Be co-founder mows BT's long grass in bid for fibre success
'We can best service a lot of the council estates'
Interview Dana Pressman Tobak can probably be spotted in the footnote of broadband history, having founded Be Unlimited with her university pal Boris Ivanovic, before quickly selling it on to O2 within a year of offering the product to the company's customers. And now the duo are back, this time under the guise of Hyperoptic – a Shepherd's Bush-based outfit that claims download and upload speeds of 1Gbit/s for high-rise-living Londoners. In an exclusive interview with The Register, Tobak tells us just how much fibre she hopes to quickly feed to the UK.
Hyperoptic is one of the latest ISPs on the market, having launched just nine months ago in September 2011. The company is offering a niche proposition to what it describes as multi-dwelling units (MDUs). We prefer to call them private flats and council high rises, but you get the idea.
Ivanovic already successfully explored the possibility of pumping fibre optic cabling directly into buildings in Sweden way back in 2001 with his private equity-funded firm Bostream, which he sold three years later for hundreds of millions of dollars.
Explaining the journey from Bostream via Be to Hyperoptic, Tobak tells me:
"Essentially, even back then in Sweden they were already at the stage of providing Fibre-to-the-Premises (FTTP) products offered at a price point that people could afford. We focus everything that we do on that aspect."
She adds: "That was the seed for what we're doing now."
Bostream eventually had 100,000 customers in Sweden - 80 per cent of whom were using a DSL variant such as local-loop unbundling or ADSL2+. But the other 20 per cent of subscribers were paying for an FTTP product.
In other words, Ivanovic has done his homework.
Eight years on, he and Tobak wanted to "fill in the holes" left empty by Blighty's national telco BT, which has a "mixed economy" broadband strategy that is focusing much more heavily on running fibre from street cabinets than with blowing the optics directly into homes and businesses in the UK.
In August 2005, when Be went live for its broadband customers, the company became the first telco in the UK to offer speeds of 24Mbit/s in the country, Tobak says.
Today, telecoms watchdog Ofcom insists that 24Mbit/s is the slowest broadband speed that can be branded "superfast".
By 2006, Be had been sold to O2 by the founders of the company. Tobak says of that decision:
At the time we sold Be, essentially the marketplace was one of TalkTalk having just launched its first broadband service, Sky having bought Easynet, and French Telecom renaming Wanadoo to Orange Telecom. AOL was still in existence and about to be bought by TalkTalk. And Tiscali was still in existence, but again about to become part of that conglomerate.
So the market was quite different then and O2 believed if it didn't get a broadband product as part of its offering that it was going to lose that product to Orange and there was an expectation that Vodafone was going to launch a broadband product too.
She adds: "It was a bit sad at the time to sell Be when we did. It was the right thing to do but we knew we hadn't done everything that we had wanted to do."
Gap in the market
Tobak says that Hyperoptic was created to address a gap in the market for FTTP, and notes what some critics have said about the UK lagging behind other parts of Europe when it comes to rolling out next generation broadband cabling.
She accepts that BT is tied to pushing for coverage as quickly as possible. There is political pressure from the government with what many consider to be a doomed agenda to give the UK the "best superfast broadband network in Europe by 2015".
What Ofcom and the government have pushed BT to do is the coverage, and I cannot deny that to get the coverage that they are looking for, FTTC is the fastest we can go to get to a higher product up to 24Mbit/s, but I think it is leaving the UK short of where it needs to be and where it can be and that's the hole that we're looking to fill.
FTTC is the way to go if you want to make the most of the networks that exist. But I think it's an awful lot of money to spend to upgrade an existing network that will essentially be too slow in just a number of years from now.
BT's Openreach wing, whose engineers had to be re-skilled to help roll out the telco's new fibre technology, has carried out a number of FTTP pilots and is slowly starting to charge rival ISPs on a wholesale basis for use of the service.
Around 2.5 million premises will have that technology by 2014 as part of BT's £2.5bn investment in its cabling infrastructure. But its FTTC product is much more prevalent throughout the land.
Tobak says: "Openreach has talked about FTTP pilots and it has talked about FTTP by demand. Essentially what it is saying is people who really want it can pay for it because 'We don't really want to spend the money to kit everyone out'. What BT ends up doing with that and how that installation cost gets borne between them – whether its Openreach or the ISP or the end user – is hard to say and I think part of what [BT] is doing is trying to gauge demand."
Hyperoptic does, however, need a little bit of help from BT.
The MIT economics grad explains: "We do use as the backbone to our service one of Openreach's business products. We're not reselling its FTTP or FTTC solutions, but there are a number of people that offer fibre products and as it turns out, for the places that we're trying to go now here in London, Openreach has the best product to suit our needs. We do use other providers' fibre products too."
Recently, a minor scuffle between BT and the NIMBYs of Kensington & Chelsea led to the company having to withdraw its plans to plonk 108 fibre optic cabling cabinets on the streets of the Royal Borough.
Fibre-to-the-Cabinet is the way to go if you want to make the most of the networks that exist. But I think it's an awful lot of money to spend to upgrade an existing network that will essentially be too slow in just a number of years from now.
Tobak reckons BT was being defensive about its FTTC biz strategy.
Our tech is done without cabinets, Virgin Media – to the extent that it exists – is done without cabinets and BT is using cabinets and using the existing infrastructure because it's the cheapest way to do it, there's no question about that.
BT is trying to vilify Kensington & Chelsea for them not wanting to spend money to put things underground. Come 20 years from now there won't be any cabinets because FTTP will be offered. Period. BT is asking K&C to accept an interim solution because it is cheaper for them and K&C are, quite reasonably, saying 'no'.
Interestingly, Hyperoptic is offering what is effectively a large office network setup within residential flats and council estates and so on for typically 100 or more different customers living in the same building.
In January, BT stepped into the same game by announcing an FTTP trial for the company to test pushing "superfast" broadband into apartment blocks. It wants around 1,000 buildings to play with.
Hyperoptic, meanwhile, is not offering point-to-point fibre, but is instead typically installing kit in the basements of these dwellings with switches added to service the building. CAT5e cabling is then run to individual flats with neighbours sharing a leased line.
"Each customer is essentially on their own VPN so they are shielded from each other. There are no security issues," Tobak insists.
Customers are then given quite chunky-looking routers made in Taiwan and distributed via Sweden. The kit is quite big, Tobak says, to help push processing power to 940mbit/s-950mbit/s throughput.
But what of the thorny issue of government investment in broadband for smaller telcos in the UK?
The difficulty frankly is that many of these funds have conditions assigned to them. Some of the other smaller players are having problems with them too in terms of what you need to put forward to be considered eligible.
We haven't been in the business for three years and we don't have a track record in public sector work.
To a certain extent we do believe that we're best-suited to receive some of this money because we think we can best service a lot of the council estates with the technology we're providing. We are talking to partners to see if there are potential ways of us engaging in this process, but it isn't easy.
Hyperoptic, which has a workforce of just 24 people, has plans to bring its network to more cities across the UK. Tobak expects to see a full rollout in 2013, but she remains tight-lipped about which urban area will be pinpointed by the company next.
Currently, the ISP has just five buildings in the capital with "live" Hyperoptic broadband networks.
"We'd like to be in 100 buildings by the end of the year. And, by the end of 2017, we'd like to be in 2,500 buildings that are a variety of sizes."
But could history repeat itself with Tobak and Ivanovic selling Hyperoptic to the highest bidder?
"We really want to do this right," Tobak tells me. "Right now our intention is to service as many customers as we can. If the future includes working with a larger party to be able to spread that tech further afield, then so be it. But right now we're happy to get on with the work we're doing." ®