Opening-up to investment is the key to unleashing Britain’s full-fibre potential

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Mikael Sandberg, Chairman of VXFIBER examines the UK investment environment for fibre roll-out.

‘Unleashing Britain’s Potential’ – the slogan we saw blazed across the Conservative 2019 election manifesto. A document full of pledges to make Britain the land of milk and honey, it showcases the many opportunities Britain can offer, putting it, amongst other things, as the best place to start and grow a business. After all, the UK government is on a mission to take back control and ensure that the country continues to tap into the fruitful ‘Digital Economy’- becoming a nation of start-ups and successful scale-ups.

But, as we are all fully aware, the vital ingredient to this success – full fibre broadband connectivity -currently comes in at a mere 10% in the UK. Meek in comparison to fibre penetration in other parts of Europe, and the world, it begs the question; is the UK – and will it continue to be – a leading digital nation after all? We may have, again according to the Tory manifesto, ‘more ‘unicorns’ – new billion-dollar tech companies –than any other nation in Europe’, but unless the connectivity infrastructure issue is addressed how long can and will this last?

Connecting Britain – ensuring that every citizen has access to high-speed internet – does seem to be a key priority for the UK government, sitting alongside other regional development programmes such as the promised Northern Powerhouse rail link and the Midlands Rail Hub. Boris Johnson himself stated (pre-leadership and General Election) that he wanted a turbo-charged broadband revolution, giving all UK businesses and homes access to full-fibre by 2025. This will only be possible once the UK installs its full-fibre network by replacing the current copper infrastructure, which is currently not fit to deliver the UK’s digital future. This means every premise – including homes, businesses and public buildings – needs to have fibre served directly to it, not to mention the necessary fibre infrastructure to support 5G networks and beyond. But, one of the major challenges that the UK faces in rolling out fibre is financing.

Pre-election – at the Tory Party Conference to be exact – the UK Chancellor Sajid Javid suggested that an additional £5 billion will be made available for connectivity upgrades, focusing on fast broadband access in harder-to-reach parts of the UK. And Ofcom’s recent four-point plan  is focused on tackling the remaining roadblocks to investment and supporting competition within the industry. However, we will now have to wait until March 11 to find out the exact figures that will make up the Chancellor’s ‘Infrastructure revolution’ post-Brexit Budget. And it begs the question – is there really enough money available from the public purse in order to make the necessary impact on our fibre penetration? And if not, where’s the money going to come from?

The government must continue to play its vital role as a catalyst for full-fibre deployment, and it has made positive steps via funding schemes as well as addressing policies/regulations that acted as a bottleneck in deployment (e.g. Barrier Busting Taskforce). However, due to the scale and the cost, it simply cannot do it on its own.  For the UK to achieve its ubiquitous full-fibre coverage target, there needs to be more collaboration and investment from both the public and private sector.  Support is needed from other sectors of society and perhaps those who potentially will gain profusely from the economic benefits connectivity brings.  Without third-party investment, it’s likely the original 2033 target will be missed by a mile, let alone Boris’ pipe dream of 2025.

Looking at the consumer, there is certainly more appetite.  This will be partly down to the customer being more educated on the different connectivity options.  Ofcom rules killing off dubious and misleading fibre claims from ISPs and the price of fibre connectivity dropping in recent years.  And thanks to increased demand from the consumer, the UK fibre landscape is looking like a more attractive investment.  Securing additional funds from third-parties is becoming a critical component of the mix.  Opening-up third-party investment opportunities will help back much needed fibre-to-the-premises (FTTP) roll-out in cities and regions across the country.

The UK telecoms and internet market is highly competitive in nature, and by regulatory standards, is “open”.  This makes it conducive to attracting third-party investment along different stages of the value chain. However, it’s important to note that there are many different business models that exist within the “open access networks” space.  As the very nature of this definition enables confusing references to be made to the traditional/incumbent vertically integrated model, to be termed “open access”. The term “open access” implies a resource that is made available to clients, other than the owner, on fair and non-discriminatory terms.

In the context of telecommunications networks, “open access” typically means the access granted to multiple service providers to wholesale services in the local access network. This enables them to reach the subscriber without the need to deploy a new fibre access network. There are a number of business models that exist depending on which role the different stakeholders’ take-up.  But one thing is for sure, aside from lowering the costs for service providers, open access can deliver what end-users want: choice of providers, choice of services, competitive pricing and high performance.

This shift in approach means that up to date and innovative fibre infrastructure is no longer really about telecommunications. Instead, it is about digital connectivity. By taking the telco operator out of the equation, investments can be made into the infrastructure. In fact, with this type of model, gigabit full-fibre becomes a strategic asset that real estate companies and municipalities should consider, along with bricks and mortar or other physical investments. It’s an approach that’s enabled the fast rollout of full-fibre connectivity in countries such as Sweden and South Africa. In both countries, investment is made directly into infrastructure projects, bypassing the corporate/incumbent telco entity, and enabling more money to flow through the system because of better penetration.

Indeed, by adopting this type of approach to broadband connectivity, investment will open-up individual regional or local digital infrastructure projects to multiple external investors and power Britain’s race to deliver universal high-speed broadband. This presents a huge and scalable opportunity and could even open-up a more sustainable territory for private investors.

If we start looking at fibre assets as infrastructure in its own right, it becomes apparent just how much opportunity there is for investment across the entire country. And whilst we might have an incredibly challenging objective of achieving universal fibre connectivity in the UK by 2033 (or 2025), perhaps it’s collaboration between the government, the industry and the investor community who will help us get there, or certainly bring us a lot closer to achieving our digital destiny.

After all, the economic (regeneration, innovation and business growth) and socio-economic benefits (access to healthcare, education and better delivery of public services) that internet access brings cannot be denied. So, bring on the UK government’s promised investment in technology and innovation, and its pledge of giving us one of the most important tools to flourish in the economy of the 21st century – full-fibre connectivity. But maybe to get there it needs just a little help from its friends – the third-party investment community.

Mikael Sandberg is co-founder and Chairman of VXFiber.  He is a serial entrepreneur in the telecom and broadband industry. Previously Mikael co-founded and managed two major broadband companies in Sweden. Prior to his operational roles, Mikael worked as a telecoms analyst in the City; management consultant with Analysys Mason and Arthur D. Little; and as Assistant Science Attaché at the Swedish Embassy in London. Mikael is a Swedish citizen living in the UK, and holds an MSc in Industrial Engineering and Management from Chalmers University of Technology, Gothenburg, Sweden and an MBA from School of Management, University of Bath, UK.