Fibre Penetration and Take-up with Eight Advisory – Interview with Guy Miller

This time Chris Stening, Senior Advisor, sits down with Guy Miller, CEO of MS3 Networks, who is confident that it’s “the Altnets who will win this endgame”.

Chris Stening: I’m very pleased to be here today with Guy Miller. Guy is the chief exec of MS3, and MS3 are a hull-based full fibre wholesale provider. Obviously, you’ve been through the report, what sort of struck you most about that paper.

Guy Miller: It’s a fascinating reading. It’s great that we’re having more dialogue as an industry about adoption. I think sometimes it is a closeted secret no one wants to talk about, but we do need to work collaboratively together to drive adoption. It is everyone’s challenge and it’s the one thing that we need as an industry to achieve over the next couple of years in order to fulfill our destiny as new providers taking the mantle from the incumbents.

CS: Why do you think the Altnet penetration is so low? Because what we’ve shown is it’s half that at Open Reach.

GM: I think we can over index on Open Reach’s penetration. Open Reach have been doing this for decades. And I’m not entirely convinced that the majority of people who moved to full fibre, actually even really know what they’ve got, why they moved. It just kinda happened. So look, an incumbent is always going to get an early advantage. When we look at other industries the incumbents such as banking got the early advantage when it came to apps and digital because they already had the customers. But actually, when you look at the banks that have been the most successful now, it’s a very different story. It’s your Monzos, it’s your Starlings, it’s your First Directs. These are the banks that actually didn’t start off with incumbency status that actually used what’s happened from the incumbents to drive better outcomes to improve customer service and things which I’m sure we’ll talk about later. I think importantly they were always going to have an advantage and we shouldn’t just benchmark ourselves with them because that isn’t fair and it doesn’t represent where our industry is in its life cycle.

I look at it as a universal challenge which I break down to three simple categories: half the country doesn’t even understand the concept of fibre. So half our market disappears overnight, because no one has told them what fibre is. Of that remaining 50%, half don’t know that you can get fibre from an alternative source. The Altnets exist as a concept, you know, they have always assumed to your report status. I think you said 91% of all customers come from the big providers. They don’t know there’s a choice. The concept of choice and the knowledge around Altnets hasn’t existed. So we’ve lost another half of that half. With that 25% opportunity and then guess what our own Altnet brands, some do a reasonable job at marketing, some not so much. So you have an awareness issue, even if you know the alternative fibre exists, and you know what fibre is and you want fibre. You may not heard of the local operator that spent time digging past your street stringing fibre up on Openreach poles. So we lose another half again and it’s my simple mass there: half of a half of a half you got 12.5 % percent to target guess where the industry sits roughly in a lot of states. I think we have to address those three things in the industry. It’s up to the industry and places like government to educate on fibre. It’s about our industry to educate on choice. And it’s about each individual Altnet to educate about themselves. Every Altnet can do something but they can only address that quarter. We need the rest of trade associations, governments and Ofcom to help us get that awareness that I believe we’ll drive those penetration targets we’ve all set in our business plans.

CS: Sounds like a good challenge. One of the things that we cover was that it’s very hard for the Big 5 to integrate in with lots and lots of smaller networks. Clearly, we want everybody to work together but do you think consolidation is the only answer to that.

GM: I think we need to be careful about silver bullets. And if you are a responsible owner of an Altnet, you need to be doing loads of things: accessing large networks, tier 1 carriers is really important and it is very difficult if you are subscale. They just don’t have the bandwidth to absorb it and certainly looking at either, consolidation is a route to get there. Working with other companies directly or using integrators to try and produce that scale is an option there as well. I don’t think it’s a substitute for awareness and I don’t think it’s a substitute for starting to sell our products on something that hasn’t been sold before: quality and service. So actually, I think there are other things that need to be done first but absolutely for certain people consolidation is ultimately inevitable and integration onto other platforms is a clear route to do that.

CS: Interesting. Clearly MS3 is a very successful wholesaler. What do you think made you so successful?

GM: It’s an interesting point. So to MS3 unlike most was wholesale from day one. Our heritage is wholesale and we understand what the wholesale market needs. It is genuinely very difficult for a reasonably successful retail provider to all of a sudden create: the systems, tools, ways of talking, account management needed to be successful in running partners. We’ve now got a few dozen partners; I think 45-50 partners now on board because A) we understand what they want B) we build the tools so that they can use us effectively and with the automation that they need and C) we have a ruthless focus on that. We also have a very big advantage which we are in mainly in hull and hull is a unique part of the UK market where lots of ISP’s have never been able to sell successfully before. So now we bring a nice wrap around it, we bring a USP of where we are, a lot of our footprint you don’t compete with BT or Virgin or Sky or Talk Talk and therefore we can offer something different to everyone else. But importantly, we really understand what those ISP partners need and we see them as true partners not as the kind of classic customer, please give me orders. But actually, how do we work with them on their marketing strategies, their door knocking strategies, their financial planning to make sure that we are successful together. I think we take a different approach to some and that’s working for us and although we’ve only been building a scale in Hull now for two years, we’re already seeing a number of areas approaching 25% penetration. So it is working and we’ll continue to develop that out.

CS: It’s good, well. I think you’re right everybody needs to do everything and there is no silver bullet.

GM: And I think what’s really important is we are deploying fibres in industry before everyone needs it, right. And that’s always what telecoms has done and we’re very proud to be innovators, we’re very proud to plan for the future and I feel great that we’re installing a network past someone’s house that they’ll be using in 50 years’ time. Unfortunately, they’re not buying it today for what is needed for in 50 years’ time. We can get hooked up on our own technical obsessions with how great this is. And people who worked in the mobile world will have seen this every time you deploy 4G and 5G and are completely shocked that the take up curves are not what people wanted them to be but actually to look at other ways of selling this right. We need to look at service. The fact of the matter is if you look at our partners in Hull who are selling our network: Our top five partners, their trust pilot scores are 4.6, 4.2, 4.6, 4.6, and 4.5, right. BT sits on 1.4 Virgin sits on 1.6 Sky sits on 1.4. Actually, the story of: oh please buy fiber because it’s going to be great and you’re going to need it when augmented reality and AI are full scale it’s not that relevant. The fact is people live in a world now where there is a cost-of-living crisis. So, prices unbelievably critical and people are always online and need to be always online, their entertainment is online, their entertainment is live. We need to talk about our network failure rates and how good they are. We need to talk about: we pick up the phone within 10 seconds. We need to switch the conversation from technology to the outcomes and the outcomes is great, great service. And it was brilliant to see in the Ofcom recent reports that actually Altnets are now getting to the scale where they’re appearing at the top and they will smash it compared with everyone else. And this is the awareness we need in that middle bracket of what is an Altnet, why are we great why is it not a risk to move to an Altnet, right. And that’s gonna change the dial. The fact is as important it is to bring the big providers on a long run, the big providers while they start from a high base are going down and down and down and down. All of the large providers, apart from maybe Vodafone, is going backwards in their base. And every Altnet’s going up. So we can obsess around getting those big providers and it is important. But actually, we shouldn’t overshadow our achievements today and where the industry is going over the next two years. As long as it continues to get sufficient backing in terms of taking those customers. And every customer that moves in our case either from BT or from KCOM quite often onto us they’re going to get a better experience, they’re going to save money, they’re going to get a choice, they’re never going back. So actually, we got to keep doing what we’re doing there needs to keep being trust in the industry, trust from investors, support from regulators and governments and actually this will turn around. No one is doing a bad job we need time, we need to keep looking at all these avenues and not pick up one silver bullet.

CS: Yeah, just thinking about something you said. I mean broadband almost feels like it’s a bit of a utility when you think about it. If I look at my own house I think I looked at the things that were connected through my router something like 29 devices: Sonos, Tado, My Ring, alarm system. My house is now so dependent on broadband. And we don’t sell it as utility. But it’s not utility but it is for us as customers, isn’t it.

GM: And that is what we get hooked up with. You know what 5 or 10 years ago the story which was broadband was rubbish. The fact is now broadband is generally really good and actually supports most people’s needs. There is still a very small minority, in rural areas, a long way from exchanges where it is terrible. And they’re the people who you sell fibre to because of that step up that difference and the change in their lives the day after fibre is installed. And you hear about it, people who can now work from home because they couldn’t. But that’s an increasing small minority it’s sub 5%. As an industry we get hooked up on that being the messaging. The fact is now broadband is good enough to do 99% of things people want to do. So why switch. Well, I’m gonna switch for price, I’m gonna switch for reliability, I’m gonna switch service. And actually, we need to change the framing of what we talk about, be proud of the product as a whole but not just obsess around the technology, something our industry has been guilty of for 50 years. I’m not sure it’s going to change tomorrow but we’ll do one right. And I think things like Trustpilot are really important to build that reputation in the industry and fundamentally show things could be different. I talked about the banks earlier Monzo and Starling said, we believe you can build a successful bank without branches, initially and everyone said, you’re an idiot, how can you do that and they said well, we believe we can offer an incredible customer experience, we can answer the phone quicker, we can do everything digitally and online. And actually, as a result of not having that legacy we can save people money and do better deals, we can pay our interest and guess what they’re the ones that are winning customers and it’s the legacy banks that are failing. We will see exactly the same thing in telecoms. The incumbents are doing a good job of pretending everything is okay and that their penetration figures are good and it’s above their plan. The fact is the incumbents are terrified of what is happening. BT Group will report half a million losses over the next year, wider than what they expected. And I guarantee that what they put down and expected was lowballed so they could come out looking good. That is going to get worse. Sky are desperate to save their TV customers and not as worried about broadband, Virgin having to build networks of unbelievable scale just to keep the same customer base. You know the Altnets are winning and as much as the markets tell you differently because of access to finance etc. the Altnets are winning. And given time and support and collaborations in industry on some of these initiatives, the Altnets will win this endgame. I firmly believe that, otherwise I wouldn’t be doing it, Chris.

CS: I think the nicest thing about working and I you and I both been in this industry for a long time is the full fibre revolution. It really does feel like we are creating a legacy for our children and our grandchildren, doesn’t it so.

GM: Couldn’t agree more. My kids think fibre is the only way as you can imagine. I haven’t even told them the old stories of Copper. But one day on my deathbed I’ll tell them the stories about what we did.

CS: We should talk about dial up at some point but maybe not a topic for today. Guy, it was really nice to talk to you, thank you ever so much. Look forward to following the progress of MS3 over the next few years, thanks again.

GM: Thanks Chris.

That’s all for today, but we look forward to publishing our next interview in the series soon.

Stay tuned!