Fibre to the Home: Take-up & Churn – Interview with John Irvine

In this episode, Chris Stening, Senior Advisor at Eight Advisory, sits down with John Irvine, Chief Executive Officer of Wight Fibre, who talks about the company’s journey in the telecommunications sector, their customer acquisition strategies, the impact of demographics on service uptake, and the challenges posed by competitors like Openreach.

[Chris Stening]

Hi, I’m Chris Stening, Senior Advisor at Eight Advisory and I’m really pleased to be here today with John Irvine. For those of you who don’t know, John is the CEO of Wight Fibre. I’m really looking forward to talking to John because Wight Fibre is one of the more mature, more established Altnets and providers and is probably now experiencing some of the challenges that others will find maybe in a year or two’s time. We’re going to talk about Altnet take-up, we’re going to talk a bit about cohort or in John’s case around the demographics, a bit about Openreach and overbuild and then finish off on churn.

So, John welcome thanks for taking the time. If you’d like to just tell us a bit about Wight Fibre and your history to get us going, that’d be great.

[John Irvine]

We are more mature, we are 25 years old next year, in fact technically we already are. We connected our first customer 25 years ago next January. We were an HFC network, the last independent cable company in the UK and since 2017 after some investment from Infra Capital Partners we were one of the first full fibre rollouts, slightly ahead of the curve with a distinct geography serving only the Isle of Wight. We’re in the fortunate position of having completed our rollout so we are at 87- 88% premise coverage on the island with about another 6,000 premises to go. Nearly all of them subject to Wayleaves, MDUs things like that.

In that sense we’re ahead of the curve.  We’ve finished our rollout, and we are focused on and always have been focused on acquiring customers.

[Chris Stening]

In our report we looked at the sort of average Altnet take-up and we showed it was now at about 20%, so it’s continuing to rise. Openreach is at 36% clearly there’s a slightly different demographic. Where are you seeing sort of take-up on the Isle of Wight?

[John Irvine]

Last month we connected our 25th thousandth customer. That takes us to point of a percentage below 35% penetration. That’s a good number. We’re adding the guts of 1% a month some months maybe only 0.8, 0.9 or even 0.7 if the sun shines too much. We’re doing well in customer acquisition. We’ve built a really strong local brand, a huge emphasis on outstanding customer service. We have it in our logo “Because we care”. That culture permeates the whole business and informs everything we do. We’re doing well on customer acquisition, expecting to continue to do so.

[Chris Stening]

That’s interesting, because one of the questions we get asked is, does it sort of get to a percentage and then tail off, but it sounds like you’re just seeing continued growth?

[John Irvine]

I don’t know where the line is, but I am expecting it to get harder at some point. Is that harder when you hit 40%, 45%. The jury’s out on that. We have pockets of 45 to 50% share. We’re not really seeing the rate of customer acquisition slow down there, but we are seeing, and this goes to the next point, we’re seeing some demographics where we’re under penetrated. Older people with less of a need for broadband and younger couples and young families who buy bundles, buy packages.

[Chris Stening]

I remember when we talked before, you said you don’t really look at cohorts because of how properties are released, but you did say demographics were quite an important factor. Can you just expand a bit more on that?

[John Irvine]

We don’t see a difference on age of cohort partly because you don’t release a whole area in one go, it can take one or two years or even longer to release an entire area. Engineering difficulties, build challenges and all the rest. Like I just said on demographics, we’re under penetrated amongst less well-off young families. Those are the people that don’t have a lot of disposable incomes. Their Saturday night entertainment is at home with Sky TV with a takeaway, therefore they buy Sky, they buy Sky Broadband along with that because it’s the most effective way to do so.

And that market, unless you’re going to sell your broadband for £18 or less, if you’ve got Sky TV they’ll sell you full fibre broadband for £18, £18.95. We don’t at this point in time.

Maybe we’re going to have to address that segment or we do something around TV. And we know that that market’s evolving rapidly at the moment.

As that market fragments everyone moves their TV viewing to streaming and less dependent on Sky unless you’re a massive sports fan. The older demographic is a challenge. Their use of the broadband where they are using it isn’t as sophisticated. Less demand for higher bandwidths and a real inertia there. That’s the segment that still thinks they’re buying their phone line from the post office. Although that’s a bit of a damaged brand these days nevertheless there’s inertia there.

We even launched a product start of this year, a phone line only product, so we were installing full fibre connection just to supply the customer with a phone line. And we’re able to do that because a phone line only from BT is horrendously expensive. Similar to the cost of a full fibre broadband connection.

[Chris Stening]

Really, well I suppose as you go over the classic adoption curve and you get into the the early and late majority and the laggards, you just have to rethink what you offer and how you offer it?

[John Irvine]

Yep.

[Chris Stening]

Okay. One thing that we looked at on our report was the impact of overbuild. And I know that you’ve had some experience of Openreach overbuilding you in the Isle of Wight. I am just interested to hear a bit more about that because there’s some interesting stuff in there.

[John Irvine]

Yeah, interestingly the town of Cowes that I mentioned earlier Openreach overbuilt us in that town with full fibre went live with it in September 2021 and we saw a slight uptick in the rate of customer acquisition there as Openreach helped us educate the market about the topic of full fibre. We moved on from needing to educate people about full fibre since then but nevertheless they helped us increase our rate of customer acquisition way back then.

Where we’ve been overbuilt, we don’t see a loss of market share. In Cowes as I mentioned earlier 45 to 50% market share in most areas of Cowes, way above our average of 35%. That’s despite the fact that Openreach full fibre is widely available.

[Chris Stening]

Yeah, that that sort of bucks the trend that we were seeing. We were seeing a slight reduction in take-up where you had overbuilt but also who got there first was quite a significant factor. I’m guessing you guys were there first?

[John Irvine]

Yeah, we’re first everywhere 78,000 premises on the island. We have aToby box outside 72,000 of them. Openreach can serve roughly 21-22,000 and have only stated a target of 47,000 by the end of 2026. So, a very slow rollout of Openreach full fibre on the island which has given us first mover advantage, no doubt about that.

[Chris Stening]

I guess it’s the first mover advantage, the strong local brand you’ve got, the exceptional levels of customer service that you provide. It all sort of comes together, doesn’t it?

[John Irvine]

Yeah, our customer offer is monthly fuss free rolling contracts. So, literally pay what you see, leave at any time. And actually, when we introduced that fuss free monthly rolling offer, just coming up three years ago now, our churn rate actually dropped slightly. The opposite of what you would expect and what that says is once you get a customer if you serve them well don’t give them a reason to leave, they’re going to stay.

[Chris Stening]

That’s a really interesting insight and the contract length is really interesting. I was in Iceland a couple of years ago and looking at how they were operating and everybody there it’s all rolling 30-day contracts yeah so it’s easier to acquire customers because people aren’t tied into long contracts.

[John Irvine]

I’m not sure why the churn went down I think it’s as simple as, you send out the end of contract notification, you tell them hey it’s monthly rolling oh and your price hasn’t gone up and they go, alright well I’ll just stick with it and when I get a moment I’ll go and shop around because I’m not tied in for another 24 months. And they never get around to shopping around because you don’t give them a reason to.

[Chris Stening]

That’s a really interesting way to look at it. So, churn was the final thing we really wanted to explore with you because you know we’ve looked and benchmarked the sort of churn and Altnets appear to be pretty much not quite half but much lower than some of the incumbents but slightly on the rise. Where are you sort of seeing your churn.

[John Irvine]

I mean our churn historically, well for the last few years has been down at 6.5%, a little spike recently, I’d say a spike up to 7% price rise time causes people to shop around. But you know we don’t have any contractually binding price increases cause you’re monthly rolling if you don’t like the price increase you can leave, it makes our marketing much simpler. None of this pay this now and pay this next April and pay Y the April after. Very simple straightforward proposition and yes, we do annual price increases. I think there are a few out there who are making a big deal out of not having monthly price increases, but the reality of the world is everyone’s costs are increasing. It’s inevitable that at some point you’re going to have to start doing price increases. So, making too much hay now about not doing it, might come back to bite you in a couple of years’ time.

[Chris Stening]

As you say, you’re just doing rolling monthly contracts, so people have got the choice?

[John Irvine]

Yeah.

[Chris Stening]

That’s really interesting. When we spoke before you said your service levels are really high and again that’s part of your whole reputation so you’re getting good NPS scores.

[John Irvine]

Yeah, and net promoter scores that are really are sky high routinely in the 60s and 70s not just our own internal surveys. But we are a member of the Institute of Customer Service. They come along and independently survey our customers and in fact their score comes out even higher than our own internal surveys. When you got customer satisfaction that high you know you’re doing a good job and it’s why our churn rate is so low, the main reason our churn rate is so low.

[John Irvine]

An interesting stat on the churn so it’s 7% half of that churn, and this is a problem that other Altnets have, are people who move outside of our footprint, and we can no longer serve them or with our older demographic on the island sadly people who move into care homes or who pass away. So, the underlying churn rate there 3.5 %.

[Chris Stening]

Yeah, you can do nothing about that I think there’s a lot of people who’d be very happy with an underlying churn at 3.5 %.

John, it’s been an absolute pleasure to talk to you. You’ve got some really impressive results there, great penetration compared to your peers, really strong churn performance as well. So, it sounds like exciting times and continued growth, so thanks very much for your time.

[John Irvine]

Thank you for having me, I’m off back down there one of the lovely sandy beaches we have here on the Isle of Wight now.

[Chris Stening]

It’s been a long time since I’ve been to the Isle of Wight, but you have inspired me to come back so if only to try out your fibre broadband. Thanks so much, John.

[John Irvine]

Thank you.