rather than metaphorically killing them with multiple price rises year on year… After all OJ Simpson (allegedly) did that and got away with it so if someone else does wrong that surely means its fine for BT to follow, i guess… right??? :-\

    • Avatar TheFacts

      Just simply pointing out TBB says ‘Full Fibre via its GEA-FTTP services is appearing. Total premise count running at 575,000 premises’.
      Let’s understand the story from all suppliers, big or small.

    • Avatar Gadget

      actually it appears that Sky and Talktalk were the ones to take the original complaint to the ASA – https://www.thinkbroadband.com/news/3391-asa-rules-on-virgin-fibre-optic-broadband-claims

    • Avatar un4h731x0rp3r0m

      Who originally complained or complained first about VM is irrelevant. If ANY organisation including BT (which have also previously complained) have an issue with the term “fibre” being used to describe a product which is partly copper based then they should not be calling their own crap “fibre” if it is also partly copper based.

      It defies all reason and logic to accuse someone of something you deem to be bad and then pull the same stunt yourself. Not only that but then for the bulk of your customer based not even be able to deliver anything near to the speed of the competitor you whined like a little beehatch about.

      Its like dumb companies that complain about Appl or Samsung and then as good as clone phones from those manufacturers.

      Pure 100% idiocy.

    • Avatar Meadmodj

      This should correct itself. As OR FTTP grows the ISPs will need to devise terminology to differentiate the FTTP products from the legacy FTTC products.

      As an aside Hyperoptic are on the list. I thought they were using FTTB and Cat6 cabling to the dewelling in some instances. If so what is that going to be called?

      Perhaps Ofcom should lead with a clear ranking but the use of the word Fibre is correct in most broadband definitions.

      Category A: Fibre to your home/dwelling FTTH
      Category B1: Fibre to your building then Data Cable to your dwelling FTTB1
      Category B2: Fibre to your building then TV cable to your dwelling FTTB2
      Category B3: Fibre to your building then Telephone Cable to your dwelling FTTB3
      Category C1: Fibre to your street then Data Cable to your dwelling FTTdp1
      Category C2: Fibre to your street then WIFI to your dwelling FTTdp2
      Category C3: Fibre to your street then TV cable to your dwelling FTTdp3
      Category C4: Fibre to your street then Telephone Cable to your dwelling FTTdp4
      Category D: Fibre to the cabinet FTTC then telephone cable to your dwelling FTTC
      Category E: Fibre to the exchange FTTE then telephone cable to your dwelling ADSL

      Note no use of FTTP as it can mean different things.

      Would categorisation help. I don’t think so for general consumers. Best probably to keep to speed and eventually Full Fibre to the dwelling will win naturally by market forces.

    • Avatar Joe

      The simplest is its fibre if it reaches your building as fibre; if it doesn’t its not. (cat6 etc in your own house or shared flats/appartments is your problem not the ISP/Supplier.)

    • Avatar Meadmodj

      @Joe. Currently people would be grateful for fibre to their premises but going forward when this is common place the method of connection to each dwelling will become as important. The issue raised here was clear advertising and my view is that services should be described correctly whether now or in the future.

    • Avatar un4h731x0rp3r0m

      “As an aside Hyperoptic are on the list. I thought they were using FTTB and Cat6 cabling to the dewelling in some instances. If so what is that going to be called?”

      FTTP and FTTB are for all purposes the same for the consumer. A fibre cable enters your building. (some *predictable*) people will try to argue this.

      What type of cabling you/is used within your home has no bearing on what type of cabling transmits the broadband to your home.

      If cabling you use in your home has a bearing on what a product is called then FTTP from anyone including BT (for the same predicables reading) can not be called FTTP as the wire between computer and modem, router or switch is likely to be CAT5/6 (IE copper) also.

      The Fibre to the home council also believe the same, they state…
      “We only promote Fibre to the Home (FTTH) and Fibre to the Building (FTTB), because we believe that only these solutions offer the bandwidth and symmetry necessary to allow the development of services and applications that make a difference to the way we live and work.”

      I agree with them entirely, those and only those products should be allowed to call theirself fibre. It does not need complicating anymore than that.

      VM and their product range which uses coax rather than full Fibre… NO to that being called “Fibre”
      BT and others with FTTC product ranges… NO to that being called “fibre” also.

      The only reason nothing has been done until now is cos government and big business (BT, VM etc, etc) like to exaggerate what they deliver to people.

    • Avatar Meadmodj

      @un4h731x0rp3r0m
      FTTH and FTTB are not the same physically, performance or reliability. Altnets also need to advertise accurately going forward.
      Current FTTC description should have been resolved long ago but wasn’t but what I am stating here is the principle.

    • Avatar TheFacts

      @Mm – do you some figures on the performance and reliability of FTTB v. FTTH?

    • Avatar Meadmodj

      @TheFacts
      MTBF would be difficult without knowing exactly how the provider is approaching it. I am simply assuming that FTTB infers some form of communal powered kit in the network and as such would therefore be less reliable that FTTH where there should be nothing between the OTL and the individual OTNs in each dwelling just fibre and optical splitters. More likely than MTBF will be the resilience of the kit from neglect or damage.
      Fibre provides a better upgrade path that Cat 6 doesn’t as faster optical kit becomes available. I know 1 Gbps is dream for most now but optical technology will continue to develop.
      As I said it’s the principle. There is a difference between FTTC and FTTP but there are also differences in the way that is provided. If some one is redefining ASA rules lets have the truth in all advertising.

    • Avatar GNewton

      @TheFacts: “Let’s understand the story from all suppliers, big or small.”

      The story is about Gigaclear. Your desire to advertise BT is admirable, but inappropriate in the context of false advertising. The fact is, BT (along with VM) is majorly misleading customers with false ‘fibre broadband’ advertising.

    • Avatar A_Builder

      @Meadmodj

      I don’t see FTTB, where CAT6/7e cable is being used as misleading.

      You responded to the thread over Gfast a couple of weeks back encouraging a mix of technology. This is a rational use of technology in that it meets and exceeds foreseeable growth.

      Yes, an all passive infrastructure is better in the long run as it is future proof. But Cat6/7e is a good viable solution and is far better than using Gfast in the basement as it is easy to upgrade the router to increase throughput from say 1G to 10Gb/s.

      Installation at volume of pure fibre may be an issue, for the smaller Alt Nets, given the sheer volume of fibre terminations required across a large estate of flats. And there is where data cable to the flat may well have a role.

    • Avatar un4h731x0rp3r0m

      “FTTH and FTTB are not the same physically, performance or reliability. Altnets also need to advertise accurately going forward.”

      Firstly i said FTTP/FTTB “for all purposes the same for the consumer” and it is.
      Physically a cable enters your building. Performance wise both are capable of 1Gbps symmetrical As for reliability in many cases that will be down to the rest of the suppliers network or how things are deployed, rather than anything to do with the cable which runs into a persons home.

      Altnets are not misadvertising Gigaclear even have long winded explanations and diagrams on their site on how their product works.

      ” I am simply assuming that FTTB infers some form of communal powered kit in the network and as such would therefore be less reliable that FTTH…”

      If you have a network where a fibre cable goes into a building then it is a “fibre” service. How it is powered, what cable is used to connected consumer gear and more INSIDE the building has nothing to do with what product is being supplied.

      If you want to get that pedantic and have definitions based on equipment in the building and how its powered things are going to get stupid. Are you going to have another classification for networks that use alternative energy (like solar) to power or partly power them?

      Are you going to have different definitions for every FTTP/H/B product which uses different manufacturers ONT gear (as just one of a million examples of other equipment used in a network) because one manufacturer will have a better reputation than another for reliability of their equipment? What about the consumer end modem/router device, is that not also going to have a bearing on reliability? Going down that rabbit hole of definition is daft and would make things even more confusing than things are now.

      Nobody except a OCD nerd is going to care how a fibre which comes into their home. People care if their connection is fibre or not fibre. Not how wide the hole was to lay the fibre cable, or what make/manufacturer/reliability/other equipment in the network is used/choosen.

      FTTH/FTTB/FTTP have never been defined in ways like that and never should.

    • Avatar Meadmodj

      @A_Builder. Yes I support all technologies to distribute whether fibre, cat 6 or dsl. My badly formed point is purely how FTTB products are compared with FTTH in relation to advertising. Particularly as FTTP appears to be the most common term in the UK. My view is that if they all used the term “full fibre” that may be as contentious in future as the current FTTC debate.

    • Avatar un4h731x0rp3r0m

      “…My view is that if they all used the term “full fibre” that may be as contentious in future as the current FTTC debate.”

      Why would it be? FTTB/H/P a fibre cable enters the premises, FTTC it does not.

  4. Avatar Tim

    Gigaclear please expand into rural East Kent! We’ve been forgotten buy all other providers. Still stuck on 4Mbps ☹️

    • Avatar Liegeois

      I second this, looks like the ones who are building in Kent prefer West side over East, I wonder why.

  5. Avatar hmm

    west kent more money east kent less money and business

    • Avatar Tim

      I really don’t understand why Canterbury, Kent’s only City is ignored by all. There is NO Virgin Media, NO Hyperoptic, NO Gigaclear. There are no alternatives fibre networks in most of East Kent! Virgin has done a small amount of expansion in Thanet but that’s about it and is restricted to urban areas.

      East Kent is always overlooked. Other than Scotland we have the worse mobile phone coverage. Canterbury is well known to have NO indoor city centre mobile coverage! We need fibre in Canterbury to help boost the possibility of investment in mobile infrastructure like 4G micro cells on street lights.

  6. Avatar hmm

    west kent more money east kent less money and business

  7. Avatar Ogilvie Jackson

    Let’s hope we get the Scottish Governments decision soon on R100.
    This £600m.project needs a bidder who will reach out to remote areas with fibre to the home. In most of these areas the pole infrastructure has been upgraded and will support aerial fibre.
    LET’S HOPE THAT BIDDER IS Gigaclear.

  8. Avatar SuperFast Dream

    It would be great if Gigaclear could blow some fibre over to rural NI 🙂

  9. Avatar TheMatt

    Hows about not focussing on London and multiple occupancy buildings.

    It’s alright to talk about expanding outside the country… but you can’t offer service to 90% of the country you’re in now.
    Please, get fibre to people and stop giving it to the chosen few ? howsaboutthat?

    • Avatar MikeP

      You seem to have confused Gigaclear (whose CEO this interview is with, and are a rural fibre broadband provider, for unusual definitions of “provider”) with Hyperoptic (who this interview isn’t about, but ARE a provider of fibre broadband primarily to urban multiple-occupancy buildings)

  10. Avatar AnotherTim

    Given the subsequent announcements that Gigaclear have fallen way behind schedule in the rollout for several of the BDUK areas, is there any chance of an update from Mike Surrey regarding their rollout plans and their ability to fullfil their ambitions?

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