Rural UK Full Fibre ISP Gigaclear Celebrates 75,000 Customers
Abingdon-based rural broadband ISP Gigaclear, which has deployed a new gigabit-capable Fibre-to-the-Premises (FTTP) network to cover 380,000 premises (mostly in England), have today celebrated after they announced the connection of their 75,000th customer to the network.
The Infracapital-backed ISP is currently investing up to £700 million to reach 500,000 UK premises (Ready for Service) across 23 counties by the end of 2024, or the end of 2023 if you include built but not yet RFS premises (here). The 75,000 customer figure released today also represents a “doubling of its customer base in only two years“.
Residential customers of the service typically pay from £17 a month (£40 after 18-months) for a symmetric 200Mbps broadband package on an 18-month term, and this rises to £49 (£79 after 18-months) for their top 830Mbps plan. All packages include a wireless router and free installation. But they’re currently also running a special offer that gives 500Mbps for £20 per month.
Gigaclear’s Chief Marketing Officer, Nick Rawlings, said:
“Our strategy is to take full fibre broadband to underserved rural communities where others fear to tread. We’re building our network and accelerating sales at a faster rate than ever before, as more and more consumers demand faster speeds and more reliable broadband. We’re look forward to reaching our next milestone of 100,000 customers in the near future.”
The timing of this announcement, which occurs during a period of uncertainty about the stability of alternative networks in the UK, is clearly intended to show that some AltNets are able to generate good take-up. But for context, Gigaclear has been building for many years longer than most AltNets, and they’ve been doing so in some very expensive to tackle rural areas, which tends to disproportionately raise build costs. On the flip side, there’s often less competition for AltNets to worry about in rural communities, at least there was before.
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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75,000 customer since first launch isn’t much to brag about considering their invested footprint
20% takeup is not good enough they need to get 60% to appease the altnet bubble mob
Of course 20% take-up is not good enough. Most of the numbers needed to work that out are in the article.
£700m to pass 500k premises is £1400 cost per premises passed. This is because they are building in mostly rural areas.
75k paying customers from 385k premises passed is near enough 20% take-up rate. The build cost per paying customer at 20% take-up rate is £1400/20% = £7000.
Assume a very generous (low) interest rate / target return on capital of 6%pa on £7000 build cost and that’s £420pa per customer in finance costs alone, excluding VAT.
Many customers are only paying £40 per month including VAT, or much less if they are on an introductory offer.
To be viable at 20% long-term take-up rate, they would need their customers to be paying well over £50 per month on average.
@CJ So looking at their prices after the initial contract the £50 average per month looks easy to achieve, specially since they baked price increases in their T&Cs (CPI + 3.5%).
“Looks easy” if you don’t account for churn. Reality is that no one wants perpetually increasing bills, especially when there is zero value added
And the build cost is per property passed, you can add £250 per customer for the droplink and CPE. Admittedly that’s only lifted us to £7,250 (using CJ’s logic), but once the business gets out of the PE funded startup stage, it’ll need to cover its weighted cost of capital, which will be in the 12-15% range, and that’s over eighty quid a month on top of its own opex and cost of sales.
Nevermind the greedy “CPI + 3.5%” hikes, just after the “introduction offer” expires, a very significant amount of people will churn. 20 quid for 200mb is fine but once the bill doubles then a lot of people will just go back to Sky to pay less
An ARPU that high to meet the business case, just means the business case has not been thought through
Whether people would go back from a decent altnet connection to a cheap Sky offer of slowish rural FTTC isn’t yet clear. Looking at Gigaclear’s post contract pricing, it’s a big hike, but the undiscounted price is not unreasonable in absolute terms. Would you go back to a 20-50 Mbps connection for £20-30 a month, or stick with a high quality high speed connection for £40-50? I wouldn’t, some will.
The big risk to Gigaclear is OR overbuild, and that’s pretty slow moving in rural areas. By the time OR (or other Project Gigabit providers) get round to these areas. Of course, Gigaclear are presumably at liberty to apply for Project Gigabit contracts.
It is very clear that people chase better prices, especially when average savings are lower and lower. I’m not saying everyone will leave but fact is that the majority of these 75k are on the introduction pricing.
There will be people who stay but even if just 3 out of 10 people leave to get better pricing from Sky (before OR overbuilds) it will be a huge blow. After OR overbuilds, the 3 out of 10 will rise to maybe 7 out of 10 as people will be able to get similar speeds at a much cheaper price. Price churning is the core benefit of competition, not speed
CJ you are spot on
The way it will be costed I would guess is does the monthly charge cover the costs of providing the service The capital costs will be recovered over the lifetime of the equipment
Not at all. Initial pricing is based on “what do we need to offer to get customers?”. And after that the price is set by what alternatives exist in the market. For the initial investors, things are simply around getting the business up and running, and then hoping to sell it for more than they put in, there’s no thought at all to longer term financial sustainability.
Even if the company wanted to cover costs, it has to do that with regard to the financial markets view on cost of capital, so the asset life is largely irrelevant. Cost of capital sweeps up interest, dividends, and depreciation into a single figure, and that’s around 12-15% for a medium sized company in a competitive market. Having longer or shorter asset lives doesn’t have any real bearing on how much the company needs to recover through its pricing.
It works well, I don’t like the look of the router, but it can be hidden.
The only problem is gigaclear don’t like it when people want to lower their package. My other half is moving from 1Gbit to 200Mb/s and the person on the other end of the phone seemed to not be happy about it, maybe they had a bad day.
My introductory deal ends just after the CPI plus 3.5% increase due in September. I was told by their staff to haggle just before the increase was due to come in and use my upcoming end of deal as leverage. I certainly will be doing so.
Being very rural the alternatives are Sky and lesser quality FTTC with the cabinet being 1/2 a mile away and covering g the distance via overhead copper wire that BT are pretty much refusing to repair or upgrade as they have given up on this area due to it’s remoteness.
Nonetheless I will drop Gigackear if they dont offer me a comparative deal on a speed pro rata basis.
There’s no value in brand/suppkier loyalty nowadays.
Ironically my wife has agreed that if we did slip back to snail internet we might get off our devices, YouTube, Netflix etc and get out and do more. Now there’s a thought!