The CEO of alternative broadband operator MS3, Guy Miller, has confirmed to Richard Tang (CEO of ISP Zen Internet), in a new interview, that they’ve just begun a trial with KCOM in Hull that will allow them to deploy their full fibre (FTTP) lines by harnessing some of the incumbent’s existing poles and ducts – potentially reducing community complaints.
Hull-based MS3 is an Asterion-backed operator that aspires to cover 535,000 UK premises with their gigabit fibre network by the end of 2025. So far they’ve already reached 210,000 premises (footprint), with 15,000 customers connected, and a big chunk of that is in Hull, where they’ve seen their network cover upwards of 130,000 premises. A further 80,000 are in Scunthorpe, with the rest coming from Grimsby, Cleethorpes, Immingham, and Mexborough.
The interview starts off by revealing that MS3’s overall market penetration is only about 7%, although this rises to 29% for areas (e.g. parts of Hull) that have been built and live for between 2-3 years. But Guy notes that, out of all their build locations, the one in Hull is the most profitable because it’s “twice the price to build, but three times the penetration [vs Scunthorpe].”
One of the main reasons for this is because Hull has traditionally been dominated by a single local incumbent, KCOM, which have long made it very difficult, commercially, for rivals like MS3 to run new fibre via existing cable ducts and poles. By comparison the other locations, like Scunthorpe, benefit from Openreach’s regulated PIA (Physical Infrastructure Access) product, which makes it easier and cheaper for rivals to run new fibre via existing ducts and poles.
Guy Miller, MS3’s CEO, said:
“Sharing infrastructure in Hull hasn’t been possible, so we have had to build telegraph poles. [This is a] really simple economic model, if the houses are close together we can dig it, but if they’re further apart we have to go [overhead], or leave it behind, because that’s the choice we have.
And we fundamentally feel that leaving it behind is taking out a number of people’s life choices when it comes to broadband, so we’re not going to do it. So we’ve had to put poles in, and they’re not always loved by residents … it’s gone from the ludicrous, such as councillors standing in holes trying to stop us doing things, to the downright dangerous and having poles chopped down.
We do have a hardcore group of a couple of dozen protestors who write to me frequently, and I write back, and we have interesting conversations. But we also have 15,000 families who have moved to our service and half are using telegraph poles to connect and they are grateful we’re there. You can’t make an omelette without breaking a few eggs, and telegraph poles are my omelettes.”
Poles – a common sight across much of the UK – are popular because they’re quick and cost-effective to build (trenching is significantly more expensive), can be deployed in areas where there may be no space or access agreement to safely put or share new underground cables, are less disruptive (avoiding the noise, access restrictions and damage to pavements of major street works) and can be built under Permitted Development (PD) rights with only minimal prior notice.
On the flip side, many people dislike poles, typically due to perceptions of their negative visual appearance, as well as concerns about exposure to damage from major storms (example), deployments in areas of outstanding natural beauty or where poles haven’t existed before. Not to mention the lack of more effective prior consultation, as well as situations where engineers may fail to follow safety rules while building and contractors that sometimes try to force them into small private gardens (rare, but we have seen it).
However, the best way to reduce such gripes in Hull would be for KCOM to adopt a solution similar to Openreach’s PIA product, which after a lot of pressure is something that another altnet in the same region – Connexin – began exploring during the spring (here). Progress has clearly been made on this because Guy Miller today confirmed that MS3 has also “been able to get some access to [KCOM’s] network, and literally that trial started this week.”
Nevertheless, it’s still early days and KCOM are a long way from the maturity of Openreach’s product (Guy Miller expressed it as being akin to the early state of PIA, over a decade ago). In fairness, Guy also notes that being forced to build their own network in Hull hasn’t been all bad, since it means they’re not having to pay Openreach or KCOM any reoccurring rentals for an empty network immediately post-build (growing consumer take-up is a slow process).
Finally, we turn to the issue of market consolidation, and on this point Guy admits that reaching their coverage target of 535,000 premises through build alone, in such a competitive market, may no longer be viable. “Do we think that going out and building another 300,000 [premises] from scratch now would be a great idea in the current economic climate. No,” said Guy, before suggesting that it would be a “better idea to acquire it.”
On this point the CEO notes that MS3 are “one of the few debt free alternative networks … we’re very lucky that our investors have put all the money in as equity. We’re in a pretty good financial place. We will be EBITDA positive in the next few months.” But it remains unclear whether MS3 will be a consolidator or one of the consolidated.
The full interview between Guy Miller and Richard Tang can be viewed below: