New-era metro providers - CWI Roundtable: Metro Networks in London - Panel Discussion - Interview

CommunicationsWeek International, April 1, 2002

A new breed of metropolitan area network service providers are pushing a 'to-building' connectivity model, in the process positioning themselves as utilities in how they propose to manage bandwidth assets. Will it work?

As Europe's biggest and most competitive metropolitan area, London would seem to be a bad market entry point for new network providers. Already Level 3, Telia, Thus, COLT, WorldCom, Energis, Fibernet and BT have network assets, among others. But new utility-backed metropolitan network builders Urband and 51 Degrees are backing a business model which they say will open up a new layer of business users who currently don't have "last-mile" access to the broadband fiber networks already built in the main business districts. If successful, other cities across Europe may see similar competition.

CommunicationsWeek International chaired a roundtable to discuss the new business model with five contenders: Stephen Chivers, operations director, Urband, a joint venture of Thames Water and national telecoms operator 186k; Barry Bullen, sales and marketing director of 51 Degrees, a network subsidiary of electricity utility LE plc; Nigel Pitcher, marketing and communications director at wholesale network services provider Fibernet Group plc; Robert Bratby, director of business development, Colt Telecom, a pan-European business network services provider; Juan Carlos Morales and Mark Blakelock, respectively chief financial officer and director of network design, CityNet International, building networks in Seville and Vienna via the sewers; and Camille Mendler, a director of Yankee Group.

David Molony: Let's start off asking Urband and Fifty-One Degrees as the latest operators to enter the London metro fiber network market: Why, when London already has so many fibre networks run by other operators?

Stephen Chivers: Urband did a lot of initial research looking at the potential market and there was a great demand for a last mile connector, especially for the fiber tails, and [having previously worked for Cable & Wireless and NTL myself] I think we'd probably all agree we've struggled to get that connectivity for the customer. We have access to some forty-five thousand kilometers of Thames Water sewers within the M25 [motorway around London] and that really does give us a competitive advantage. Every building has a sewer connection, so that's terrific for speed of deployment. It's very cost-effective. Currently, it's also a great time to negotiate with vendors.

Are you saying the economics of this is a cost-driven model rather than market-driven?

SC: There's a strong demand for fiber tails. Behind that if you can buy the tails in very cost effective [and] timely manner, that's the niche in the market that we're currently filling. We have funding from both parents, Lattice Group and Thames Water, for [pounds sterling]34 million altogether.

That's what you expect to spend?

SC: Yes. We've gone for a very targeted area, concentrating on the key business areas of London, and, again, we've spent a lot of time looking at customer demographics to make sure that at least 50% of our potential customer base is only fifty meters from our core network.

Roughly how many business users would you expect there to be in the London area?

SC: Somewhere in the region of around eight thousand.

Barry, give us an account of your model. Does it differ very much from Urband's?

Barry Bullen: There are some similar drivers in our case. The major driver is access. I think you're right to point at London and say there's a huge amount of fiber in the ground, and that's certainly true in Docklands, in the City and to a lesser extent the West End. Once you get outside those areas, very quickly you end up getting back to the incumbent if you want to get the tail. I think also it's an interesting time to enter the market. 3G hasn't happened yet, digital subscriber lines haven't happened yet. [The argument is] it's applications not being there that fail to drive the market, or its bandwidth not being there that doesn't allow the applications to be developed. [But] at some point it is going to happen.

What are you spending on your network?

BB: We're still building, but I think we value the build we have planned over the next twelve to eighteen months at about fifteen million pounds. Our plans are more fluid. We're much more about building on demand--and not concentrating particularly heavily on the areas that are already soaked in fiber because you can acquire that.

Nigel Pitcher: Barry, you made an interesting comment saying the drivers for broadband have yet to be realized. I would argue they have actually been there for twenty years, especially where we're talking about business to business. People have wanted to connect local area networks together between their buildings for donkeys' years, and there's a new breed of chaps called application service providers (ASPs), all of whom would have a model if they could get suitable last-mile delivery. Now if these guys' proposition is to take over last-mile services, well outside those three already densely populated areas, then good for them and we should probably be customers of theirs. If the model however is based on interconnectivity between telecoms companies in Docklands, then my heart is with them, absolutely, because it's a toss-up between whether chips are more expensive than fiber or fiber is more expensive than chips at the moment.