Neutral Host Delivers the Value of Openness
Podcast episode 65
Neutral Host helps homes and businesses get connected by allowing CSPs to treat fiber rollout as an operating cost rather than a capital one. In the second part of our two-part special on neutral host, SiFi Networks’ CEO Ben Bawtree-Jobson, talks through the details.
Below is a transcript of this podcast. Some parts have been edited for clarity
Michael Hainsworth: What if the cost of delivering 5G service was lower? As communications service providers struggle with the problem of building bigger pipes to handle the increased speeds and demands of ultra-low latency communications devices, like augmented-reality headsets and autonomous vehicles, there is a solution: openness and neutral hosts. Ben Bawtree-Jobson is the CEO of SiFi, an international fiber-to-the-home network developer that helps CSPs by turning the capital expenditure of a fresh fiber rollout into the operating expenditure of using open networks. The bean counters know this frees up cash to expand elsewhere and avoids the recurring cost of maintenance and upgrades, but while the CSP's CFO knows this, does the CEO? We began our conversation by pointing out: SiFi is not an internet service provider.
BBJ: No, you're quite right, SiFi is a fiber-optic network developer, so we do not provide the end services to customers. What we do is we fund, build and then operate the entirety of the infrastructure that then enables the delivery of service across it. So we are a developer that creates the infrastructure, builds the infrastructure, and then we wholesale that access out to service providers who then provide that customer-facing relationship for your normal, residential or business, internet data connectivity needs.
MH: So then what makes you unique from other neutral host providers, aside from the fact that, until relatively recently, there weren't a lot of you out there?
BBJ: Yeah, well, you sort of took my first part of the answer is that, to start with, we were pretty much the first privately funded open-access or neutral operator in the US, certainly of any scale, until recently. As you point out, there's a few others that are coming into the scene, and to be honest, we don't mind that. For us, it's a little bit of a vindication and a complement to our business model being the right one for the market and for the US. So I guess the main thing that now remains as a big unique is being that farther ahead of the curve, to having more markets operational, which is vital in giving you scale. So one of the big points to being competitive when you're wholesaling out networks, and being able to provide a great solution to service providers, is actually being able to provide scale. And that's something that we have, and are getting in abundance now even further, as we progress throughout this year.
MH: So, you control the end-to-end network. An ISP doesn't need to bring their own equipment in, which I can imagine helps them tremendously on the CapEx side of things. Is this how you define open-access network and neutral hosts? What's the role as well that they play in the future of the industry?
BBJ: Good question. And there's a few different answers in there and one of them sort of speaks a little bit to the USP as well. So what we look at as an infrastructure provider, providing this last-mile fiber-optic network past every single home and business in a city, is: we're not just going out there to be a service provider, as you've already quite rightly pointed out. What that enables us to do is think about a neutral platform that enables dozens of different types of applications and dozens of different types of service providers to be able to access the network.
And for us, that's what the openness is really about; it isn't just about providing competition for internet, it's about creating an infrastructure that is built and architected in the right way from day one, so as to allow for smart city applications, government services and healthcare services to all flow across the same common infrastructure. So you only have to dig once. You don't have to dig in three or four or five or more different fiber-optic networks. It makes no sense when you can have one network that can deliver all the same services across that one infrastructure.
MH: So you talk about smart cities-type technologies, it sounds like the diverse niche products that both yourself and neutral hosts, generally speaking, are capable of providing is a real Industry 4.0, sort of next-generation-society, infrastructure.
BBJ: Yeah, that's exactly right, and by having that neutral host, you don't have a competitor, you don't have the fox watching the hen house, you have a neutral host there, so it enables that ability to foster that environment for other providers to get on there, knowing that there is that neutral environment, that there's going to be fair competition. So it does create not just a new wave of infrastructure but a new wave of free market competition, or certainly the enablement of those environments. Obviously, what the service providers end up doing on that platform and who acquires who, or who wants to develop what types of products to enter which type of market, or market segments within those markets, we leave to them. We don't want to get involved in that. There are organizations and people out there that are on the cutting edge of fantastic innovations to meet customers' requirements, and we're not that piece, we are the putting in that bedrock of a fantastic platform to enable them to succeed.
MH: So if we are going to get security services, telemedicine, standard mobile phone service, as well as all of that smart technology for the next-generation city, tell me about that environment, because corporate culture is critical to the success of openness. Has the CSP community evolved enough to accept and welcome open networking in bringing in partners like this?
BBJ: It historically hasn't, outright, in the last mile. Even though, historically, mid-mile networks, long-haul fiber networks, mobile cell towers, quite freely and readily shared, and that was encouraged and has been adopted by the big corporate players in the industry. But in the last mile, there's been a lot of reticence there and these large segregations across the country that are very easy to map out, where you have essentially regional duopolies, a cable company, a Telco, that dominate the marketplace, really carved up the nation into certain quadrants and regions. And that in itself has then led to a lack of investment then in that infrastructure over time, pricing has increased, service, customer service, has decreased, and then, with the advent of fiber-optics and now the affordability of deploying fiber-optics, it provides an opportunity for a real revolution, a broadband revolution, to come into place, into these markets.
So I'd say the corporate culture, whether it's the culture as such as much as the philosophy and the strategy, has been changing, will change more over time as we move down this path and more of these networks become available. Because of, as I mentioned earlier, what makes it attractive to the larger incumbent providers is when you hit a threshold that you can actually provide them to scale. It's all well and good having a great, competitive network that serves 20,000 homes. That's not really going to shift the dial for the big carriers and service providers in the country. So you've got to be able to provide the solution. You got to be able to find the right economics to meet their expectations and their shareholders' expectations. And then you've got to be able to provide them enough scale to warrant a strategic shift. And we're just getting towards that type of threshold now, I'd say.
MH: So then what does it take to bring greater acceptance more quickly? Do we have to turn to the invisible hand of the markets and guide it somewhat?
BBJ: We've been doing our small part for a while, the quiet, private advocates on the sidelines of broadband communities, for nearly a decade. But we're just starting to really find prevalence in the market, as I say, and find that scale. There's one thing that forces it in other markets, around Europe and Asia, something that is almost a hushed word in the US in comparison, which is regulation. So you can regulate it and have intervention, government intervention, to force these types of competitive environments, because it's better for the proliferation of these networks, which is better for the infrastructure and for the services and then thus for the economy and society as a whole, or you can create subsidized programs and fiscally step in to help, which you see through the Biden administration's implementation of their infrastructure bill.
But that solves one segment of it. It solves the infrastructure component in some markets. It doesn't solve it for a lot of other markets that aren't underserved or unserved, and it doesn't solve, necessarily, the long-term competition. It's all well and good having investment of a fiber-optic network in a city today; with one service provider that owns and controls the whole market, the whole infrastructure, but then fast forward 15 years and you find yourself in another monopoly. Whereas through the inception of our type of business model, where you have a neutrally hosted network creating that three-layer model. The separation of infrastructure from the neutral operator, and then the service providers able to access it on top, you ensure that long-term competitive nature and market. Which is going to only drive better innovation, better services and products, throughout the US.
MH: One of the things we learned on this podcast was that, in the early days of Covid-19, when everyone was working from home who could, that the ISP community found that their five-year plan to expand their broadband capability was consumed within a month! What was it like within your world, and how has the pandemic helped build acceptance of the need for openness and neutral hosts?
BBJ: Yes. Good question, so I think on the issues front, you have the same issues that are impacting, by and large, every sector out there at the moment in regards to supply chain and logistics and ensuring you can control those things as best as we can in a high-inflationary environment, making sure you're protecting your costs and deployment, etc. So we've seen those as direct impacts now, sort of, I'd like to say, post-pandemic, if we can almost get to that point, hopefully, in the next few months some normality will resume. But yes, one of the big winners, if we can say that, and I say it apprehensively, given the struggles that the pandemic's brought, but certainly the realization of the essential nature of broadband. And not just to businesses but to homes, and to schools and to underprivileged or deprived areas of our community, that access to fiber-optic high-speed broadband is as essential as water.
And that has then matriculated itself into the business models of pretty much every Telco out there. And the cable companies are obviously doing what they can with their cable infrastructure and making some good strides too. But everyone has doubled down investments in their infrastructure, in their space, as they see the market now. Whereas, go back five years, and it was a real struggle to sell the idea to private-capital markets that an investment in broadband, against the big tier-one providers that have controlled this market for two decades, was a prudent investment. They just didn't believe that you could go in and invest fiber into a new city and that people would move away from the incumbents at a high enough percentage to make the economics work.
Whereas fast forward now... Pretty much, this is happening pre-pandemic. We got our initial funding through pre-pandemic, for our types of projects. But certainly through, and hopefully as I say post-pandemic, we've seen a huge influx of new funds and LPs (local providers) and GPs (global providers) looking to get into the marketplace and invest into this sector as quickly as possible. And we're going to see an awful lot of activity over the next 12, 18 months and, hopefully, the country covered within 10 years.
MH: Tell me about those next 10 years. What is the evolution of open-access fiber?
BBJ: Open-access fiber has evolved already, it just hasn't been proliferated. So there'll be a little bit of further evolution in terms of the nuances of software applications and ease of accessibility, but I think what you'll see is a real proliferation. So it's not just SiFi Networks who are out there flying the flags for competitive networks, there are now a brigade of other revolutionary businesses stepping up as sort of startups into this space to try and move that on. And I wouldn't be surprised, in 10, 15 years, if you don't start to see some of the incumbents actually opening up their own networks. I can see that on the horizon, whether it's in the next 10 years or whether it's slightly post-10 years, obviously I don't have a crystal ball on that, but it wouldn't surprise me if we start to see a lot of other networks become more open over time, rather than more closed networks.
MH: I see over the next decade an explosion of technologies that will all be leveraging the ultra-low latency that comes with 5G wireless and the ultra-high speed that comes with it as well. Autonomous vehicles are going to need a certain type of connectivity, the augmented-reality sunglasses that I'm wearing will require another, that sort of thing, and it all requires edge cloud technology to ensure that we have that ultra-low latency. What's the role of open-access fiber in that world, where we're going to need to have near-edge cloud computing, edge cloud computing, as close as you can possibly get to that user equipment?
BBJ: What I believe is we see a convergence in terms of the customer experience between someone having a separate wireless service to something that's wirelined at home. We can see a convergence here between having a seamless integration between having your home service, because 5G's going to be limited to what it can do in the home. You're going to need the home service, especially for all the applications that are... Well, even though applications out there in terms of the metaverse that's coming on as well, there's just no way that 5G is going to be able to do what you need to do inside the home. But having that merger between indoor to outdoor, and having that seamless connectivity and have those same needs that you have when you're at home met when you're outside of your home, I think that's what these networks are going to enable.
And not so much just because they're open-access, but if they've been architected in the right way, so not all open-access networks are made equal, but if the network has been architected in the right way, so as to... without just thinking about: I must sell services to the home. I must sell the fastest internet I can to the home. That's all I want to do. If it's been architected around enterprise-class services, business, residential, video, internet, voice services, and then all the smart city applications, knowing that you need that redundancy and resilience in your entire network in the last mile, is something that we take up as another step, and I hope, I honestly hope, others that are out there doing similar things to us are doing the same, to make sure that you've got that resilience and reliability in the last mile now.
And that's what we do with our network architecture, so we're not just talking about a couple of rings in a city and that makes up our network, ours is far more of a star or a mesh-type network architecture, and that's key for enabling those types of core essential services, not just 911, but when you think about autonomous vehicles, that low latency you're talking about, that's great, but if you lose service, what's the car going to do? I'm sure there'll be a bunch of protocols, but it doesn't want to lose service, right? So the reliability of that low-latency network, it's absolutely critical. So we're in the process now where we've solved speed, we now need to solve for reliability, and those networks that aren't being built today solving for reliability are going to have pitfalls and lose out on opportunities to implement fantastic next-generation services, autonomous vehicles and other low-latency-driven applications, in the future.
MH: So then on the topic of pitfalls, what's the one challenge to the neutral host business model that most industry players don't understand, but must overcome if they're going to play in it?
BBJ: Ooh. That's a good one. And you could have me revealing secrets, Michael, I don't know whether I should reveal that one!
MH: Tell us all!
BBJ: Something that all providers out there that are going out there investing at the moment, that are going to face a big issue on, is delivery, especially with the infrastructure bill, going to be a huge strain on labor and supply and materials, etc. But I think from a technical standpoint, as a neutral host, that software layer and the management systems that you put in place is something that we've seen quite often underestimated on how important that is to make sure you're able to actually manage that complex environment with multiple services across it.
MH: So then on the topic of revealing secrets, how do you avoid being perceived as a threat to incumbent CSPs?
BBJ: You can't. Because of that corporate culture that we mentioned earlier, we're coming in... Certainly, three years ago, four years ago, we were coming in, and instantly, regardless of what we were doing, what we were saying, we were a threat, although, frankly, they didn't think we were much of a threat because we were so small back then. Whether they think that we're much of a threat now is yet to be seen, frankly, even though we're talking about a few million units that we'll be passing, that's still relatively small compared to an AT&T, right?
So, I think we always welcome incumbent providers to work with us, but as I say, the corporate philosophy and strategy at the moment for a lot of them just won't align, but it makes an awful lot of sense, if you're on an aging infrastructure in your market, and you've got someone who's coming in to build a competitive network in... fiber network, which has got the most resilient, the most reliable, the fastest network, frankly, better than the network that you've got, and you don't have to spend any money on it, and you can transfer all of your existing customers across to it, it's a bit of a no-brainer, frankly, in terms of the long-term prognosis for those two infrastructures going toe-to-toe, to jump across and seize advantage of not losing your customers to someone else coming in, but actually taking advantage of capturing them and maybe expanding your customer footprint on a better network.
MH: Well, it strikes me that there is a definite future where CSPs work with openness and neutral hosts, because you turn something that would otherwise be CapEx, your capital expenditure, it becomes an operating expenditure, and you can free up that CapEx to use it elsewhere.
BBJ: Yes, exactly. For the innovation of better products and services, or purchasing content, which a lot of the providers are moving into, obviously acquisitions with Time Warner and Fox and all those heavy content providers, it makes a lot of sense, so I can't argue against you on that one unfortunately, Michael.
MH: Will SiFi provide customer services from Google, Amazon, Apple, or Metaverse?
BBJ: So, we don't directly provide any services. If any of those organizations want to approach us because there's a solution they want to deliver to a market, then that's a conversation we're able to have, but we don't go out there delivering any services, but if Facebook require some connectivity through town, or they want to create a digital learning hub in the middle of a community for metaverse education, then they can work with us and we can provide those types of solutions, or they can work with one of the service providers on our network, depending on what the specifications are of what they're looking for.
MH: So then, to ask an awkward question, how do you avoid the moniker of becoming a dumb pipe, where it's just the pipe you're providing. Don't you want those value-added services?
BBJ: No. That's because we're not just the pipe exactly, as one of the key fundamentals of what we do is we provide a circuit-based system, so we provide all the electronics that enable the connectivity across the network. So that's how we avoid that one really, is by providing what you'd really call more of a sort of a managed service, but you're providing that to those companies. You're not providing it direct to consumers.
MH: So how do we leverage open networking to monetize 5G?
BBJ: The open networking point comes down to what the corporates want to do. You've got the four big guys out there, who are trying to proliferate the 5G cell sites. Now it doesn't make a lot of sense to me, or to them really, to try and stack themselves all up on the same pole and say masts, which is what they sort of have to do at the moment in a lot of markets, because they don't have that density of fiber footprint. But where you have these networks that are built and, I guess call it an open network that's built, you could have theoretically, a closed ISP network that's built that they still enable to be open for 5G purposes, you could have that.
With us, obviously, we're open on the 5G and 4G side of things, so any of those carriers can approach us and we can work with them to deliver fiber to their cell sites, but the key again comes back down to the network architecture, and these builds that we do and others do are citywide builds, and we're going up and down both sides of every single street, practically, in a city. So that gives you hundreds, thousands more potential demand points, as we call them, or points of access to the network, than you would ever have if you were building a discreet 5G network, where you just have to try and get to half a dozen or a dozen or maybe 100 sites across the city.
And that's a dedicated project with all the CapEx involved for just that project, and you've got to amortize that infrastructure spend with just that revenue and maybe some additional enterprise revenue that you can get from selling some businesses as you're going past. Whereas with us, we're amortizing our costs over not just 5G, but 4G and smart city services and the residential and the business access, so you are able to bring down that cost as well, which also helps the smart city side that we discussed earlier. So you can bring down the cost per demand point for 5G connectivity, you can provide greater availability and flexibility in how they build their networks, because you can reach anywhere in the city that they want to go and at nearly any volume that they want to go in the city.
So by doing that, you provide the perfect bed for anyone to get into and create large, dense, fully covered 5G networks, and the same thing for smart city. You can bring down that cost per demand point to such a point that you can actually make these applications now viable. Three years ago, four years ago, it wasn't viable to have a citywide 4G- or 5G-supported or WiFi-supported 911 first responder system for drones. Whereas now you can bring down that cost of connectivity to such a point that you can have drones be the first responders and beam their signal straight into the emergency response vehicles so that there you’ve got live information and visibility of exactly what's happening at that incident, whether it be a fire or a domestic event at a property, they can see exactly what's going on. It makes the human first responders far safer and more adapt and agile on site, as well as it helps secure the situation and report that back through the chains of command to make better decision-making at sort of centers of excellence.
So you don't have to have the fire chief necessarily going out to every single incident to assess where the fire's going, to get that important insight and his valuable experience live there at the scene. If he's got multiple incidents going on, he can be in a control center and be able to make those judgements on multiple incidents simultaneously and a lot more efficiently. So it enables everyone to be a lot safer, a lot smarter, a lot more efficient, which ultimately, hopefully, leads to improved quality of life.
MH: So if there's one thing you'd want a 5G provider to know about openness and neutral hosts, what would it be?
BBJ: Don't let the prior conceptions, I guess, of how they must go about deploying their networks dictate how they move forward in the future. There are different ways, in terms of business models and partners out there, that just didn't exist five years ago. Be open-minded and come and do your due diligence, scrutinize it a lot on whatever network and whichever partner you work with, the same way you do anything, with the processes and protocols, but this is the time to get out there and get as much market share as possible and get some real meaningful coverage over the next five years plus. Come and talk to players like ourselves.