CityFibre: ‘This is the last network we're going to build ever’

We spoke with Strategy Director at CityFibre Clayton Nash (pictured) about the firm’s progress against rival Openreach, the cost of living crisis’ impact on sales, market consolidation, and the ‘generational change’ that the fibre rollout represents.

Give us a general update on where things are with CityFibre right now.

We’re just coming to the end of the first half of the year, and I think I’d characterise it as, it’s not an easy environment out there, but we’re hitting our numbers and we’re feeling pretty comfortable with the plan. As you may be aware, we’ve just closed a debt deal now for just under £5 billion. So we’re funded for the 8 million homes, plus a few other things that we might want to do. We’ve got the build machine working – sometimes that needs to be adjusted here or there, and there are bits of failures and other bits working better than we expect, but we’re fundamentally on the on the trajectory that we need to be.

And from fill side of things, we’re really starting to see the ISPs ramp up now. I think everywhere people are getting the message that full fibre is actually a different thing to what they’ve got, and that’s starting to work really well. I think we’re up to about 30, maybe slightly more than that of ISPs selling on the network, and then there’s a long tail of people we’re still we’re still adding into the process. So we’re feeling pretty comfortable with the whole thing.

You mentioned the £4.9 billion investment you raised in June – there’s obviously a lot of investment money flying around the fibre market as well as the rollout activity. Is there a matching demand for the product?

Yeah, absolutely. I think there’s still a selling job to do, there is still a bit of confusion out there, a lot of people who you speak to think they’ve got fibre, and of course they’ve got some form of copper or sometimes cable or something like that. It’s a bit of a cliche, but through covid everyone realised exactly how important this stuff was. And they saw where stuff broke. They might be back in the office now, but they understand this needs to be pretty stable and get the throughput that they need.

And more importantly, especially in the older cities where you’ve got a bulk of people who have bought stuff and word starts to get around, you just start to see an acceleration of that process as people understand this is actually something different. It’s really good. It does what it says on the tin, another big problem that we’ve got in telecoms. Absolutely demand is there. Broadband is one of those weird things that people don’t think about very much but it is probably the most important thing in their lives in many ways. And doing it better is better.

And how do you rate your progress in that regard to your main rival Openreach?

We’re exactly on plan as I said. Clearly they’ve changed their plan over the past few years, things are moving around, but I think we’re feeling pretty comfortable. And partly that’s because our build machine is building things in places they’re not there yet. So we have lots of cities where they’re just barely just getting started or there’s only a smattering of activity. They’re spread out across the whole country, we’re concentrated on a third.

But also, and I think you’re seeing this in some of the pre briefings, the network we’re offering is different in a few really important ways. One, it’s a brand new network, and it doesn’t have any of the backlog of trying to be built on top of some other stuff. And that’s important for a few reasons – it means that when we deliver things they get delivered, because we know where the network is, and there’s no issues like there’s some fault that happened in 1982 that no one tracked. It means we’ve scaled the network for a modern age, so you don’t sit down having bought 500 MB and see you’re getting 300MB or something, and [are then] told don’t worry, it kind of sorts itself out. You get what it says on the tin, because that’s the way we’ve designed the network.

But more importantly, because it’s a simple to consume network… modern web apps and everything else are built on an open access fashion because we thought about it that way. That means you get lots and lots of ISPs who can join the network and try lots and lots of new things. So you don’t get basically ‘me two’ offerings. We’ve got big ISPs doing exactly what they do in each network and selling that stuff. We’ve got smaller ISPs really trying new innovative stuff. Some of that’s going to work some of it’s going to fail. But you know, it’s a ‘let 1000 flowers bloom’ kind of approach.

Is there a chance that the cost of living crisis puts off people upgrading their broadband connections in a way that perhaps you haven’t forecast for?

Clearly people are going to look at their spending and decide what it is they want to do. In many cases, it’s actually cheaper to be on our network than to be on your current broadband package. So that’s an easy decision. Is there a chance that people will decide to stick with 200MB or 300MB services instead of a gig? I think that’s a likely outcome. But at the same time broadband still remains ridiculously cheap in the UK. If you’re going to buy one thing, you can go to the pub for an evening, or you can pay for your broadband for two to three months. And that provides a lot more entertainment and it’s for the whole family. So yes, people are going to take a hard look at what they’re spending. But I think at the end of that process, the value wins in what we’re doing.

You’ve released some stats on how much economic growth is on the table for the UK thanks to fibre rollouts – can you flesh out your predictions in that regard?

It’s tens of billions of pounds of value. It’s driven by efficiency, people working from all over the place, but also people working from all those northern areas that we’re trying to make better as a country, and giving people a choice to work from home. And fundamentally the UK is a services economy, services run on the internet and the internet runs on glass, it runs on fibre. So the more we get out there, the more that fundamental set of things we do as a country can be done better. That’s without talking about the environmental benefits, and the societal benefits of people being able to stay at home with their kids and entertaining them.

How do you go about working something like that out to a specific degree?

As a general approach, you look at how value is built up in the telecoms space. Partly it’s about things like, as a result of this there will be more 5G so people will be able to do all those kinds of valuable mobile things on high bandwidth services. Part of it is around getting people to work who otherwise would have to travel more, they can be more efficient as remote workers. You break it up into all those categories and say, if this is unavailable or it’s a bad service of some description, then this is how much work gets done. As you move forward with something that’s stable, something that’s really fast and efficient, how much work gets done and how much space does that free up for more valuable activities?

Where do you see the UK fibre market in five years-time?

I see us winning! In five years-time, in 2027, I think most of the build that we’re talking about is done. Everybody’s done the majority of what they’re doing, there’s still some activity around that, but we’re really in the process of monetizing the networks at that point. It’ll have settled down, clearly there’ll be some consolidation. I think we’re tracking maybe 80 altnets at the moment that are building things. Some of those are going to find themselves as part of bigger groups, or are going to get together and do something separately. So we’ll start to sort of see a more rational set of players out of that.

What I do think is that it doesn’t look like the network ten years ago, but a bit faster. I think what it looks like is a set of new players in place. A lot of the old players are going to come through, there’s a lot of value in what those people do. But I also think we’re going to see a lot of smaller players kind of bubble up and start to serve niches within the market. We’ll see those kind of economics come into network services now. Which means you’ll see the equivalent of Tesco in terms of sales, they’ll always be the big people in place, but you’ll also see a lot of niche players providing specific services.

And you can see that now in some of the things people trying on our network. We’ve got people who are regional specialists, especially up in Scotland and elsewhere. There are small companies which only operate in one city, doing super well, just by word of mouth, local contacts, great local marketing. And I don’t think that’s something that’s really possible if you’re trying to use the old network. They got up and running really quickly, that’s working really well.

We’ve got a small ISP called Brillband on our network that’s trying out an app based only approach to things – so no people involved in the structure, everything’s dealt with through an app, [it sets up] some really advanced stuff in your house as well to track what’s going on. And I think that’s a great experiment, I’d love to see that work. Some people aren’t going to like that and other sorts of people are going to love [that they will] never need to speak to somebody. And it’s through that process I think that we’ll see a difference. There’ll be new players doing new things and providing value in different ways. Despite the fact that the old players will still be there kind of holding up the stumps of the whole thing.

The thing I always say is, this is the last network we’re going to build ever. It’s only the second network that we’ve ever built. The first one we built back in the 1800s, and we’ve waited 170 years, and the new one’s going to last us until 2100. That’s when we might look back at this network and say, ‘is it still working?’ So it’s important what we’re doing, it’s not it’s not just about looking at those short term economic benefits in Milton Keynes or Inverness or something. Those are really important at the moment, but what we’re building is a generational change here. Will this change society for the better? I believe it will. And I’m really having a lot of fun being part of that process.

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