FTTP ISP Toob Keep 900Mbps UK Broadband Price Frozen Again
Alternative broadband ISP toob, which aims to cover 1 million premises across the South of England by 2027 (mostly in Surrey and Hampshire), has joined the growing club of smaller providers that have bucked the trend of recent price hikes by opting to keep their package prices frozen.
The operator, which was originally backed by an investment of £75m via the Amber Infrastructure Group (here) and “up to” £87.5m from the Sequoia Economic Infrastructure Income Fund (here), has been deploying across locations such as Southampton, Portsmouth, Aldershot, Eastleigh, Chandler’s Ford, Camberley, Frimley, Ash, Farnborough, Green, Guildford, Mytchett, West Byfleet and Woking etc.
Customers of the service typically pay just £25 per month on an 18-month term for their 900Mbps (symmetric speed) package (£29 thereafter), which includes a router, unlimited usage and free installation. Suffice to say that they’re one of the cheapest providers in the market and, despite rising costs and high inflation, they’ve opted to keep the prices frozen again.
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On top of that, toob said they’d also maintain their promise of “no in-contract price rises“.
Nick Parbutt, toob’s CEO, said:
“Costs are rising for everyone right now, and the major broadband providers are not helping. They are taking the opportunity to increase their profits by pushing through inflation-busting price rises for their customers even in the middle of a contract. At toob, we value the relationship with our customers and are committed to never increasing our prices mid-contract.”
The downside of being so cheap is that it can make it harder for toob’s backers to gain a return on their investment. But for now the aggressive pricing strategy should, we hope, be helping to grow consumer take-up in the areas where they’ve deployed.
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and Linkedin.
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Well done Toob.
Note to other Alnets, this is how you remain competitive and make your product attractive, rather than complaining about Openreach cutting their prices.
Being competitive in the retail market may be a good thing for customers, but if Toob continue to make the double digit million losses they did in previous years then they won’t be around for long. The whole alnet market is like the Railway Mania, as investors throw money at infrastructure businesses with maybe some good, but most unsustainable, probably hoping for a profitable early exit before the house of cards comes down. Even Hyperoptic, who have perhaps the best business model and lowest risk of altnets have been losing around £45m a year. I’ve several decades of experience in regulated infrastructure businesses, and looking at what’s happening in UK broadband it’s utter, utter madness. This idea of competition in physical infrastructure provision is almost unique in any sector and in the world – essentially a wild Conservative party experiment based on the mad premise that free markets solve all problems, ignoring the overlap and duplication of assets, the inevitable investor losses, and the wasted resources. Should either have been invested in Openreach as a single national wholesale infrastructure, or if that’s not desirable, regional franchises for FTTP similar to the gas or electricity distribution model (and that latter model wouldn’t pan out so well for consumers, looking at the outcome of auctions of mobile spectrum).
@Andrew G
Hyperoptic used to lose £10s of millions a year but their last accounts (December 2021) showed a loss of £7.4m, and in 2022 i expect they will be around break even for 2022, even with significant growth of their footprint. I think what you also see for the Alt nets is that the bigger ones are not overbuilding each other for the most part (I’m not including VMs cable network as an alt net).
I’m not sure you’re aware how much money toob are losing pricing like this.
The product is certainly attractive but how sustainable their business model is is questionable.
Most of the ALTNETS have decent pricing and no mid contract price rises. Some are too questionable at the lower end, and Trooli failed because of multiple reasons. Their pricing wasn’t competitive and their service didnt even offer symmetric over Bt and the others. But like I said not just that.
Very, very few people are bothered by whether the service is symmetrical or not. Most are only interested in pricing.
Think these guys were killed partly by their build costs, partly by FTTC being good enough for many and partly by their pricing.
@ Jeremy_da_best, are we looking at the same Hyperoptic, company number 07222543? I looked before posting, I’ve got the Companies House accounts for year ending 2021 open (again) now and it shows a loss before tax of over £48m in the P&L on page 23. Not to mention quarter of a billion quid of fixed assets, and over £400m of debt, and those balance sheet numbers mean there’s no way on earth they can turn a net profit in 2022. I’d really like the altnets to be a stonking success, but the fundamentals look appalling – too much capital, too few customers, massive operating losses, and aiming for growing in a market where there’s challenges from wireless broadband, Openreach and Virgin Media, plus growing understanding amongst customers that most of them don’t need gigabit speeds. Even VM are busy destroying value with little prospect of actually making a sustainable profit (check out their ROCE).
Brutal and inarguable. The numbers don’t lie. Even Hyperoptic will be acquired, and if their numbers don’t work it’ll be a distressed sale.
Only way new entrants will have a successful exit will be through brutal cost control, lean and mean, and delivering where it matters.
Trooli went into a really difficult market and were unlikely to succeed. Openreach could both overbuild them and make a PR success of doing so.
Hi Andrew,
I come from this industry, but not hyperoptic specifically.
The cost of installing a network is labor. The cable, duct, CPE, cabinets and switches cost something, of course, but it’s barely in the double digit percentages.
Those above are fixed assets. Unless you do some incredibly creative accounting you can’t have labour show up as an asset, even when you outsource said labour to a contractor.
Ergo the more you build the worse your balance sheet will look. The numbers on takeup are known by relatively few as it’s a closely commercial guarded secret, but hyperoptic have a better take rate than virgin media. They are not the ones to worry about. There are some others with worrying take up rates and or build costs certainly.
M, yes, the more you build the bigger (not necessarily worse) your balance sheet is, and that was indeed my point. It only becomes “worse” is the company doesn’t have a customer base paying enough to offer a return on the capital employed, and that’s where every altnet is struggling.
However, with respect to you, I’m the wrong person to try and explain capital programme management and accounting to. I speak from the experience of personally programme managing somewhere around half a billion quid of infrastructure investment over about seven years, under the careful scrutiny of investors and a very zealous regulator, and I designed the tool my employers used to balance the accounting versus tax treatment for investments, and the investment decisions made totalling around £2bn.
If you work for a company that doesn’t capitalise construction labour costs then (a) the company finance director is mad, and (b) that’s not how everybody else does it, and (c) your company are in breach of the relevant requirements of the Financial Reporting Council, specifically FRS102 (its 424 pages, but I’ll let you read it). You’ll see in many company accounts adjustments to the P&L to transfer own-account labour to the balance sheet, and third party construction labour is always capitalised unless it’s classified as abnormally wasteful.
I suppose in the context of the coming Altnet Crash, perhaps the FDs are prescient, and have classified all their labour costs as abnormally wasteful? (BTW, that’s humour).