Gigaclear: Rural Broadband Demand Will Justify Expensive FTTP Deployment

One thing seemingly all broadband providers can agree on is that it’s expensive to build networks.

BT is keen to point out the high cost of infrastructure when it defends the current ownership model of Openreach, while rivals like TalkTalk and Sky say the cost is prohibitive unless a rival network can challenge for BT’s retail wholesale contract.

The initial findings of Ofcom’s once-in-a-decade review of the UK communications market would agree, with the regulator seeking to find ways to make it easier for rivals to create competing infrastructure.

Funding demand

But Gigaclear is confident that the sums work out. Its investors are prepared to make long term investments in infrastructure and it believes that pent up demand from rural communities for faster speeds than those offered by Openreach will justify bringing fibre to the premise (FTTP) to another 40,000 properties in the UK by the end of the year.

The company has just raised £24 million in fresh financing and secured an £18 million loan from the European Investment Bank (EIB) in January to fund the project.

“Building new fibre infrastructure needs a lot of capital,” Gigaclear CEO Matthew Hare told TechWeekEurope. “We have lots of capital in the bank, but this gives us the capital to keep us going to the end of the year.”

Gigaclear owns and operates 56 rural fibre networks and has another 35 under construction across the UK, including Kent, Oxfordshire, Northamptonshire, Cambridgeshire, Leicestershire, Buckinghamshire, Hertfordshire, Rutland, Gloucestershire, Berkshire and Essex.

Rural niche

Properties covered by its networks can receive speeds of up to 5Gbps – faster than any consumer package offered even in urban areas. Connecting sparsely-populated communities is more expensive, but Hare said the rewards are worth it, and unlike TalkTalk and Sky, its investors are concerned with infrastructure not content.

“If we invest £1,000 in connecting each property and one in three properties passed take our services, with an average customer generating £400 a year, it’s not a short term investment,” he said. “But we have a market niche and don’t lose any customers almost ever. Once you get gigabit [broadband], it’s difficult to use anything else.

“The only other competitor we have at a network level is BT’s copper network and even when they have upgrade, it’s only been fibre to the cabinet (FTTC).

“Unfortunately, in rural areas, copper doesn’t deliver the same level of service in urban areas. People in rural areas feel left behind so that means we can get faster penetration. More people take our service quicker even though [BT’s] entry level service is cheaper. There is huge unsatisfied demand in the places we go to.

“We aim to cover more than 50,000 properties by the end of this year, so we’ll have trebled in size for the third year in a row and we want to do the same again the following year. There’s no shortage of people banging down our door for a fibre network.”

Alternative infrastructure

But if there is such a large potential market up for grabs, why is BT not investing?

“It’s the classic incumbent dilemma,” argued Hare, who said Gigaclear had more incentive to invest because it was targeting entirely new business, whereas BT would have to invest in expensive FTTP for only an incremental rise in revenue.

Hare welcomes the initial conclusions of Ofcom’s communications review, but believes that the move to make it easier for rivals to access Openreach’s ducts and poles will have more of an impact in urban areas.

“In urban areas, some of the duct work is in pretty good nick,” he said. “In rural areas, you don’t have ducts everywhere and the poles aren’t in straight lines and are shared with the electricity company. It isn’t a nice, neat opportunity.

“BT doesn’t have a detailed plan of its network to rent because they don’t know, so it makes buying their product quite difficult. Until they do that, ducts and poles in rural areas is going to be tactical only to get from village to village.”

Ofcom wants BT to create a database of its ducts and poles so other providers can lay their own fibre cables. If such information was available, then Gigaclear would be interested “because then you can plan a network.”

CityFibre, another FTTP provider, believes it can establish a wholesale infrastructure to rival Openreach and is interested in ducts and poles. But Gigaclear is adamant the opportunity for itself remains in rural areas.

“We have no problem at all competing BT, we do that all day and every day. What we’re less enthusiastic about is the third, fourth of fifth fibre network in a [location],” said Hare.

“We have no problem with urban per se, but we don’t want to be digging up the same streets, building the same networks.”

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