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May 17, 2021

Rural Broadband Connectivity: A Blended Approach

The following transcript has been edited for length and readability. Listen to the entire discussion here on The Broadband Bunch

This episode features the CEO of Voneus, Steve Leighton. Voneus takes a different approach when serving its customer base. Instead of taking a fiber first approach, they build in stages. First with fixed wireless and then after they have built up a sufficient customer base, they convert to fiber. Is this the way to bring fiber to smaller rural communities? Topics discussed include:

  • Targeting High-Speed Broadband to Thousands of Homes
  • Broadband Connectivity
  • Rural Broadband
  • Transformational Broadband Connectivity  
  • Broadband Fixed Wireless to Start
  • Fiber Broadband City VS Rural
  • Broadband Company Putting the Customer First
  • Bringing Broadband Connectivity to over 150 Communities
  • Fiber Broadband Projects
  • Broadband Connectivity as the Fourth Utility
  • Broadband Gigabit Connectivity 

Craig Corbin:

Welcome to The Broadband Bunch, a podcast about broadband and how it impacts all of us. The Broadband Bunch, as always, is sponsored by ETI software.

Craig Corbin:

Hello everyone, and welcome to another edition of The Broadband Bunch. I’m Craig Corbin. Thanks so much for joining us. Access to broadband service is a hit-or-miss proposition for many in rural communities around the world. The reality of that digital divide has never been more apparent, illuminated by a seemingly exponential increase in the need for distance learning, telehealth, and remote work brought on by a global pandemic. Now, a growing number of providers are focusing their efforts on bringing connectivity to those who’ve been left behind in the world of internet access. One such provider is making a huge difference for residents and businesses in the United Kingdom.

Craig Corbin:

Voneus utilizes cutting-edge, fixed wireless access technology to target upwards of 900,000 homes across the UK countryside still without high-speed broadband services. Our guest today has more than two decades of experience in telecommunications and serves on the board of ISPA, the Internet Service Providers Association. It’s a pleasure to introduce the chief executive officer of Voneus, Steve Leighton. Steve, welcome to The Broadband Bunch.

Steve:

Thanks, Craig. Really good to be here. Nice to meet you.

Targeting High-Speed Broadband to Thousands of Homes 

Craig Corbin:

It is great to visit with you today and learn more about what’s going on at Voneus. But before we get to that, if you would, please give our listeners who might not be familiar with you a bit of your background in the world of telecommunications.

Steve:

I got the telecoms bug, I guess in the late nineties. I was working in the UK government at the time. I had a very high profile, role, which had the very grand title of head of communication sponsorship and regulatory policy within the old department of trade and industry. In that role, I was working with all of the major telecoms players in the world. On one side, I was regulating the providers to make sure that they always acted in the public interests. But on the other side, I was encouraging the manufacturers, the kit manufacturers, the equipment manufacturers to bring core R and D competence, and other skills into the UK. So, it was a really interesting role. At that point, I got the bug. And I actually left government in the year 2000 to start my own telecoms company.

Steve:

I went from a very plush office with lots of staff, to me and a laptop and a mobile phone with a rented desk above a tube station, as many entrepreneurs will no doubt tell you. And that business grew quite quickly. It was a business called Keycom. We targeted a niche, which was the university sector in the UK. And we grew that business to upwards of 4 million pounds of revenue and 80 odd staff in a very short period of time, about two and a half years. Since then, I’ve been active in a number of communications and in online businesses. I’ve dabbled in the online marketing space. I’ve dabbled in the reverse search space with varying degrees of success. hen, I launched this company, Voneus, as a pure technology company actually, about eight years ago now. And we wanted to disrupt the VOIP markets, the voiceover IP market.

Steve:

You guys are probably familiar with this market, but it still… Well, it was then, and probably still is heavily populated by some fairly chunky names, people like Cisco and Martell and ShoreTel and Avaya. And all these guys offered a homogenized end-to-end solution that, whilst very efficient, was also very expensive. At the time, it seemed to a colleague and myself, who were looking to set this business up, that there was a gap in the market for a small player, somebody who could create a VOIP ecosystem that would benefit and users irrespective of size, scale, or location.

Broadband Connectivity

Steve:

So, that was the birth of Voneus. And we started off by putting together a software stack that would VOIPify, if that’s even a real word, any connection, whether it be ADSL, ISDN, PBX, or even mobile. It took us a couple of years to get that software where we wanted it, with the help of some very good, but very expensive developers.

Steve:

Our original plan was to stick that software on the kit of the main hardware manufacturers that I’ve already listed, and then get them to license our product, and then sell the company after a couple of years, and sail away to our respective does islands having made our money. We then, however, have a fairly significant problem, because our software wouldn’t work on their hardware, because their chipsets weren’t big enough or sophisticated enough to handle the complexities of our software. As much as these big guys might’ve liked what we were doing, they weren’t about to change their designs to accommodate us.

Steve:

We then took a decision to build our own hardware. And then, once we got hardware where we wanted it, and it was all working, we found that all the people that wanted our service, that wanted to take our VOIP solution, certainly a lot of them, were in rural areas with poor connectivity. And one thing you need, if you want to have a workable VoIP solution, is good connectivity. Right?

Steve:

We started to do the connectivity piece as well.

Rural Broadband

Craig Corbin:

You mentioned the target audience being those in the countryside, the more rural consumers. If I have it right, roughly 5% of homes in the UK have what would be considered robust infrastructure for high-speed broadband connectivity, a VoIP service part of the residential offerings from Voneus. And you also have mesh wifi solutions for broadband. Talk about that, Steve, if you would.

Steve:

Well, as I mentioned, we found that the people who wanted our VoIP solution were in areas with poor connectivity. We knew we have the expertise in the business to supply that connectivity piece. The UK is a strange country in many ways. But certainly, when it comes to internet provision, there are huge chunks of the UK that are left behind. You mentioned, in your introduction, the digital divide. And that’s a real issue here in the UK. And you’re absolutely right. During the pandemic, people who live in rural areas have been effectively told to stay at home. And that really then highlighted the paucity of their internet connection, because they were being forced to work from home, learn from home, shop from home, and be entertained at home.

Steve:

And essentially, in most of the UK, most of the UK is rural areas. Their connectivity piece wasn’t strong enough to cope with those demands. And the UK, as you’re probably well aware, is a long, long way behind most of Europe in terms of fiber connectivity, gigabit-capable connectivity.

Steve:

So, there’s a massive market for us to target. We focus exclusively on rural and semi-rural areas. That’s our bread and butter. And there are probably still in the UK… There are 30 million homes in the UK, 24 million of those homes don’t yet have some kind of gigabit-capable connection. And probably a good chunk of those, a couple of million of those 24 million, are in rural and semi-rural locations. So, that’s the market we are targeting as a business. We do that initially through a fixed wireless access solution. So, the reason we adopt that approach is that fixed wireless access is quite quick to deploy. It’s relatively easy to design. It’s relatively quick to build. And it’s then relatively quick to connect people to that solution once it’s in place.

Transformational Broadband Connectivity  

Steve:

Aesthetically, it’s quite neat in the environment. You’re not putting up heavyweight mass, and large chunk chunky infrastructure. You’re building stuff that, in many areas, is barely visible, but delivers a connection to these communities that is transformational and gives them a lifeline currently. And I was looking at the market in the UK a couple of years ago. It appeared to me that we were purely fixed wireless access at that point. But I wanted us to get into gigabit connectivity as a business. I wanted to take fiber to these rural areas, or at least some kind of gigabit connection fiber, wherever possible. And I was looking around the market, and they’re certainly appeared to be a lot of money around.

Steve:

The infrastructure funds were splashing the cash and investing in some interesting projects, but there did appear to be a man with a van and a fiber plan on every street corner in the UK. And they were all raising silly amounts of money, 200 million pounds for this, 300 million pounds for this, 400 million pounds for this. And they all had one thing in common. They were largely building speculative fiber. And what I mean by that is they were adopting the old Kevin Costner line of “If you build it, they will come.”

Steve:

And they were spending a huge amount of money on an asset being fiber, sticking lots of fiber in the ground, but with no immediate intention of trying to get customers to come onto it. And I think one of the other alarming statistics about the UK market even today is that, although we’re now starting to build fiber, and as I mentioned, 6 million homes in the UK now have access to a gigabit-capable connection, most of which is fiber, only a quarter of those homes have actually taken it as a service. So three-quarters of the people in the UK with fiber outside their front door aren’t taking it.

Broadband Fixed Wireless to Start

Steve:

And there are probably a number of reasons for that relating to cost, and also because most of those people are in urban areas, of course, where their service is probably okay. They’re probably surviving and coping with the connection that they’ve got. And therefore don’t want to spend more on an upgraded fiber connection because they actually don’t feel like they need it. They’re not munching through enough bandwidth to be able to justify the upgrade and the additional expense. So, we wanted to target the rural areas. And we already had good numbers of customers out there. So instead of saying, “If you build it, they will come,” we were very much saying, “Well, they’re already here, so let’s build it.”

Steve:

We use our fixed wireless access products as beachhead products. We build fixed wireless access or call it a Trojan horse. We build it to get people online in these rural communities really quickly. Then, when they’re online, we just find that everybody wants it. Once we build a network in a community, within six months, we’ve got 65, 70% take-up in that community. These are relatively small communities. Our average community is about 200 homes. So, they’re genuinely small rural communities. But we get 150 of those properties on our network within six months of going live in a community.

Craig Corbin:

That, to me Steve, is the beauty of your approach with regard to establishing the consumer base, and then transitioning to the more fiber-centric approach. It absolutely makes so much sense.

Fiber Broadband City VS Rural

Steve:

Well, it does from my perspective, and it does from the perspective of our investors as well, because rural fiber is much more expensive than urban fiber. Okay. Your cost per prem is passed in rural areas. Is a factor of five more expensive than if you’re building in a city where all the properties are right next to each other, and you’ve got MDUs, multi-dwelling units, apartment blocks, et cetera, that you can easily run a single fiber too? We mitigate the risk associated with that increased investment by doing two things. One is that we’ve already got the customer. So, when you build a fiber network, you’ve immediately got revenue coming from it. So, you’ve already got customers you can connect with. And we switch off our fixed wireless access network and move all of the customers across to fiber, but they pay no extra. So, we migrate them to a better product, a faster product, a more robust product, and it makes no difference to their wallet at all.

Steve:

They stay exactly where they were in terms of cost. And the other thing is that the UK government over here has a scheme called the rural gigabit voucher scheme. And they offer companies like Voneus a grant towards the cost of connecting a rural home. And that can be quite a generous grant. It could be as much as 1500 pounds, or just over $2,000, I think, in your money, for every home that we connect. And because we already have good numbers of customers, we know that we can immediately connect lots of homes. So, we secure those vouchers and we get the customer.

Broadband Company Putting the Customer First

Steve:

And that makes investing in rural fiber in the UK, from our perspective, sustainable. So, although we build infrastructure, Craig, we don’t call ourselves an infrastructure company. We call ourselves a customer acquisition company because securing a customer and giving our customers a fantastic experience is at the heart of everything that we do. We are all about the customer.

Craig Corbin:

You’re listening to The Broadband Bunch, brought to you by utopia fiber, by DX tail, and by ETI software solutions. Our guest today, Steve Leighton, chief executive officer of Voneus.

Craig Corbin:

Steve, the motto “Fast, rural broadband delivered” you’re making good on that promise and changing lives across the board, and I know both for residential customers and for businesses. If you would talk about how you’ve made a difference from the business customers’ standpoint.

Steve:

There are a number of points to make on that. It’s a really good question. So historically, in the UK, and you may have even seen this in the states, what you get in the UK is companies start in rural areas. And then, when they get to a certain size, they head for the city. And they head for the cities or the larger towns because they need connectivity and they want to secure good talent. And getting talent to travel to a location that isn’t easy to get to can be a challenge. But of course, one thing that the pandemic has done is it’s forced businesses to go the other way. So certainly, here in the UK, there’s a lot of empty office space in a lot of our larger towns and cities right now. People are being encouraged to work from home. And in fact, those rural businesses that would have normally made the transition from rural to town are now actually staying in rural, and growing in rural areas. And we’re helping them.

Steve:

There are lots of business parks popping up in the UK on farmland, for example. So, farmers are quite an entrepreneurial bunch of people. And if they’ve got land that they’re not using for livestock or for arable purposes, then they’re very happy to build a small industrial estate on that land, and secure tenants to come and rent some space from them, rent warehouse space, or office space, or a combination of both. And in fact, we have an office in rural Oxfordshire, a Voneus engineering center in rural Oxfordshire, with exactly that kind of arrangement. We pay a landowner for rent to have this property on his land. And one of the things we do for him and his other tenants is provided connectivity to that entire business park.

Steve:

We’re encouraging people to stay in rural areas, which of course is beneficial for the rural economy, beneficial for rural employment. But more importantly, it gives these businesses the opportunity to perform, from an online perspective, as well as their city and town-paced counterparts. So, we’re certainly doing our bit to encourage businesses to expand and grow whilst not necessarily giving up their rural ways.

Craig Corbin:

And given the need for having connectivity, both from the remote work standpoint, telehealth, that sort of thing, it would seem that what Voneus is bringing into reality for rural UK residents and companies has to be a phenomenal change in the day to day lives. And that’s something that is hard to put a price tag on.

Bringing Broadband Connectivity to over 150 Communities

Craig Corbin:

Because for many of those communities, part of the equation is their long-term economic viability. I know you’ve already begun service to dozens and dozens of communities such as Lancashire, Yorkshire, Cotswold, and Devin. Are there any others that would be on the map for expansion in the near future for Voneus?

Steve:

Yeah. I’ll just give you some basic data. We’re actually live in almost 150 communities across the UK, and that doesn’t include our business proposition.

Steve:

We have a B2B side of the business, which is active in more areas than that. But expansion is very much on our agenda. Now, we secured some fairly significant funding 18 months ago to roll out this FWA to fiber plan. But what we found when we did our first few fiber pilots is that your fiber footprint is bigger than your fixed wireless access footprint. Fixed wireless access, as you guys are probably well aware, is a line of sight technology. You’ve got to have a clear line of sight between a receiver on somebody’s property and the sector antenna that they’re pointing at. That’s how we deliver the service to them. And then, from that sector, antenna to the radio, there has to be a connection.

Fiber Broadband Projects

Steve:

And from the radio back to the fiber backhaul point, there’s a microwave connection. So, it’s all about things being able to see each other. Fiber is not the same. Okay? You don’t necessarily need that with fiber. So, going back to my beachhead point, when we built our fiber pilots, we took our best-performing fixed wireless access sites, including two that had 90% penetration in them. And we built fiber into those sites. Now, to get the fiber there, we brought it on a journey from the nearest exchange, the nearest fiber back core point. And on that journey, we were able to go through additional communities that weren’t on the grid, that weren’t on the broadband map.

Steve:

Our fixed wireless access footprint of 300 homes suddenly becomes a fiber footprint of 900 homes, because of the journey the fiber takes to get there. You’re expanding the reach of your network, and you’re expanding your customer base as a part of that process. What we’re now looking at doing is taking that 900 homes, as an example, and building out from there using the hub and spoke model. So, we’ve got fiber projects in design right now, and we’ll be starting to build these sites in the next few weeks that are as big as six and a half, 7,000 homes in single build installments.

Steve:

So, we’re very much about using fixed wireless access as a beachhead, converting that beachhead to fiber, but expanding the fiber while we do that. Because we’re finding that areas we couldn’t reach with fixed wireless access, from our beachhead fixed wireless access locations, we can reach when we take fiber into those communities. We’re maximizing the impact of our fiber footprint by building out from those core sites.

Craig Corbin:

You made mention a moment ago, Steve, of the investment. And if memory serves, I believe it was Macquarie Capital that made a substantial commitment to Voneus. If you would, talk about how that will speed the process for just what you’ve shared regarding the transition, both to fiber and hybrid situations, as well as speeding the addition of other communities to be served by the wireless model.

Steve:

In this market, more than any other market, money allows you to go faster. We’ve got a great business model. We’ve got a proven business model. The FWA to fiber conversion model just works. It’s for a sustainable investment model in rural areas. But investors are Macquarie Capital. That’s the infrastructure part of Macquarie that’s invested in us. And they’re keen for us to extend our footprint. And of course, by extending our footprint, we’re including many more communities in the build. And that effectively gives us a far stronger reach but allows us importantly to go much quicker. We’ve got an advisor on our board. He worked for City Fiber. And they’re a fairly large company here in the UK, a real competitor to BT in the urban areas.

Broadband Connectivity as the 4th Utility

Steve:

And City Fiber was successful because they did something really interesting. They went quickly. They built quickly. They had some ambitious plans They raised the money to support those plans. And they built a lot of fiber in a lot of places, really quickly. Organically, Voneus grew by building a site, making money, then building a site, then making money, then building a site. What we’re doing now is we’ve got several sites in planning at the same time. So, it just allows us to go quicker and grab more of the market out there. But more importantly than grabbing the market, it gives us the opportunity to transform the lives of the people in those communities. Connectivity is the fourth utility now. It’s a basic human right.

Steve:

It’s up there with gas, electricity, and water. You can’t survive without it. We’re taking it into these areas. And a lot of the UK, in the rural areas, they’re still getting speeds of less than two megabits per second. And there are several million properties in the UK still getting speeds of 15 or 20 or less.

Steve:

Now, that’s not workable when you start looking at what bandwidth people need just to be able to perform their day-to-day activities. And that’s without entertainment, et cetera. I always talk about Netflix. Five, six, seven years ago, whenever it was, Netflix was a DVD delivery business, right? They used to stick DVDs through people’s doors. And you’d watch them and send them back. Now, Netflix is in every home in the bloody UK. It’s everywhere. Everyone has got Netflix. And Netflix is a relatively bandwidth-heavy product. If you want to watch it in HD and you want to get the full impact of that subscription, then you need good connectivity. Fine if you’re living in a city in the UK, although some of the cities still have poor service here. But if you’re living in rural areas, most of our customers couldn’t even access Netflix before we came along.

Steve:

They couldn’t access Spotify. They couldn’t make wifi calls. They haven’t got a mobile signal. This is the other complication in the rural UK. The mobile coverage is very poor as well. So, it’s not even as though they could hotspot off a decent mobile and get connectivity that way. They’ve got nothing. They’re effectively cut off from the rest of the world. And of course, we ride in and say, “We’re going to change that for you.” And that’s our motto. That’s our mantra. We love our customers and we transform our customers’ lives.

Craig Corbin:

That, to me, is the key. You made use of the word transformational because you’re transforming lives for your residential customers, for your business customers. And I believe that is a huge difference in the approach Voneus has. You touched on it earlier from the perception from the world of investment, which is consumed with homes past versus the approach from Voneus of homes connected.

Craig Corbin:

And one thing we always like to ask our guests is the back to the future question. If you could hop in the DeLorean, go back to some point in time, and whisper some bit of advice to yourself that might change the development of your company, what would that be?

Broadband Gigabit Connectivity 

Steve:

That’s a great question. And I think the answer from my perspective would be we wouldn’t have done the technology piece. We wouldn’t have been through the VoIP journey. We spent four years developing the VoIP software and hardware, only to then find that the guys who wanted that solution were in areas with poor connectivity. If I had my time with Voneus again, I would go straight into the connectivity speed piece.

Steve:

And I would target specifically, as we have done, those rural areas. But I’d be more ambitious with our plans. So, I would probably have looked to raise bigger money earlier to service our plans. And I would certainly have looked to deliver gigabit connectivity to these rural areas sooner than we have done.

Craig Corbin:

It’s obvious, Steve, that you have a passion for service to the community. You’re to be congratulated on the tremendous success of what Voneus has achieved. I am curious about asking what you see in the future with what is yet to come and what Voneus will accomplish.

Steve:

Well, I think from, our perspective, we’ve got a very clear plan for what we want to achieve over the next three to five years. We want to be the number one rural provider of gigabit connectivity in the UK. And we’re well on our way to achieving that. We want to give our shareholders and our investors a fantastic return on their investment, and to reward the faith that they’ve shown in us as a developing business. And we’re well on the road to achieving that. But I think the main objective for me is to make sure that the digital divide does not exist. Your postcode, or zip code, as you would say, should not be an indicator of your level of connectivity. And in too many parts of the UK, it is. And too many parts of the UK are still struggling with very, very poor connectivity.

Steve:

And we won’t solve that problem in five years, but we’ll certainly be a long way towards solving that problem. And we’re going to play our part in that, to make that happen. I want that digital divide to disappear. Once that’s disappeared and everyone’s got… as everyone has access to electricity, right? Everyone has access to gas. Everyone has access to running water. But not much of the country has access to gigabit connectivity. And as I mentioned earlier, it’s the fourth utility. And until everyone can access it, we’re not going to be happy within this business. That’s our mission.

Craig Corbin:

And Steve, that message and that mission is true no matter where in the world you go.

Craig Corbin:

So glad to see what you’re doing, the commitment. And thanks so much, Steve, for your time. We can’t wait to visit again, to check in on the future successes at Voneus.

Steve:

It’s been a real pleasure. And if you ever come over here, we’ll stick you in a minibus and take you around some of our sites. And you can meet our customers and ask them yourselves what a difference we’ve made to their lives.

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