Big thanks Guy for a fascinating and unique insight into the very peculiar telecoms island of Hull, and how MS3 Networks has successfully built a full fibre Alt-Net there to compete with the incumbent, KCOM, significantly boosting free market competition.
MS3 has built to just over 200k premises, of which about 130k are in Hull and about 80k are in Scunthorpe, Grimsby, Cleethorpes, Immingham, and Mexborough. Guy tells me that Hull is more profitable than the Openreach areas, because although building in Hull is twice as expensive, MS3 enjoys three times the market penetration. With 15,000 customers on the network currently, MS3’s overall market penetration is about 7%, but that rises to 29% for areas that have been built for between 2 and 3 years.
Unlike many Alt-Nets, MS3 is wholesale only, and has around 50-60 partners, which guy says is probably too many. His “utopia” is to move towards a smaller number of bigger Layer 2 partners, with the current Layer 3 partners connecting via the Layer 2 partners. The impact of One Touch Switch was interesting to hear about, as MS3 used to take orders on behalf of its partners, but this is not allowed under the One Touch Switch regime.
MS3 has just last week managed to get some access to KCOM’s ducts and poles, after a long struggle. This will allow MS3 to get to some of the more outlying areas of the Hull licensed area, and deliver on its ambition to cover all 210k premises.
Guy comments on MS3’s original ambition of a half-million premises network build, telling me that they didn’t anticipate there being 100 other builders when the ambition was set. He admits that building another 300k premises at this point would not be a good idea, and so acquisition would be the only sensible route to reach the original ambition.
Guy goes on to talk about the financial strength of MS3, in a market with its fair share of financial worry currently. MS3 is debt free, which is very unusual in the Alt-Net world, and Guy claims that MS3 will not only be EBITDA positive very shortly, but that it will be the first Alt-Net to be cash positive.
Finally, Guy talks about the spot of bother he’s had with telegraph poles in Hedon.
CHAPTERS
00:00 An Alt-Net with a difference
03:05 The MS3 story and consumer choice
04:02 KCOM versus MS3 and free market competition
07:38 What works better, an Alt-Net with a retail ISP arm or securing an anchor ISP?
10:05 How to attract wholesale partners and drive volume
11:51 Price comparison sites and the MS3 model
15:32 The challenges of running an Alt-Net in parallel to an ISP
17:35 MS3’s footprint - 200,000 homes passed
20:24 Infrastructure access and regulatory obligations
21:42 Bringing people online; the affordability of full fibre
24:02 MS3’s build aspiration to reach 1/2mn homes
27:20 A debt free Alt-Net
27:50 The great consolidation
29:25 MS3’s market penetration
30:15 The advent of UK’s 3rd network
34:21 The BDUK question - not for MS3
35:22 Introducing telephone poles to Hedon: a community challenge