Freedom Fibre CEO Talks Future UK FTTP Rollout Challenges

The CEO of alternative broadband network builder Freedom Fibre, Neil McArthur, has today – as part of an exclusive interview with ISPreview – spoken about some of the challenges the operator has faced in building a new full fibre (FTTP) network and called on the government to be more overtly supportive of such efforts.

At present the operator’s gigabit-capable Fibre-to-the-Premises (FTTP) network – available to UK ISPs via wholesale – already covers over 100,000 premises (up from 40,000 in Nov 2022) and they have an initial goal of expanding to over 150,000 properties through 2023. After that the operator, supported by over £111m in investments from Equitix and UK ISP TalkTalk, aims to eventually cover “approximately” 1.3 million premises.

Neil himself is an industry veteran that joined telecoms in the mid 90’s when deregulation happened, setting up a business ISP called Opal Telecoms. That business ultimately merged with Carphone Warehouse in 2002 and helped to form the foundations for a much more familiar consumer and business provider – TalkTalk.

Neil then ran the technology side of TalkTalk for 8 years and was a non-exec for quite a few years before returning to run Fibre Nation, a direct trenching FTTP venture based in York that was also linked to TalkTalk. In case anybody has forgotten, the Fibre Nation project was sold to CityFibre for £200m in 2020 (here) and at that point Neil decided to stay in the business of building digital infrastructure by establishing Freedom Fibre.

Freedom Fibre initially began life with only a few smaller deployments – focused upon bringing full-fibre broadband to rural and hard to reach areas instead of larger towns and cities. But they’ve recently been ramping-up their roll out and have also won one of the Government’s first Project Gigabit contracts for Shropshire (here), which is worth £24m (state aid) and will see them cover “around” 12,000 hard-to-reach homes and businesses.

Suffice to say that this makes Neil one of the best people to ask about the current state of the sector and its future challenges, many of which have become quite well known over the past few months (e.g. job losses, investment constraints, rising costs, competition and consolidation etc.).

The Freedom Fibre Interview

1. Firstly, can you share with us a quick general update on the status of your network coverage (premises passed so far and areas of deployment etc.), your future targets / plans and how much total investment Freedom Fibre has managed to attract thus far?

Neil’s Answer:

Freedom Fibre just recently celebrated its second birthday in late 2022, and we’ve been celebrating a busy two years! We’re based in the North West of the UK, so the areas we cover are principally around the Mersey Valley in Manchester through to Liverpool. More specifically our build areas are North Manchester to North Cheshire, North of Shropshire towards the Welsh Borders, including areas of Warrington, Greater Manchester and South Wirral.

We’re currently sitting at approximately 100k premises passed with an additional 70k contracted for North Shropshire through the Project Gigabit Scheme. With regards to capital we have secured over £111m of funding so far from TalkTalk and Equitix and we’re already in conversations to increase this capital to expand our build footprint with plans to bring our network to approximately 1.3m premises.

ISPR EDITOR’S NOTE: The above coverage data is from the end of May 2023.

2. As the founder of Opal Telecom and former MD of TalkTalk Technology, you’ve certainly come a long way in the process of establishing your own network operator. Can you tell us a bit about how that transition happened and what made you go down this route?

Neil’s Answer:

Initially, Opal was a fairly small B2B player in the days of voice and pre-dated broadband in what was a very capital-intensive industry. We were a very technically-driven organisation and joining Carphone Warehouse gave Opal access to more capital as well as their tremendous ability to market to consumers. This led to quite large growth for the business and in 2006 we decided to enter the broadband market and built what we termed the ‘next-gen’ network which made use of metallic path facilities (MPF) which allowed us an offering of voice and data over a converged network that we rolled across the UK to just over 4m customers.

Seeing this level of growth and the advancement of technology meant that when fibre finally matured and we were able to start building full-fibre networks we could hit the ground running. Initially, the project was finding out how we could effectively and economically build full-fibre networks and over a period of about three years we made our way to sophisticated models using passive infrastructure access to avoid the disruption caused by new network build.

3. Naturally you have a lot of familiarity with TalkTalk, which has long been a key backer for Freedom Fibre and is your main partner in the retail ISP space. Did that history make it easier for Freedom Fibre to get started and establish the relationship, or would you have proceeded to setup the operator even without their support?

Neil’s Answer:

Would we have set up Freedom Fibre without the support of TalkTalk? The short answer is probably not. As an engineer, my main focus has always been the effective deployment of capital within telecoms markets. I know from my 20 years at TalkTalk it’s incredibly difficult to run an engineering focused organisation in conjunction with an ISP, which is a retail and customer focused organisation.

Trying to establish a new telecoms company, especially in something as capital intensive and engineering intensive as fibre and achieve excellence in both areas is immensely difficult. So, the obvious thing for us was to focus on what we know best, which was the engineering. Therefore, Freedom Fibre was set up to always be wholesale. TalkTalk is our anchor ISP with great experience in delivering a retail and consumer product, so it made sense for us to establish this partnership from the get-go and partner with TalkTalk on both a consumer and B2B wholesale offering.

4. Securing the support of a major ISP is a pretty significant feat for a smaller AltNet in this market, which we assume may have included some sort of exclusivity agreement for access. But does Freedom Fibre plan to onboard more ISPs and, if so, how will you work around any exclusivity clauses?

Neil’s Answer:

Obviously the partnership is great for Freedom Fibre, as it means we can focus on what we’re good at and not worry about having to build a retail ISP which – as I’ve already mentioned – is a big challenge. Regarding the point on exclusivity, we are able to onboard small ISPs, and the work we’re doing under the North Shropshire Gigabit project is an open access project which, by definition, is going to allow us to embrace more ISPs – many of which we are already in discussions with.

5. One of the biggest challenges for alternative network (AltNet) providers, including Freedom Fibre, is the need to generate a sufficient level of take-up in order to satisfy investors and your own internal business models for future payback. But some AltNets may struggle with this and a great deal of consolidation is often predicted to be on the near horizon.

What sort of challenges have you run into when trying to generate take-up for the new network and, if I may be so bold, do you feel as if your own efforts are currently generating the desired level of adoption?

Neil’s Answer:

A significant challenge for us regarding take-up is that as a wholesale only player we’re totally dependent on our ISP partners. Our arrangement with TalkTalk is greatly beneficial to Freedom Fibre as TalkTalk – as well as the whole industry – is transiting from the world of copper to the world of Fibre. This transition isn’t going to happen overnight as it takes time to migrate all these services onto a new network. And without going into details regarding our contractual agreement with TalkTalk, I will say it’s sufficiently favourable to us to be able to focus on our engineering and build rather than having to worry about penetration at all times.

With that being said, most AltNets will say that the take-up has been slower than anticipated, and there’s been a lot of unhelpful things going on that have caused this lack of take-up, least of which being the confusion of calling FTTC ‘fibre’ which has been a nightmare for all AltNets and is something that should have been avoided many years ago.

But at last, we have an outbreak of common sense in the sector where people are starting to understand what full-fibre means, so it shows that our education efforts haven’t been In vain. It’s this educational angle that the industry really needs to keep up, particularly around highlighting the reliability benefits of full-fibre instead of just the speed increases. Even super-fast copper is not without its faults, which to those in the industry is obvious but needs to be highlighted in marketing efforts. Once you’ve gone onto full-fibre the speed, availability and reliability of optical fibre networks will definitely dominate, so we just have to be patient. That being said we’re very comfortable with the arrangements we have for the size of the business we’re hoping to build.

6. The government has made a bunch of recent law changes, such as to help spread gigabit-capable broadband into new build homes (updates to the Building Regulations 2010), and to make it easier to install in large residential blocks of flats/apartments when landlords fail to respond (Telecommunications Infrastructure (Leasehold Property) Act).

On top of that the new Product Security and Telecommunications Infrastructure Act (PSTI) hopes to make it easier for full fibre broadband and mobile network operators to upgrade, share and deploy new infrastructure (masts, poles etc.).

Are you expecting to see much of a benefit from these changes with your own rollout and, if so, in what areas do you expect them to have the most impact on your specific deployment?

Neil’s Answer:

The government is making these changes for very good reason and all these changes are helpful to the industry. At the end of the day telecoms is now a utility so anything that gets in the way of a consumer or business customer being able to use advanced fibre services is going to be detrimental for the UK economy. So, it’s obvious that the government is trying to reduce these issues. Touching on things such as wayleaves which are absolutely important, particularly in multi dwelling units (MDUs) and the B2B market, and anything that eases the requirements to go seeking permission to obtain a fibre service is helpful.

Prior to that, the regulatory changes in passive infrastructure access were absolutely instrumental in the acceleration of fibre roll-out for AltNets. Interestingly, where it perhaps goes slightly awry is when we moved over to FTTC where I think the lack of access to passive infrastructure meant that there was minimal to no investment by third parties in super-fast copper and I think the regulators corrected that as we moved to full-fibre.

I think it’s unfortunate that the UK had the roll-out of FTTC at all, and it’s even more unfortunate trying to call it ‘fibre’ which was blatantly an error in many ways because it’s confused the heck out of consumers, and it’s delayed the roll-out of full-fibre. But we are where we are, and full-fibre will dominate so we’re getting on with it.

7. Following on from the prior question, are there any areas of legislation or regulation that you feel the government could still tweak or improve in order to support the work you’re doing to expand full fibre?

Neil’s Answer:

I think the best thing the government could do right now is to get behind the industry and make it absolutely clear that we are migrating to full-fibre, because they are spectacularly silent on it. There are some real challenges here, for example retaining legacy network is massively costly to industry and ultimately for the consumer. For other industries once you reach an inflection point in the deployment of new technology there’s nothing worse than hanging on to the old technology for as long as you can, and we’re running a lot of legacy services on copper, some of which are not very sensible to try and emulate on full-fibre.

We really just need the government to say, ‘look we’re just not providing these services anymore, we are exiting legacy services, switching off copper and moving to full-fibre networks.’ It’s very tempting – particularly for the regulators – to look after minority interests in this point. But they have to balance that with the costs to industry, and ultimately these costs are picked up by the consumer.

8. Speaking of the government. During the latter stages of 2022 we saw some of the first full fibre rollout contracts being awarded under the Gigabit Infrastructure Subsidy (GIS) scheme, which forms part of the Government’s wider £5bn Project Gigabit programme. The project aims to help extend 1Gbps capable broadband networks (they currently cover 73% of the UK) to reach at least 85% of UK premises by the end of 2025 and then “nationwide” by around 2030.

What are your thoughts on the Project Gigabit scheme thus far and do you think it will be enough, alongside existing commercial investment, to achieve the targets and tackle the remotest of rural communities? In addition, do you have any plans to bid on the GIS contracts?

Neil’s Answer:

The Government, treasury and regulators must be absolutely delighted with the amount of capital that’s flowed into full-fibre, it’s been fantastic. And it’s testament to the industry’s growth that the Treasury and DCMS only feel the need for £5b to subsidise the hardest to reach areas out of a total investment of over £30b, especially when you think of the economic advantages that fibre delivers. So, in the scheme of things this is a very small bill for the government to pay to have such a valuable utility available.

When it comes to delivery, I think the gigabit program has been a massive improvement from the voucher scheme which was incredibly administratively difficult, very frustrating, and though it had its places in addressing smaller projects it wasn’t scalable. So, the gigabit program has been really welcomed by the AltNet sector.

We bid for the North Shropshire Gigabit Project and I’m pleased to say we won that bid. Will we bid for more? Yes, we will, but how many we bid for will depend on the timeframe in which the bids come out, how the projects go along, and the availability of capital and resources to deliver them. Ultimately, we want to focus on bidding for projects in our area, as it makes sense for us to networks.

Now flick over to page 2 to see the remaining questions.