Netomnia and YouFibre CEO on Pushing the Boundaries of UK Broadband
8. In terms of your physical network build. Netomnia tends to adopt what we’d call a very PIA heavy build (i.e. running fibre via existing cable ducts and poles – mostly Openreach’s), which also involves taking rack space in BT’s exchanges. This approach can make the roll-out quicker and keep build costs low, which in the short to medium-term is probably a good way (maybe even the best way, in this climate) to cost-effectively grow the network and customer base.
On the flip side, some other operators, such as CityFibre, build their own Fibre Exchanges (FEX) and equipment required to support multiple ISPs. Plus they usually cable all their network with diverse routes, while making more strategic / limited use of PIA, hence the extra cost of their build and slower time to RFS (Ready for Service).
One issue here is that, at some point (probably after 2030), Ofcom may well soften their regulation of PIA and that could allow Openreach to jack-up the prices – putting heavily PIA focused AltNets in a more difficult spot, which might necessitate a new round of street works to help grow greater independence away from the dominant player (or risk being left at the mercy of OR’s future pricing strategy).
Not to mention that, further down the line, the Government might – under pressure from the public (poles aren’t particularly popular right now) – re-introduce some of the old red tape on street works once they think most of the FTTP build is finally done (i.e. this could put PIA heavy networks in a difficult position, particularly if the Openreach regs are softened). How likely do you think this sort of scenario is and, if some of it did come to pass, what would be Netomnia’s strategic response?
Jeremy said:
First of all, I struggle with the terminology, “PIA Heavy”. We have taken a simple approach – let’s build like Openreach but let’s do it better – hence our approach is almost identical (architecture, contractors) and therefore our CPPP is very similar (£250 on average). I would love to have my own Netomnia Exchanges and my own Spine and Distribution ducts but let’s be clear, the take-up and ARPU would be identical either way and therefore financially it does not make sense.
Because VM with nexfibre will have 5 to 7 million premises connected over PIA and the altnets could have as many as 15 million premises connected over PIA, I am confident that Ofcom will not allow Openreach to impact the PIA product. But I can see a world where Ofcom is more relaxed on wholesale pricing.
9. Back in 2022 we saw YouFibre adopt some of CityFibre’s network coverage into their packages, albeit only in a very limited and strategic sense around Middlesbrough (North Yorkshire). The move was an interesting one, particularly since, up to that point, YouFibre had typically been Netomnia’s sole retail outlet.
Are there any plans to maximise coverage further by expanding that agreement with CityFibre, or perhaps even onboarding other networks, such as possibly Openreach? Speaking of which, was maximisation of coverage the primary goal, or did you learn anything else useful from the experience of onboarding another network, and has it paid off?
Jeremy said:
Netomnia and YouFibre have two different strategies and are not constrained by each other. Having said that YouFibre’s primary focus is on the Netomnia network.
We do experiment with CityFibre and Openreach but so far limited use on both. We hope to see more collaboration between altnets in the future and maybe with Nexfibre too.
The main thing we learnt is that Openreach is very good at doing wholesale, just too expensive.
10. Openreach are currently preparing to close roughly 4,500 exchanges across the UK, which will ultimately leave around 1,000 exchanges – the Openreach Handover Points (OHPs) – that are primarily used to provide nationwide coverage of modern “fibre broadband” based services (FTTC, FTTP etc.).
However, this change creates somewhat of a thorny issue for alternative networks around Ethernet, Inter-Exchange Dark Fibre (DFX), Co-Location and PIA (access to existing cable ducts and poles) services, which are supplied by many of the “old” exchanges too. The costs for some AltNet’s of adapting to this could be significant and some believe that Openreach should shoulder more of that burden.
How much of an impact is this likely to have on Netomnia’s network, if any, and what do you think would be a fair outcome?
Jeremy said:
We only use OHPs so from an exchange standpoint we are comfortable and while we use DFX in some regions we are actively replacing it with other Dark Fibre providers or our own Fibre, therefore this exchange closure program is just noise for Netomnia.
A fair outcome would be for Openreach to provide a like-for-like replacement from the OHP at their own cost.
11. Are there any areas of legislation or regulation that you feel the UK government could still tweak or improve in order to support the work you’re doing to expand full fibre?
Jeremy said:
No… they just need to protect the PIA and the BT exchange products because those are physical assets that are very costly to replace. Everything else is easy to do.
12. YouFibre have been fairly successful in attracting customers away from more established networks. One part of the reason for that is the price of your packages, customers pay from just £21.99 per month on a 24-month term for 150Mbps, which rises to £99.99 for 7-8Gbps. You also offer a social tariff at £15 per month for 50Mbps to those on state benefits.
Naturally, it makes sense to offer such low pricing when trying to grow take-up, but how sustainable is this likely to be over the longer term?
Jeremy said:
We currently sell a 1Gbps service at £29.99 and our new orders generate an ARPU (Average Revenue Per User) of around £24 which is similar to the TalkTalk ARPU. Our older cohorts have an ARPU of £30 today. We are expecting the ARPU to rise to around £30 over the next five years which is materially lower than BT or VM today and both companies love increasing pricing. Our business model is designed to sustain a 30% take-up with £30 ARPU therefore we are in a very good place.
13. Finally, if we could hop in a time machine and travel to 2030, what do you think Netomnia will be doing and what do you expect the market to look like?
Jeremy said:
Netomnia will be the third national fibre infrastructure in the UK and will be in talks with a mobile operator to become a fixed and mobile provider.
We’d just like to thank Jeremy for taking the time out from is otherwise busy job and being his usual open and honest self when engaging with our interview.
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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Good interview, love the CEO of YF
Just a reminder Jeremy did an interview with Richard Tang of Zen a while ago here:-
https://youtu.be/fkhE6Wg0myA?feature=shared
Guys a Legend. Just wish they would eventually start their Tonypandy rollout!
Bear in mind even if they do bother to build in your town, they might not build all of it, and you could still be disappointed.
I looked through a lot of streets in Tonypandy and they seem to be mostly through electrical poles, maybe that’s why, it’s a separate license that’s hard to get
‘Guy’s a legend…’
True. Force of nature 🙂
I’m pretty sure they aren’t going to restart it as things stand as they don’t want to overbuild Ogi. They’ve tended to try and avoid overbuilding other altnets even when they’ve done some civils in an area.
The recurring theme throughout the interview is the reliance on PIA price regulation to sustain Netomania’s business model.
One sentence particularly caught my eye, “A fair outcome would be for Openreach to provide a like-for-like replacement from the OHP at their own cost”; The exchange closure program has been known about for years, if this increases the PIA costs for Altnet’s, why should it be Openreach’s responsibility to subsidise Altnets who haven’t planned for the event?
That would be for ethernet services and similar which he doesn’t consume. It was mentioned that it wouldn’t affect then.
Thank you R 🙂
R that’s why I used the term “Altnet’s” instead of Netomania in the second paragraph; I was commenting on the comment, not what Netomania are doing themselves.
It doesn’t change the fact that OFCOM are placing a regulatory stranglehold on BT/Openreach and creating the environment for companies like Netomania and ZEN to profit. Without the OFCOM boot on BT’s neck the Altnets business model would evaporate, since BT would likely price them out of the market by competing aggressively on price.
There are basically two types of Altnet, the wholesale providers like CityFibre, VMO2/Nexfibre, etc, and you only have to look at how things kicked off with the Equinox offerings to see how regulation affects them; Then there are companies like Talktalk, ZEN and Netomania who piggyback on BT/Openreach, and other’s networks, who take the opposing view and want Openreach wholesale pricing as low as possible. I believe OFCOM’s plan is to eventually push BT to completely spin off Openreach, with it becoming the Telecom equivalent of the National Grid; I don’t see that happening until BT’s Pension deficit is resolved and all Fibre rollout’s are completed.
Ofcom are there to look after customers and the industry as a whole, not to pander to the needs of Openreach or BT Group’s shareholders. It is neither in the customers’ best interests or the industry as a whole to return to the Openreach/VMO2 duopoly or, worse, have Openreach edge out investment from anyone else and end the VMO2/Liberty Global expansion alongside all the altnets.
Incidentally Netomnia don’t piggy back on Openreach’s wholesale infrastructure. They colocate equipment in Openreach exchanges and use cablelinks to get out of the exchanges then lease space in the physical infrastructure. They are not a TalkTalk or a Zen that do not have any of their own fibre serving homes and businesses. They belong with CityFibre and VMO2 in your lists.
This is kinda weird:
‘One sentence particularly caught my eye, “A fair outcome would be for Openreach to provide a like-for-like replacement from the OHP at their own cost”; The exchange closure program has been known about for years, if this increases the PIA costs for Altnet’s, why should it be Openreach’s responsibility to subsidise Altnets who haven’t planned for the event?’
Response: ‘That would be for ethernet services and similar which he doesn’t consume.’
Follow up: ‘R that’s why I used the term “Altnet’s” instead of Netomania in the second paragraph; I was commenting on the comment, not what Netomania are doing themselves.’
You started off talking about PIA costs being increased, then after being told it was Ethernet services, etc, agreed claiming that was what you meant all the time and seeming to miss that those are nothing to do with PIA?
For clarity: what impact do you think that the exchange closure programme will have on PIA?
BT has a monopoly because it was given an asset by the government and paid by the tax payers. This asset (Duct and Pole) is regulated to enable sharing.
It is important to note that Openreach chose to focus more on FTTC than FTTP which forced large CPs to invest in far too many exchanges, after this investment now Openreach decided to close BT exchanges…hence my comment that Openreach should bear that cost…BT chose FTTC over FTTP and made all of us pay for it.
Strange point about investing in exchanges considering most of the FTTC is linked to parent exchange and not child exchanges that are due to be closed
“BT has a monopoly because it was given an asset by the government and paid by the tax payers. This asset (Duct and Pole) is regulated to enable sharing”
I’ve read this type of comment many times. The Government sold BT, with the shareholders buying the company, the Government didn’t give anything away.
“In November 1984 the Government offered 3,012 million ordinary shares for sale”,”The total amount raised was
£3,916 million”.
“A second issue took place on 21 November 1991 which saw 1,598 million shares being sold, raising £5 billion for the Government”.
“A third issue followed in July 1993 with the Government selling off virtually all of its remaining shares for a further £5 billion”.
https://www.bt.com/bt-plc/assets/documents/about-bt/our-history/bt-archives/information-sheets-and-timelines/privatisation.pdf
According to that document shareholders paid the Government over £13 Billion in aggregate for BT, so tell me what was given away? Where the Government have subsidised FTTC and FTTP, I agree that it’s only fair that BT should be made to share the access/infrastructure, but OFCOM have created a situation where BT/Openreach have to share all their access infrastructure, which was paid for by the original shareholders at a higher price than the current Market Cap. Wouldn’t you agree that the Government didn’t give anything away?
IF BT were not so rubbish and trying to do the minimum they can get away with all the time, then you would not have ALTNETS now. BT tried for years to say FTTC was all people needed and fast enough.
The government may have sold GPO off as BT, but it was still cheap as chips compared to someone coming in and setting up from scratch. They had a good start as a new company. Ofcom have given ALTNETS a good start (they don’t inherit anything) by mandating BT share their physical infrastructure. Admittedly, this should work the other way as well.
I think you misunderstand. A key component of FTTC was the ‘copper line’ which goes back to the exchange. It’s quite true that e.g sky could pick up the data component at the parent exchange but it couldn’t pick up the copper line, so lets say they Unbundled OHPs only:
-Would have to buy a ‘resold’ line rental/calls product such as WLR, unable to offer good rates on calls and line rental which would hamper thier competitiveness. Even if they decided to do SIP over the FTTC and found a way regulation/compatibility wise to do that years ago they would STILL have to buy WLR regardless as the copper line rental was a part of FTTC, there was no SOGEA as is only just now being introduced.
-Unable to offer ADSL services to those not covered by FTTC, as openreach decided only to cover those it chose, not universal.
By the way even the 1100 OHP exchanges is a totally mad number. We need one per city and surrounding area. London, Manchester and Birmingham are the only ones that may warrant multiple (8,2,2) exchanges. Approx 50-80KM gaps (by road) between exchanges depending on density is ideal from an efficiency perspective.
Not to mention EAD services are still not OHP based, so any customer leased lines, cell backhaul and so on would only be able to be cost effectively sold on 1/5th of exchanges which makes competing for framework/wholesale/gov business very hard.
Pull yer finger out and start deploying in Berkhamsted. There’s a lot of very deep pockets here and only BT or Virgin to choose from with no fibre from either.
Those who demand get nothing.
I met Jeremy while working at an old job for an outsource provider YF use. I found that he is a man who just wants to get things done, some of his managers were not as forward thinking, but when Jeremy seen the points the outsource client was making he agreed and forced change. Very good stuff from someone who seems to be out to do good.
Oh, those comments about being capital-efficient. The very antithesis of the “land-grab” approach of almost every other altnets, guaranteed to be capital inefficient.
Perhaps if BT had got their finger out years ago when sweating copper with FTTC and GFAST, there wouldn’t be any ALTNETS forcing them to do FTTP now, and still BT have an inferior asymmetric product with GPON.
Okay, anonymous, but that has what to do with either what you’re replying to or the article? Mike’s point doesn’t refer to Openreach in any way, shape or form, and he’s absolutely right.
Disagree. He was commenting on all Altnets which isn’t true. Some have questionable investment areas for build, build techniques and pricing whilst others (like Netomnia) don’t. There was no support for any ALTNET in his statement, hence the implied support for Brokenreach.
Netomnia have deployed to road less than half a mile from my home, I’m hoping that they extend their reach to me, I’d sign-up to their/YouFibre’s symmetrical gigabit service immediately.
Not sure I see it happening, but could be quite cool if an altnet like Netomnia and Three were to join forces, if the Thee/Vodafone merger was to fail.
It could become a challenger to BT/EE and VM/O2
I expect we’d need to see a little consolidation first though
YouFibre booked my install last week, phoned mid way through the day and said engineer was sick… next available slot is 27th May. I have had to chase them all week to get a date, never contacted back on multiple occasions. Not a great experience to start with. My contract is up with Sky soon and i’ll probably have to renew with them 🙁
Better late than never. When I looked to see if I could sign-up (which I cannot unfortunately), I saw that YouFibre will buy you out of your existing contract, so see if they’ll do that with you. Or alternatively you could let your Sky subscription roll outside of your contract and see if YouFibre will compensate you for the additional cost?
wow, bit strange all these people proclaiming the love for a man they’ve never met.
why? because he runs an ISP properly?