Is Dominant KCOM Giving Hull Businesses The Best Broadband It Can?

Dwindling though their numbers might be, the iconic red ‘K6’ telephone box has come to represent an idealised image of British life.

Except in Hull, where telephone boxes are cream.

As a condition of its licence renewal in 1914, KCOM was required to purchase the local telephone infrastructure in Hull and East Yorkshire, whereas other regional telecom groups were absorbed into the General Post Office (GPO), which became BT.

This means BT Openreach and Virgin Media have no presence in Hull and East Yorkshire and KCOM is by far the most dominant provider despite regulatory overtures from Ofcom. This naturally leads to competition fears, but the newly-rebranded KCOM believes it’s doing a good job.

Consumers and businesses in Hull might have to deal with a near-monopolistic dominant player but the peculiarities of the local market mean they get better speeds and a futureproof service, according to the company’s CEO.

Going straight for FTTP

Unlike BT, which is using fibre to the cabinet (FTTC) for the majority of its superfast broadband rollout, KC is using fibre to the premise (FTTP). It claims the unique characteristics of the network allow it to do this more cost effectively than BT would be able to do nationally.

“The expensive part of fibre deployment is what’s called the civils – the need to dig up streets and gardens. It’s also time consuming,” Bill Halbert, KCOM CEO told TechWeekEurope. “Our network is either in ducts or on poles, we don’t have a need to dig anything up. By and large we can just deploy the fibre. We have a lot of overhead routes, this is fairly uncommon.

“We can get to the home more easily and more economically. If you want to futureproof the network, then taking it to the premise is the answer. In the future, the copper outside Hull and East Yorkshire is going to have to be replaced. We’re jumping that.

“We’ve had discussions with the regulator to see whether we can turn off the copper and take it out.”

Rebrand

KCOM recently sold its national fibre network outside Hull and East Yorkshire to CityFibre for £90 million and brought its consumer and business under a single umbrella brand.

KC, its consumer broadband brand, Kcom, an IT and communications provider, Smart421, an applications integration specialist, and Eclipse, a supplier of communications and IT services to SMBs will all be affected.

Halbert said this would make it easier for all of its staff to work together on engineering, customer service and other areas.

“We’re taking the opportunity to integrate our skill sets,” he said. “We’re better able to develop those skill sets. It gives us better ability to develop economies of scale, develop careers and give a better response to customers.

“We’ve been moving from our telecommunications roots to an ‘IP world’, a converged space, which is a combination of communications, technologies and IT.”

As part of the announcement, KCOM said it would be accelerating its rate of FTTP deployment and now expects to connect 200,000 properties in its region by 2018 rather than 2020.

“You’re not going to find that anywhere else in the country,” Halber added. “You’re not going to see FTTC deployment by then.”

Dominant position

KCOM claims adoption of superfast broadband is now 40 percent in areas where the FTTP network is available – higher than the national average.

But broadband campaigners in the area claim people and companies in Hull pay more for their communications than in other parts of the country because of KCOM’s dominance, and that rollout of superfast broadband is slower in the area than other parts of the country.

Halbert is adamant that KCOM is not only innovating but is also ensuring it is affordable – even as superfast broadband creates new types of services that will inevitably be more expensive.

“It’s inevitable in an area that has suffered economically, there will be some percentage of the market that will struggle to pay for advanced IP based bundles,” he argued. “What we have tried to do is tried to introduce pay as you go services, different economically viable bundles for those kinds of circumstances. We’ve tried to address it as much as possible.”

Campaigners say Ofcom should tighten regulation, arguing that KCOM is still able to tie in services with its business broadband and restricts its resellers – raising barriers to entry. Halbert rejects such accusations, claiming that KCOM is regulated on the “same level as BT” and is obligated to open up its exchanges.

Nexus has offered a rival telephone and Internet service to businesses since 2009 and the self-proclaimed “largest alternative provider of telecoms in Hull” serves 1200 business customers. The most recent entrant into the market, Purebroadband, is a fixed wireless operator and uses CityFibre’s fibre network for its masts, bypassing KCOM entirely.

CityFibre told TechWeekEurope that its network in the city was built with MBNL, a site sharing joint-venture between Three and EE, acting as the anchor tenant and that the infrastructure was designed to expand if a wholesale customer wanted it. Although the company says it has received “enquiries”, no other provider has decided to challenge KCOM.

Halbert admitted that his firm’s position might discourage competition, but said it was not because of anything it had done.

The best for Hull?

“Whereas BT’s exchanges have been unbundled by likes of TalkTalk, no one has ever unbundled one of ours,” he said. “Effectively, we have significant market power, not as a consequence of a corporate policy.

“Anyone entering that market would be competing with a very strong incumbent supplier. The socio-economic factors of [Hull and East Yorkshire] aren’t strong. It’s probably very difficult to make an investment case. When we modelled FTTP, the payback period was about 20 years. It’s not viable to make an economic case to do that.

“If you look at the business market for Hull and East Yorkshire there are very few enterprises. BAE pulled out, but there are still one or two and Siemens are investing in the area. Most of the businesses are at the lower end of SMB [and] we’re putting fibre into business parks.

“We found that 700-800 SMBs took up our product because of the super connected voucher scheme. Many hundreds of businesses in the area have benefited from FTTP. I would say we are delivering the best possible business for Hull that we can.

“I do understand the frustration of local people who feel there is no choice. That does give rise to complaints and we’re very conscious of the fact. We try to give the best value we can, offer packages that don’t confuse people – there’s nothing hidden in the small print.”

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