Computer scientist and CEO of full fibre network builder Netomnia (inc. sibling ISP YouFibre ), Jeremy Chelot, has today talked to ISPreview about why he’s pushing the boundaries of
UK broadband performance, while also touching on the topics of market consolidation, wholesale and the possibility of launching a mobile service. Netomnia currently (Feb 2024) covers over 850,000 premises (up from 730k in Nov 2023), in parts of over 70 towns across
England, Wales,
Scotland and Northern
Ireland, with their 10Gbps capable Fibre-to-the-Premises ( FTTP / XGS-PON) broadband network. The operator’s immediate ambition is to reach 1 million premises during “ early 2024 ” ( coverage plan – plus additions here , here and here ), but they may go beyond that. The operator, like a few other alternative networks in this market, tends to adopt a Physical Infrastructure Access (PIA) centric build model, which means they can keep their build costs low and rollout quite rapidly by running new fibre via Openreach ’s existing cable ducts and poles. Not to mention harnessing rack space inside BT ’s existing exchanges, rather than building their own Fibre Exchanges (FEX). Netomnia is also somewhat vertically integrated by virtue of operating their own ISP via the increasingly popular YouFibre brand, which last year became one of only a handful of retail providers to launch an 8Gbps capable broadband package for residential consumers ( here ) and they’re looking to go even faster ( here ). As of February 2024, the provider is home to 80,000 customers (up from 65k on 13th Dec 2023) Overall, progress has been good and the seeds of that growth can be largely attributed to the company’s boss, Jeremy Chelot , who was previously the CEO of another fairly successful AltNet, London-focused operator CommunityFibre . Prior to that he was also the IP Core Network Solutions Manager/ IP Architect for Three UK (H3G) and has now been in the fibre industry for the last 10 years. Naturally, we wanted to know more about what drove Jeremy to start the new company, its progress, future plans and why he’s so keen to push broadband performance well beyond what many other operators are currently doing. 1. Firstly, can you share with us a quick general update on the progress of your network coverage (e.g. premises passed, total customers, take-up levels and areas of deployment), your future targets and how much total investment Netomnia has so far managed to attract? Jeremy said: Since October 2020, Netomnia and YouFibre have raised £345m in equity from Advencap, Soho Square Capital, and Digital Bridge, and, £450.5m in debt from Avenue Capital and a group of nine banks (Alpha Bank, Barclays, HSBC, ING, NIBC, Nord/LB, RBC, Standard Charter, and UKIB). As of the end of February 2024, we have 850,000 premises on the Netomnia network ready for service (RFS), and 80,000 YouFibre customers. We expect to reach our target of 1 million premises passed by Q2 this year. Our new target will be to achieve 2 million premises passed by the end of 2025. 2. As most people reading this will probably know, before starting Netomnia and YouFibre you were actually the CEO of another fairly well-known AltNet in
London, CommunityFibre . I’m curious to know what made you want to start your current business after having done something similar before and, perhaps more importantly, what learnings you carried over from your previous role to help grow the new business? Jeremy said: I enjoyed my time as CEO at Community Fibre but I always knew I wanted to build a national fibre network across the UK and was convinced that I could replicate what I had done at Community Fibre on a national scale. When I was young, I had access to a 512kbps cable connection when all my
Friends were still on a 56kbps modem. Having access to faster speeds meant I could learn faster than anyone else I knew at my age and without this, I wouldn’t be where I am today. With Netomnia and YouFibre, I wanted to create a network infrastructure and an Internet Service Provider that could deliver a faster, better, cheaper Internet connection to as many people as possible, to give everyone the same access and opportunities. 3. Naturally, we can’t talk about the current market without also considering the seemingly growing likelihood that a fair number of alternative networks, under pressure from rising costs, competition and the need to generate good take-up by consumers, may shortly find themselves being either consolidated or becoming consolidators in their own right. We sometimes fear that all this talk of consolidation may overlook the challenges of actually merging two networks together, particularly as different operators can have different approaches to build (e.g. Netomnia’s low cost / PIA approach vs a greater proportion of trench building). Not to mention any differences in technology and network design, which will later need to be aligned, adding costs. However, Netomnia seems to be bucking some of the industry’s more negative trends, and currently shows no signs of slowing down. What makes your approach different, and do you anticipate being a consolidator yourself in the future (as opposed to being consolidated)? Jeremy said: Netomnia’s approach is different because we are one of the most capital-efficient altnets in the UK. I believe altnets have proven they can build at scale and together will achieve more than 10 million premises RFS by the end of this year. I also believe that altnets have proven that they can achieve a high level of take-up with most companies having delivered more than 30 per cent take-up in mature developments. For example, YouFibre has 33 per cent take-up in its oldest cohort (2020). Where altnets differ significantly is the capital they spend to get premises RFS and to acquire customers. By the end of February 2024, Netomnia and YouFibre have only consumed £170m of debt. That works out to £200 of debt for each premises RFS – the larger altnets in the UK have consumed up to five times more debt than us for each premises they make RFS. And it’s the same story with equity. Because of our key difference (capital efficiency), it makes consolidation in the UK very hard. We are so capital efficient that almost every deal will cost us more than organic growth and we have an addressable market in front of us of several millions. Therefore, while we would love to be a consolidator, it makes it difficult. We have not built the business to be consolidated. We focus on delivering for our customers and becoming the third network in the
United Kingdom and that’s what drives me! 4. Quite a few of the other AltNets that I’ve spoken with often tell me that they see going wholesale as the best way to help grow take-up longer-term, particularly if they can attract bigger ISPs, much as CityFibre has done (i.e. getting big brand names on board can make a world of difference, but it’s not easy). However, Netomnia currently remains more vertically integrated, given that you primarily still sell consumer broadband packages via YouFibre, which is also run by yourself. On the flip side, as an operator, you’ve often described your network as being open to wholesale, so I’m just wondering where you are with that approach today and how you see that side of the business (excluding YouFibre) progressing? Jeremy said: We are keen on wholesale. I don’t believe that we will get BT or Virgin Media (but happy to get a call from them) and Sky is only working with Openreach so far – so TalkTalk and Vodafone are our main options for scaled ISPs but, as we know, both companies are quite busy at the moment with a merger (3 and Vodafone ) and a restructure ( TalkTalk split into three companies). I am convinced that the future is bright because it makes sense for us to work together and let’s be fair, 12 months ago Netomnia only had 350,000 premises RFS, and now we have 850,000 and soon 1 million, therefore, we are only just becoming interesting. We will win together but our business plans have been built with YouFibre only so if it happens great, if it does not, not a big deal. 5. YouFibre and Netomnia made a few headlines last year by becoming one of only a tiny number of providers to launch an 8-10Gbps class product. By comparison, the CEO of your former haunt at CommunityFibre, Graeme Oxby, said they could do the same but have chosen to stick with a 3Gbps maximum because he felt that consumers would struggle to harness more than that in the real-world. Not to mention the difficulties that such speeds can cause for customer support departments and speed testing (i.e. very few devices and online services are capable of even remotely close to such speeds). Is it all a game of bragging rights for marketing purposes, or is there more to this strategy? Jeremy said: There is more to it. Since I started rolling out fibre and providing Internet connectivity, I promised myself that I would always push the limits and drive others to do the same. We have hundreds of 8,000 Mbps customers and I am looking forward to 50G-PON. The reason the UK was behind with its full fibre availability is because operators were satisfied with FTTC ( DOCSIS or VDSL) whereas they should have pushed the limit sooner…I will push them. 6. Naturally, one risk with an 8Gbps product is that it might only take a few people to join, in the same area, to stress local network capacity during certain periods. Granted, the probability of this would seem to be quite low, and each user would really have to be hammering those links constantly to cause a problem. But edge cases do sometimes emerge and if such an issue did occur then how would you resolve it or at what point does it become something that needs a specific solution (ordering extra backhaul bandwidth etc.)? Jeremy said: Our backhaul is not a constraint. Our infrastructure runs from BT exchanges, and we use either Dark Fibre or 100-Gbps and are in the process of upgrading to 400-Gbps. Bandwidth consumption is increasing but it’s a lot slower than our ability to scale our backhaul, so we’re not concerned by this. We have many “power” users on that network and capacity, even with 80,000 customers, is far from being a constraint. 7. Speaking of insanely good connectivity speeds, we’ve already seen the odd UK network playing around with 25G-PON technology, while a provider in Qatar recently went as far as to launch a 50Gbps package for homes using 50G-PON technology. In terms of future network platforms, what do you expect Netomnia to adopt after XGS-PON and why? Jeremy said: I always considered 25G-PON to be dead before it was born because of the technology cycle and roadmap (especially from
China to drive volume). A little bit like NG-PON2 when Verizon or CityFibre were considering it. It was obvious (to me at least) that it would not go anywhere. The next step for us is 50G-PON because it’s fully compatible with XGS-PON and because we only have XGS-PON on the network it is easy to use combo optics to have XGS-PON and 50G-PON at the same time on the network. The interview continues on Page 2..