As revenues reach £6.4m, CityFibre explains how KCOM purchase, network architecture and ducts and poles can help it compete with Openreach
TalkTalk and Sky have complained it is impossible to build a fibre to the premise (FTTP) network capable of competing with Openreach while it is still part of BT. But CityFibre has every intention of doing just that.
As one of a number of FTTP providers operating in the UK, CityFibre doesn’t see the perceived dominance of BT as a major barrier, but a business opportunity.
It targets towns and cities outside London by building FTTP networks for ‘anchor’ tenants such as local councils or mobile operators and architects them in such a way that they can be extended to residential areas so capacity can be sold on a wholesale basis to ISPs. It claims this ‘demand-led’ approach de-risks investment.
“We’ve always taken the view that when you look at concerns about Openreach, the opportunity to create a large scale, modern, pure fibre alternative is a business opportunity that we want to take advantage of. And that’s a niche we’re carving out in the industry.”
CityFibre now has a presence in 37 cities outside London and recently purchased KCOM’s national network outside of Hull and East Yorkshire for £90 million. It says the deal can accelerate its model by 5 to 7 years and has the finance to reach 50 cities.
Overall, the company has 2,150km of metro fibre either constructed or under construction, and 1,100 kilometres of national backbone fibre acquired from KCOM. Its infrastructure covers 26,000 public sector sites, 7,400 cell sites for mobile operators, 260,000 businesses and 3.7 million homes.
At present it has 41 communications providers (CPs) using its networks, including Vodafone, EE and Three, and SSE Enterprise Telecoms. SSE is the first customer to use the KCOM network and signed up within 90 days of acquisition, something CityFibre says shows the potential of its new asset.
Revenues rose 67 percent to £6.4 million during 2015, while pre-tax profits reached £5.5 million and losses after tax narrowed from £7 million to £6.8 million.
“Our target is to attract [a proportion] of those 500 CPs [using the Openreach network],” said Collins.
One of the most high profile projects is taking place in York, where a joint-venture with Sky and TalkTalk is looking to provide FTTP to residents and businesses with a view to expanding the model elsewhere in the country.
“What we’re demonstrating is that you can take the core infrastructure and expand that into the residential areas,” explained Collins, who said CityFibre is confident the project will prove the viability of the network architecture and cost of deployment, but it will be up to Sky and TalkTalk to drive customer demand.
Sky and TalkTalk both want Openreach to be separated from BT. They argue the current model Openreach serves BT rather than the other communications providers, hence the decision to use fibre to the cabinet (FTTC) rather than FTTP, and means any rival FTTP network would be doomed to failure because it would be unable to bid for the retail business of BT – the UK’s largest ISP.
Collins said structural separation would still mean a lack of competition at a network level and believes there is still scope for a rival and that an Openreach with multiple stakeholders might not necessarily improve things.
“Clearly yes – our investors wouldn’t be investing if it wasn’t the case,” he argued. “Our view is there’s a question of whether you try to drive the industry towards a monopoly or whether it’s structurally separated.
“When we talk to the industry … they want competition and don’t want dependency on Openreach. That would be true [with either model]. We’ve always considered the structural separation points as secondary to competition.
“[Ofcom] wants to encourage [investment] in a way that stimulates competition for Openreach. We’re encouraged by that.”
Ducts and fibres
One of the ways Ofcom wants to encourage network level competition is making it easier for other companies to access BT’s ducts and fibres to lay competing fibre networks. BT has offered this product since 2009, but rivals have said an absence of adequate information made it more or less useless.
Ofcom wants BT to create a central database, perhaps calling Sky and TalkTalk’s bluff, to make it easier. Rival Gigaclear, which operates in rural areas, said it’s keen, and CityFibre is examining the possibility to see if it can go “further and faster” than it could by deploying its own fibre.
“We’re certainly evaluating it,” said Collins. “We’ve taken a view to date of owning our own infrastructure. Building the types of network we do in BT’s infrastructure is going to be complex.
“If that is to be usable, there needs to be more transparent data available and a listing of usage restrictions. For it to be workable, we need unfettered access so it’s if we had our own [cable]”
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