Shovels in the ground attract little glamour but the UK's digital future hinges on dark fibre being available in spadefuls according to national infrastructure builder CityFibre.
Following CityFibre's Dark Fibre Symposium - held at the London Stock Exchange on July 20th and attended by 75-plus influential industry players - the UK's legacy infrastructure suddenly seems older and more tired. But digging to create a modern fibre and duct network architecture now marks a very different connected future facilitated by the highly motivated national pure fibre infrastructure provider. In a keynote address CityFibre's CEO Greg Mesch delivered a jolt of reality to the sceptics who said at the time of CityFibre's inception that it could not compete with BT Openreach. The basis of their argument was that nobody confronts head-on the incumbent monolith. It's the same argument, ironically, that underpins CityFibre's strategy. Nobody else is competing, so competition is the only response. This simple law of economics is shifting the tectonic plates and there's no limit set on CityFibre's ambition.
"We're serious about building infrastructure that's fit for purpose," stated Mesch. "It's not about the next few years, it's about the UK's future. There needs to be more infrastructure, more ducts and more fibre in the ground. The UK must be diversified away from BT.
"This is not about fibre strands. It's about ducts and sub-ducts that are capable of running thousands of strands of cable. In York we're using a two duct network sub-ducted four ways and we have enough capacity to connect every home and business, every cell site, every school, every single property on a purpose built infrastructure. That's what we mean by a new generation of future proof digital infrastructure."
CityFibre's intention is to show that unlimited fibre capacity is a national priority that rids the UK of an aging copper network that is ultimately holding back the nation. "Increased investment in digital infrastructure, primarily fibre, drives GDP growth, innovation and creativity," added Mesch. "Our vision is simple: We believe that every building should be connected to fibre. It's inevitable. We are not afraid of digging up roads and engineering a fibre infrastructure. How else can we transform the digital capabilities of citizens and businesses? Our mission is to build a next generation future proof infrastructure for the UK."
CityFibre's goal is to be in 50 cities across the UK quickly, offering dark fibre and associated products. The power of fibre is most evident in the projects already advanced by Mesch and the goal of CityFibre's endeavour is to scale those successes across a wider footprint. "We're connecting core networks and densifying more and more connections with a shared infrastructure model," he added.
Mesch's passion for fibre is also an invitation to the industry and potential partners to start thinking afresh about the UK's infrastructure. "We believe in sparking innovation," he stated. "We're preparing for 10 Gigs and terabit speeds because that's where the industry is going."
CityFibre's management share more than two decades experience in designing, building, operating and financing fibre infrastructures. They established CityFibre in 2011 after a base acquisition that helped them develop and refine a shared infrastructure model that caters for the public sector, business, mobile and residential verticals in cities outside of the M25. Those are the most needy of a new digital infrastructure, believes Mesch. "That's what we're targeting, that's what we're building," he said.
Listing on the AIM market in January 2014 CityFibre grew rapidly and late last year completed the £90 million acquisition of KCOM's national fibre and duct network assets, giving it access to 21 new cities. The company secured financing of £180 million to facilitate the acquisition and commercialise its national network. "In less that 24 months we went from a concept in a few UK cities to 37 cities and £90 million of unused facility to build infrastructure," noted Mesch. "And there's much more to come."
CityFibre's journey as a public company has been impressive, underpinned by international touchstones and learnings derived from markets more advanced than the UK. "Investors like our model," stated James Enk, Head of Corporate Development and Investor Relations. "The dominance of Openreach has until now meant service-based competition only, not infrastructure. Investors also bought into our strong recurring revenue yield and disciplined approach to growth. When we put a shovel into the ground there is a contract behind it."
Part of CityFibre's challenge when coming to public markets was to educate investors on its strategy, a learning process made easier by a number of international precedents that prove CityFibre's model by multiples. MetroWeb, based in Milan, provided a fibre overbuild in competition with Telecom Italia to bring fibre to the home. The company is now an astute, pioneering and adept player in the roll out of fibre in Italy.
Stockholm-based Stokab has traded for 22 years and represents the closest analogue to CityFibre's UK ambitions, providing a passive fibre network sold as a shared infrastructure and facilitating FTTP. Every business in Stockholm has a fibre connection. Four LTE networks also run off the network which has provided an overall 3x return on investment.
Like CityFibre, Eurofiber was born out of a series of acquisitions in the Benelux region. The company is focused on the business park and enterprise segment in Holland, primarily delivering dark fibre. Eurofibre has changed hands twice in recent years with handsome returns for investors. CityFibre therefore boasts a proven model backed by validation from international comparatives.
"CityFibre's here at a national scale and open for business," said Rob Hamlin, Commercial Director. "Dark fibre is available nationally from us and we are willing to keep digging because everyone should have access to dark fibre. Many have lobbied Ofcom for years to get access from BT, but challenges persist. We are ready to sell dark fibre at scale with a flexible approach and terms that work for our customers. We fully anticipate bringing in substantially more funding. We have a large financing stream in place to fund projects, with a remaining facility of tens of millions that customers can view as a capital stream to exploit for their businesses."
CityFibre is now connecting end users at volume through a growing number of channel partners. Already more than half a million school children are using its infrastructure, made possible through specialist partnerships. "The opportunity with dark fibre to flatten out the increasing costs of managed solutions is attractive in the market," added Hamlin.
"Three and EE have moved their backhaul architecture entirely to a bespoke dark fibre platform in Hull. Dark fibre is seen primarily as an engineering based product but its influence is felt right through to the user experience and improved top line performance. Public sector customers are deploying dark fibre for CCTV, traffic lights and Wi-Fi sites. We're pushing hard to challenge our design and delivery approach to start rolling out that infrastructure across our cities."
CityFibre is putting in place an architecture that is perfectly positioned to support small cells for mobile operators. The expectation for small cells playing a huge role in the delivery of capacity and reliability in the mobile networks over the next five-ten years is becoming an ever-increasing theme. "We want to anticipate that in the design of our networks and products and start to lay the ground for something that will be revolutionary - a backhaul to support the future of mobile networks at the right cost and the right scale across a number of our cities," said Hamlin.
John Franklin, Operations and Engineering Director, explained that CityFibre's 'well planned city' design is based on a ring methodology with the ability to hand off to any particular location, buildings, towers etc wherever needed as the market expands. "We think in thousands of fibres, scale is key," he said. "Getting sufficient ducts in the ground at the right location creates the flexibility to extend a capillary network off the core that drives demand.
"CityFibre is developing a tool bag of architectures to address every possible opportunity, working with data centres on how best to optimise them via our nationwide infrastructure, looking specifically at strategies to connect in, through and across data centres, and continue to drive for automation, visibility and cycle time improvement."
There is a notion that dark fibre is a niche market and difficult to commercialise to different markets. But high capacity fibre networks are driving transformations across all sectors. This compelling message was underlined by the remarkable work undertaken by Commsworld in Edinburgh which is using dark fibre to transform the city's digital future.
"Our commercial approach comes down to us following our customers' strategy, understanding where they need network, on what terms and the nature of their financial and commercial goals," added Hamlin. "We recognise different business models. There is also an idea that the infrastructure status quo cannot be changed. That's not true. That's what's holding back the UK's digital future. Digging is a challenge, but it's what we do." •