Meeting the challenges of the telecoms market
Back in 2002, market liberalisation allowed competition in the Jersey telecoms market and Cable and Wireless-owned Sure became a player, before they sold the business to Batelco in 2013. Sure now has around a 30% share of the mobile market in Jersey, and for the fixed line/traditional telephone, about 33-34%, along with the dominant player, JT, and the other competitor, Airtel Vodafone. Gwyn Garfield-Bennett went to meet Graham Hughes, the CEO of Sure in Jersey, to see where the business is now.
GGB: Starting with the consumer side, there’s obviously lots going on in the mobile market with 5G coming.
GH: Jersey is very well served in 4G. It’s one of the rare jurisdictions that has near 100% geographic coverage. 5G is going to bring enhancements to the delivery of high-speed mobile services, but it’s still a very early technology. What we’re seeing is those jurisdictions that are launching early versions of 5G aren’t really seeing it as a great differentiator – the evolution of 5G comes with the more exciting next levels of release, which is going to sort the latency and bring the Internet of Things.
The other developments are in the fixed market, where we are trying to exploit and capitalise on the fibre to the home deployment JT have completed. That’s an asset that was paid for by the Jersey taxpayer. So we’ve been working with JT and the regulator to ensure that we can maximise the value of that asset, and that’s really around ensuring that there is fair, transparent and accurate access to that asset, and we’re having some good productive discussions.
GGB: There’s obviously rivalry between yourself and JT but you must also appreciate that they have put a lot of effort into the infrastructure which you’re benefiting from.
GH: JT is a 100% government-owned entity. So it’s owned by us, the taxpayer. That investment has been made by us all. JT are the custodian of it, and they are required under licence to allow others to access it. I think it’s fair to say historically, we’ve been challenged in getting that equitable access. We’ve not been stopped from using it, but the price that we are paying to access it, we believe can be improved. And that’s for the benefit of the consumer.
So we are saying to JT and the regulator, we believe that by further reforming the access to that network, both commercially and in the technology, will better serve the consumer by having differentiated services. And what I mean by differentiated services is not necessarily having to take the highest-speed service at a cost of ‘x’. But perhaps having a lower-speed service for people that don’t necessarily spend a lot of time at home streaming data, but need a reliable broadband service.
GGB: How much of your profit comes from the consumer side and how much from business or enterprise?
GH: In Jersey, in terms of revenue, we are probably about 60% consumer, 40% enterprise. But we are gradually seeing that shift, not because our consumer business is shrinking – our business is still growing – but we’re seeing the enterprise portfolio growing a lot faster. And that’s only to be expected in an island of 105,000 where at the consumer level we’re all seeking to access what is effectively a fixed population sitting on a rock. With our enterprise business, we’re seeing a lot of growth through not only securing new customers, but working with our existing customers as they grow internationally. And also bringing in business into our data centres from businesses that have very little connection with the Channel Islands. So we have over 120 customers from the Caribbean region – BVI, Cayman and the like – that host their data here principally for weather-event protection. But more recently, and quite rightly, because Jersey is seen as a secure place to put your data.
What we will see over the next three to five years, or maybe quicker, is that balance swing. Probably to 60/40 the other way.
GGB: I guess the fixed-line market must be dying?
GH: It is. Most people just take the traditional landline to receive the broadband. We believe that we should be able to shape the market where customers that just want a broadband service can access it without getting the landline. But you’re right, we’re seeing the trends now, especially with some of the younger population, that they’ll move into a property and they won’t even take a landline or a fixed broadband – their whole life is run off mobile.
GGB:Are you finding that your revenues are going down because of WhatsApp and Skype?
GH: Absolutely. We’re often asked, who are your competitors? It’s so easy to say the other telcos. It’s not. It’s the over-the-top providers. So that’s Facebook; it’s WhatsApp. Of course, we carry the transport mechanism. So the customer is paying for data, whether it’s through a data package or pay-as-you-go, but absolutely, we’re seeing those revenues decline. And that’s a real challenge, because customers are continually asking for more data. They want access to the latest technology, 5G, but revenues are declining.
GGB: So is the consumer market getting less attractive?
GH: Less attractive is not the right definition. It’s becoming harder and more challenging. And I think that goes back to Jersey having three mobile networks – that’s three network costs. So our investment in Jersey for 4G was about £7million. So on the assumption that JT and Airtel also invested the same amount, give or take, that’s £21million invested in Jersey. Now, regardless of which network you’re a customer of, you’re only the beneficiary of £7million of that investment – the other £14million is out there being used by somebody else. So wouldn’t it be better if we took a view – and these numbers aren’t coming from any work we’ve done so far – but let’s say hypothetically, we would invest £10million, all of us in a single top-class 5G network that we’re all the beneficiary of. So that means our network costs will come down, because our investment in that would be just £3½million, not £7million. So, therefore, it would allow us to provide a service that is top class, but also reduce the costs, which means we can provide a better retail proposition. The technology is now so standard that it’s pointless, in some respects, competing at the network level.
GGB: My understanding is JT don’t want to share and want to do their own thing.
GH: We don’t know. The common-sense approach is that we agree a strategy that allows an investment in a single architecture. We can debate how that architecture is owned and run – there are models all over the world where competitors have come together and run a network but at the retail level they’re fighting on the High Street.
I think it’s a folly to think that we all need to build our own networks again because that will be quite difficult to justify to shareholders because we’ve currently got excellent 4G coverage.
We want to bring the technology here. We’re doing a pilot, looking at putting one, possibly two sites in Jersey, and that will allow us collectively to understand how 5G will actually benefit us.
I have to have a compelling case to go to my shareholder and say I want to have X million now so I can put 5G in, effectively making my 4G partly redundant, because you then have two superfast networks.
GGB: Would you work with just Airtel?
GH: We’d work with anybody. I think that all of the permutations are possible.
I guess the other challenge potentially with 5G, is it’s seen as a potential cannibaliser of the fibre network. Some younger customers, are not wanting to take fixed services, and if it’s not used, then it’s not returning any investment to the people that paid to put it in. So that’s another reason we are keen to work with JT and the regulator to at least get more out of that asset.
GGB: Do you regret choosing Huawei as partners?
GH: No, not at all. We went into a very rigorous vendor selection process for 4G and we worked closely with the cybersecurity authorities in the UK. Our 5G pilot will be run with Huawei because they’re an existing vendor, but we are in an engagement process with a number of international vendors now to understand what capability they have in 5G.
GGB: So it may not be Huawei who support your 5G?
GH: We have made no decision yet on that.
GGB: Looking at enterprise, Foreshore was a big acquisition.
GH: Our business in Guernsey has a strong history around working in the data centre space, and that was principally derived from the eGaming business that Guernsey and Alderney successfully developed in the very late 90s. At one stage Guernsey hosted over half of the world’s international eGaming business.
So that gave us a very good understanding of that market, and the potential of that market. We saw the opportunity of acquiring Foreshore, which was the Jersey data centre business in 2014.
GGB: What’s the future of data centres?
GH: When data centres first started, customers would come in and say, ‘I want to take four racks’ or whatever, and ‘I just want to put my stuff there, and you power it, you cool it and you give it some external connectivity’. That sort of co-location model still exists, but we only have one customer in there that I would say is now doing that.
You’ve then got the next evolution. Customers came in and said, ‘We want some space there, but we want you to put the racks in and manage the equipment for us’. Then along comes the cloud and a customer wants an area of virtual storage that is solely dedicated to them. And those clouds are becoming more prevalent, where we see, for example, that the buildings that have gone up in the IFC, there’s no data centre capability in there. In the early days nearly every bank and trust company had their own. These new buildings are being built, not to host technology but to host people. And that technology, moves to a back office, to up here.
GGB: You have restricted space here. Are you wanting to expand?
GH: What we’re seeing, and it is fortuitous, is as we’re growing our customer base the technology is shrinking. So we’re about 70% full. If somebody came along and said we needed to put 500 racks in your data centre, we couldn’t accommodate it right now, but we have planning permission for converting the office. So my worst problem is that we just find an office for 72 staff.
GGB: So what are your challenges?
GH: The biggest challenge I see today is skills. And that’s getting people of the right calibre. That’s not just technical skills, it’s skills across the business. We’re working very closely with Digital Jersey but we’ve also taken ownership ourselves. So we’ve run successfully now for the past five years a Sure Academy scheme, where we take two youngsters in every year and put them through a programme of rotations within the business. We’ve seen ten go through the programme now and nine are in the business. We’ve also just launched the STEM bursary targeted at females because we’re recognising that there are ladies that want to go into technology, who perhaps need a bit of help to do that.
GGB: What’s the relationship with Guernsey and how is that working?
GH: Our business in Guernsey has 190 staff and is the incumbent business. Batelco owns and manages all infrastructure as JT do here – the roles are reversed.
It’s very much seen on paper as the headquarters, but one of the things that we took a conscious decision three or four years ago – and this includes the Isle of Man – is that when we identify roles where geographic location is not the key issue, we would rather get the best candidates than take them because they just happen to be in Guernsey or the Isle of Man or even Jersey. So as a consequence, that’s seen some of Jersey’s growth – 75% of the people in this business, including myself, are doing jobs across the patch.
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