When Hyperoptic became the first company to offer 1000mbps download speeds in the UK, not everyone was able to see the immediate benefits. Some customers had no need for faster internet, others simply just didn’t understand the technology. BT’s Openreach was positively dismissive.
‘Openreach kept saying that no one needed more than 24mbps and that they had proven that in their lab,’ says Dana Tobak, Hyperoptic MD and cofounder. ‘So from a business model perspective we didn't know if anyone would be interested in full fibre.’
HYPEROPTIC IN BRIEF
Turnover: £16.6 million (2017)
Luckily at least some people were. Fast forward seven years, and Hyperoptic now delivers the UK’s fastest broadband speeds to 500,000 homes and businesses in 29 towns and cities around the UK - and its reach is about to get bigger.
In August 2018 the company announced it had raised £250 million in debt from eight banks to extend its network to 50 towns and cities around the country. Its ambition is reach two million homes by 2022 and five million homes by 2025.
A European model
The company was set up by university friends Dana Tobak and Boris Ivanovic.The pair had previously founded the broadband provider BE Unlimited, which was eventually sold to O2 in 2005.
They were motivated by the ‘momentum’ in the market towards part-fibre broadband and an appreciation that eventually consumers were going to want a faster speeds.
Hyperoptic provides what is called a fibre-to-the-premises model (FTTP) whereby it installs its own infrastructure within the customer’s home or business. This is different to the ‘part fibre’ or fibre-to-the-cabinet (FTTC) option offered by the majority of UK providers where the supplier plugs into a central cabinet - run by Openreach - and the broadband is taken to the property via Victorian copper wires.
‘Rather than being technologists, what we did was find a technology that was emerging and found a new use case for it,' says Tobak. Prior to founding BE, Ivanovic had been working for a Swedish company using FTTP and the method is commonly used in other parts of Europe, but hadn’t previously been employed in the UK.
Hyperoptic installs its own infrastructure
The company's first site was in a Wandsworth apartment block called Price’s Court, which turned out to be rather fortunate. The block is located immediately next to the Thames and as wifi signals travel further over water, residents living around and across the river started to see the company’s SSID address, which was named Hyperoptic1GB as a way of attracting curious customers.
The company was reliant on ‘early adopters’ as a way to gain momentum and spent the next two years growing its presence in London. By 2013 it was ready to expand.
After receiving £50 million of private equity funding from the George Soros backed Quantum Strategy Partners, Hyperoptic extended its services to Bristol, Cardiff, Leeds, Liverpool, Manchester and Reading.
After further investment the company currently serves 29 cities and towns around the UK, and employs 600 people across offices in London, Belgrade, Manchester and Reading. The most recent round of funding is expected to double the company's headcount by the end of 2019.
90% of Hyperoptic's sales are to residential properties and the over the last few years it has targeted working with developers to install superfast fibre into new builds.
Economies of scale
Over the last few years the UK has started to wake up to the full benefits of full fibre, albeit somewhat sluggishly according to some. In July 2018 the UK government announced its Future Telecom Infrastructure Review, in which it aims to roll out superfast broadband to 15 million properties by 2025.
Hyperoptic is not the only company offering full-fibre solutions with plans to expand. Tobak says it is its focus on residential homes that sets it apart from the Goldman Sachs backed CityFibre and the Prudential backed Gigaclear - the latter of which focuses on rural areas.
But how has the company found competition with telco giants like SKY, BT, Virgin and TALKTALK, who have increasingly focused their efforts to improve the fibre offering? Has its size held it back?
‘The one benefit that the larger companies have is efficiency at doing national marketing, but the thing that works well for us is that we have both the ability and the interest in serving customers as people,' says Tobak, who explains she deals personally with some customer complaints and that most of the staff on the company’s Belgrade based customer services desk have masters degrees and speak multiple languages. Belgrade was chosen because it gave the company access to talent, it also happened to be Ivanovic’s hometown.
The company's ‘industry leading’ Trustpilot rating seems to back this up, but as Tobak admits it’s easier to maintain as a smaller company - whether this will be the case as Hyperoptic continues to grow its network is yet to be seen.
Whether they will be able to grow it quickly enough, i.e. before the war chest runs out, is also a question yet to be answered.
Rapid expansion is expensive, especially when it involves the capital outlay of building your own infrastructure. A quick scour of Companies House shows that the Hyperoptic’s expansion is burning money: the operating loss for the year ending December 2017 was £13.1 million, which the company attributes to it’s ‘planned expansion strategy’.
Of course it takes investment in order to build. Hyperoptic’s investors clearly believe in the potential for the full fibre business model and with only 3% of the UK currently having access to FTTP, there’s plenty of opportunity.
Header image: Alessandro Farcomeni/Shutterstock
Body image: courtesy of Hyperoptic