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Freedom Fibre CEO Talks Future UK FTTP Rollout Challenges

Saturday, Aug 26th, 2023 (12:01 am) - Score 5,144
Neil-McArthur-CEO-of-Freedom-Fibre-2023-Picture

9. The rising cost-of-living has been a big topic during the past year and network providers are certainly not immune to its negative impacts, both in terms of higher costs for your own operations / builds and the risk of rising prices for customers.

In response, the government and Ofcom recently warned that ISPs should now “consider whether large price rises can be justified at time of exceptional financial hardship”, and they’re also strongly urging providers to offer and promote cheaper social tariffs to consumers (those on state benefits).

What are your thoughts on the pros and cons of offering a social tariff? In addition, how do you see this balancing against the highly competitive market for alternative full fibre networks, where new network builders are already competing aggressively on price – despite rising costs and high inflation – in order to peel customers away from rivals?

Neil’s Answer:

First of all we’re a wholesale provider and not a resale ISP, but from a wholesale provision point of view the very best thing we can do is be a very efficient builder. We already have a situation where the industry is becoming highly competitive and Ofcom must be pretty enthused that BT have already introduced two price reductions on the wholesale front with Equinox 1 and 2, and I’m sure they would have done this much earlier had the capital not been flowing into the AltNet sector. So, from a competitive marketing point of view at the wholesale level I think it’s already starting to happen.

In terms of the pressure on the ISPs with social tariffs, I think the government is being a bit disingenuous, as on the one hand they’re saying that it’s an essential utility that is absolutely important so you must introduce social tariffs, but on the other hand they’re taxing it at a VAT of 20% which is classified as a luxury goods tax. So, it’s the only utility that is taxed at 20%. If the government really wants to incentivise the industry to provide social tariffs the first step is to drop VAT and align it with other utilities at 5%.

Of course, to get a highly competitive position you need multiple networks so that there is competitive tension at that level, and I think this is already starting to happen. You’ve seen BT drop its wholesale price across its whole build area and in response AltNets will follow in some capacity. The price of fibre is already pretty good, especially when compared to the price of fibre in other European countries. Fibre prices in the UK are coming down and then we just need to make sure we get to the state where there are multiple networks with multiple ISPs offering a wide range of products, which will include social tariffs in some capacity. However, I do believe that the government needs to step up and stop blaming the ISPs for the fact that there is a lack of social tariffs when you have VAT at 20% and business rates on the networks etc. This is an industry that takes very little subsidies from the government.

10. Speaking of pricing, the UK’s advertising standards authority appears set to require that ISPs be clearer and more transparent with their prices, particularly around the often thorny and confusing issue of mid-contract price hikes.

What is your view on how mid-contract price hikes should be handled by ISPs and do you think the ultimate answer is to just ban them (i.e. ensure all packages offer a true fixed price for the entire contract term), or take a different approach?

Neil’s Answer:

This is more a retail question, as wholesalers rarely have mid contract price hikes. However, at the end of the day it’s a contract term and if someone signs a 3-year contract that has an annual RPI or CPI then that’s just part of the deal. But the most important part is that these clauses are clear and visible so that consumers and businesses aren’t misled through the process. But if the UK Advertising Standards Authority has an issue with misleading people, then calling FTTC ‘fibre’ has long been a much bigger culprit in misleading the public than putting RPI indexing in a contract.

I can understand why at the very least it should be clear that it is the deal you are getting, but as it’s a retail issue rather than a wholesale issue I’m not necessarily an expert on the subject and remain fairly neutral on this point.

11. The price of full fibre has also been a big topic among alternative network providers for another reason this year. Openreach recently proposed to make further discounts (Equinox 2) to their wholesale FTTP broadband products, which prompted Cityfibre to lodge a Competition Act complaint with both the Competition and Markets Authority (CMA) and Ofcom.

The operator accuses Openreach of “undertaking an aggressive strategy to foreclose infrastructure competition in the UK fibre broadband market“ (i.e. making it harder for smaller AltNets to grow customer take-up and thus attract investment). Where do you stand on this and does anything need to change?

Neil’s Answer:

We live in an industry where we have free competition, and we rely on a regulator to manage any monopoly interests in there that could distort that. It’s a tricky job because on one hand the regulator needs to attract huge investment in the sector which they have now done – there’s something like £30b of investment earmarked for fibre networks which is a big tick in the box – But they also then have to encourage price competition.

I think what Ofcom have potentially overlooked isn’t just Equinox 1 and 2 – they were never going to want to prevent that as it’s in the best interests of the consumer- but they have to make sure that there are no anti-competitive activities going on and think they need to look deeper into the migration of copper into fibre.

Certainly, if you look back to FTTC, we moved from a very competitive world of ADSL to a very uncompetitive world of FTTC because AltNet operators didn’t have the tools to deliver it. This placed BT at an exceptionally strong position to pick up all the subsidies that were going on super-fast copper and build an intermediate product that has allowed them to manage the migration from copper to full-fibre in a way that suits and benefits them more than it suits anybody else. So, I think there’s been a little bit of ‘eye off the ball’ from Ofcom in all the various small steps.

We’ve had the issues of subsidies to Area 3 which only BT received when there were plenty of AltNets already building in Area 3. That didn’t seem fair to a lot of people, that there were approximately 3m homes BT received a subsidy for that nobody else was receiving in areas where AltNets were already building and relying on vouchers. And then DCMS conveniently removed a load of subsidy contemporaneously with Ofcom, and you’re not telling me there wasn’t some kind of dialogue going on there as it all happened a little bit too quickly for it to be a coincidence.

So, from the AltNet sector I can see how it would look a little bit like the regulator is conspiring against them. I don’t think it’s as devious as that, but equally BT have made it quite clear that they believe there should only be one network, which doesn’t sound like a business that is embracing a competitive world. What we need is a very healthy AltNet competition because it’s that competition that has kept BT honest.

Ultimately, I don’t think the regulator has looked across the piece wide enough at the issues that affect competition rather than just simply something like Equinox 1 and 2. The whole migration of copper to full-fibre needs a closer look at how it’s being orchestrated to impact competition.

12. Moving away from pricing now. Ofcom were due to introduce their new One Touch Switch (OTS) migration (switching) system for UK broadband ISPs from 3rd April 2023, which was intended to make it easier for consumers to switch between providers on physically separate networks (i.e. extending the existing Gaining Provider Led [GPL] solution to include alternative networks, rather than just Openreach).

However, many ISPs and the related vehicle for this – The One Touch Switching Company (TOTSCo) – were NOT ready to introduce the system in time for the original deadline. What has been your own experience of OTS / TOTSCo and how long do you think before it can be fully implemented?

Neil’s Answer:

I can understand why there’s frustration with this. Of course, it’s a great idea but it’s a bit like phone number portability in the days of mobile. It was a bit of a nightmare to implement but it was really important that people were able to move contract in a seamless way, so I absolutely support the principle.

Of course, the timing has landed at a point where you have the best part of 100+ AltNets and a myriad of ISPs delivering a service, and what the OTS/TOTSCo are describing is a really complex IT and operational set of processes, and trying to implement this quickly is fraught with risk. Certainly, at the network level, if you have multiple network operators and you’re trying to run multiple IT systems it’s a very difficult thing to do. So, I think the stresses that you’re hearing about in OTS are really driven by the complexity of this IT and the ability to invest in this IT and the sheer volume of companies that are going to be involved.

Again, you can point to our industry being quite poor at standards. While the industry is great at technical standards – which is why the network works – we’re actually quite poor at operational standards and we don’t have a regulator that’s particularly enthused by engaging with operational standards, so they’ve not been at the forefront of people’s minds. Most operators don’t have uniform operating standards as it’s not required in the industry, so to then introduce a system and process that requires these uniform standards it’s no wonder why it takes the industry some time to figure out how these processes are going to work.

But ultimately, it’s a good thing for consumers and it’s a good thing to do, so it needs to get done.

13. Finally, Over the past few years there has been a notable shortage of skilled fibre engineers, which risks causing delays to the rollout of new full fibre networks. What has your own experience of this been (if any) and do you think that the government are doing enough to tackle the issue (e.g. working to add telecoms engineers to the shortage occupation list – making it easier to hire foreign workers)?

Neil’s Answer:

I think at the peak of the enthusiasm for setting up AltNets and investing in full-fibre I think this was true, however I don’t think it’s so much of an issue now. Because with the number of AltNets building now and the amount of capital in the industry, the AltNets have managed to build the network at an incredible rate. And the industry’s pretty good at adapting, so certainly with the capital that’s come in they have managed to become more efficient. Things like using passive infrastructure has massively reduced the amount of civil engineering required, though this has put pressure on other types of skill areas. 

So yes, I’m sure there’s shortages and there’s areas of the country where this is potentially more acute, however we’re based in the North West of the UK where there’s a massive labour force and a lot of associated industries where people can retrain from. So, we’re not really finding those shortages at the moment, which has probably been helped by the rush of capital, the rush of build, but the slight slowdown as the industry focuses on connections rather than continuing to build at pace. Do we need a massive influx of foreign workers? I don’t have an objection to it if there’s a massive need for it, and maybe I’m speaking out of turn slightly as I’m sat in the North West and we’re feeling this problem a little bit less than people who are in more challenged parts of the country. 

With regards to Freedom Fibre directly, we have been fortunate through our positioning and recruitment efforts to secure a number of highly skilled and highly experienced staff, and ultimately we have a heavy focus on our internal company culture to ensure these staff are happy, healthy and that we can retain that talent.

We’d like to thank Neil for taking the time to engage in our interview in such an informative way, and look forward to seeing how Freedom Fibre progresses over the coming years.

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Mark-Jackson
By Mark Jackson
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 .
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Comments
9 Responses
  1. Avatar photo binary says:

    “I think it’s unfortunate that the UK had the roll-out of FTTC at all, and it’s even more unfortunate trying to call it ‘fibre’ which was blatantly an error in many ways because it’s confused the heck out of consumers, and it’s delayed the roll-out of full-fibre.”

    I quite agree with the second point re the misuse of the ‘fibre’ terminology.

    However I’m not convinced by the first statement, suggesting the roll-out of FTTC in the UK was ‘unfortunate’. FTTC is obviously an interim technology (albeit one that’s likely to be around, at least on the periphery, for some time to come) – but I do question how realistic the utopian vision of jumping straight from copper ADSL to full fibre really ever was.

    I’m by no means an expert on global comparisons regarding FTTP vs FTTC roll-out, but certainly in Europe FTTC has been widely deployed. I know there are those who look back on those very embryonic thoughts that a few in BT had in the eighties of installing a full fibre network, and curse the then government’s competition rules that were intended to prevent the monopoly BT from essentially squashing the roll-out of the new cable TV & telecoms networks. However I am sceptical this was ever really a goser.

    I do appreciate the existence of FTTC likely inhibits the take-up of FTTP (with many people thinking FTTC is good enough for them), and furthermore one could argue that FTTC cemented the position of BT Group / Openreach as the ‘default’ network provider – both arguments that an altnet could well get behind.

    However the success of PIA arguably demonstrates that really the dominance of the Openreach network stretches back to its time as the state monopoly provider, in a time when providing a telephone service was more of a natural monopoly. And the PIA initiative has been successful in opening up Openreach’s infrastructure to other providers… though perhaps in a way, this might ultimately perpetuate Openreach’s dominance in being a near-universal network provider.

    Then again maybe my thoughts above are all written from the perspective of today’s status-quo, and represent a failure of imagination on my part!

  2. Avatar photo The Facts says:

    Who would have benefited by not rolling out FTTC 10 years ago? It gave large numbers of customers speeds that gave them online video.

    Back then 50% had Virgin Media coverage and were there many business cases and investment available to justify FTTP builds by altnets?

    Does the FTTC speeds that many get make FTTP a hard sell?

    1. Avatar photo Bob says:

      For most people there is no compelling reason to change to FTTH, If you take out the start up costs the underlying costs of FTTH are lower than that of FTTC

      Probably getting to the point where offering FTTH at the same price as FTTC makes sense, The first push with this I would guess is when the Stop sell on analogue lines comes in. Not clear if it will affect people that just change ISP’s

  3. Avatar photo Not THAT Gary that everyone seems to take issue with says:

    Why is he trying to look like an MP?

  4. Avatar photo Jon Fawbert says:

    A really enjoyable piece. Brilliant questions, and equally good answers from someone who really knows the industry. A level of candour unlikely to be matched by other interviewees!

    Yes, BT/OR grabbing a whole pile of cash to deliver FTTC and keep milking the old copper monopoly is galling in retrospect, but at the time no-one had made a compelling case for FTTP, something that wasn’t really ready for wide-scale delivery at the time. And FTTC got the country online through Covid-19. Now there’s a demand for FTTP level bandwidth, the investment to replumb the country is easier to obtain.

  5. Avatar photo Disgruntled of Dankshire says:

    For most people there is no compelling reason to change to FTTH, If you take out the start up costs the underlying costs of FTTH are lower than that of FTTC

    Wrong as adsl/vdsl is based on flawed technology .

    Tell that to the substandard broadband speed ‘enjoyed’ by many.

    However I’m not convinced by the first statement, suggesting the roll-out of FTTC in the UK was ‘unfortunate’. FTTC is obviously an interim technology (albeit one that’s likely to be around, at least on the periphery, for some time to come) – but I do question how realistic the utopian vision of jumping straight from copper ADSL to full fibre really ever was.

    Wrong. other countries mamnaged, S Korea for example, see Cochrane/Thatcher

    Yes, BT/OR grabbing a whole pile of cash to deliver FTTC and keep milking the old copper monopoly is galling in retrospect, but at the time no-one had made a compelling case for FTTP,

    Wrong, search Cochrane/Thatcher

    Correct

    I’m by no means an expert on global comparisons regarding FTTP vs FTTC roll-out, but certainly in Europe FTTC has been widely deployed. I know there are those who look back on those very embryonic thoughts that a few in BT had in the eighties of installing a full fibre network, and curse the then government’s competition rules that were intended to prevent the monopoly BT from essentially squashing the roll-out of the new cable TV & telecoms networks. However I am sceptical this was ever really a goser.

    Political Interfrence with minimal understanding of technology, but more interested in the more lucrative options.

    Wrong

    For most people there is no compelling reason to change to FTTH, If you take out the start up costs the underlying costs of FTTH are lower than that of FTTC

    Backup of their information to a secure offsite service is an advantage of synchronous fttp.

    1. Avatar photo bodgeup says:

      Axe the Wholesalers and let Private enterprise get on with the improvements, Dinosaurs like Openreach and freedom fibre are in that category, don’t get me wrong they could make tons money copying the smaller Private providers and ditching their antique leased line, mlps services and sell more FTTP at synchronous speeds instead of crippling consumers because they won’t migrate their Leased like etc customers, maybe they could shift directions and invest in new providers who are putting the older providers to shame tech wise. The UK is going to look behind the curve again in a year or 2 with cuts and changes to there gigibit plans, Stick to FTTP only ditch FTTC and make the ratio 1:1 give customers what they have wanted for years now but cant buy it and get locked into plans they go out of date in a year meaning providers win! Granted OFFCOM has helped with this last part but I still cant work out why the UK cant keep up with some Europe countries or far east countries although there outliers again with there cash flows, still Vodafone revolutionised Cell tech now were behind the world again. I hate to rant as I do like my FTTC from virgin which was built 15 years ago and at the time was paid for to last which it has but 1gbps FTTP wont last long not with newer WIFI 7 and now 8 retifications coming soon.??

  6. Avatar photo Teuchter lad says:

    North West UK? So around Ullapool? Can’t see FTTH happening round the North West UK any time soon

    1. Avatar photo Darren Jackson says:

      Im in a small town newton-le-willows 20 miles away from liverpool and had freedom Fibre now for over a year, 6 months free trial, then 24 month contract with 6 months free then £32 a month for about 550mb.

      They covering a lot of the small towns between Manchester and Liverpool.

      BT plan is 2026 for full fibre FTTH currently

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