Broadband competition – phenomenally good for business
Gibraltar’s three broadband suppliers, each with a separate infrastructure, is “phenomenally good” for business and consumers with lower prices, faster speeds and wider services
The dominant supplier, State-owned Gibtelecom (Gibtel), saw its market share of broadband slip to 70% in 2016 from 90% previously, largely as Sapphire Networks, the second largest supplier, diversified from corporate and enterprise business into residential connections through its u-mee subsidiary.
Relative newcomer, GibFibreSpeed has been strongly marketing broadband services, while investing £10m in fibre cabling to service Gibraltar homes and businesses. “I believe it is because of our intervention in the market that prices generally have come down in Gibraltar – we have had a major impact on reducing the cost and raising the speed offering for internet,” Julian Sheriff, GibFibreSpeed’s development manager, said.
The Gibraltar Regulatory Authority (GRA) reported the number of broadband residential and business subscribers in Gibraltar at the end of 2016 increased by 1,641 to 16,357 and was “due, in part, to the new residential housing estates being constructed around Gibraltar”.
The GRA’s annual report published in September declared “new broadband packages from u-mee and GibFibreSpeed have attracted substantial [residential] subscriber numbers and now have market shares respectively of 17% and 11%” at end-March 2017.
“With Gibtelecom upgrading customers to higher broadband speeds at lower prices as well as the wider availability of products from broadband providers … subscribers are now enjoying fibre to the home (FTTH) broadband with speeds of up to 300Mbps, as well as customisable packages in excess of 300Mbps,” the GRA said.
Despite high-speed offerings, 25Mbps was the median purchased in 2016-17, compared with around 7Mbps a year earlier. “It is widely accepted that consumers generally want faster broadband,” declared the GRA, which expected the shift to higher bandwidth products to grow.
TV fuels competition
Much of the demand has been fuelled by the two smaller companies packaging broadband and ‘phone provision with live TV, something that Gibtel has resolutely refused to provide without the latter being licensed. Now, by end-March, Gibtel expects to launch its IPTV service, which chief executive, Tim Bristow says will be “different to the others, a technically superior product with a range of media services that aren’t currently available from our competitors and, crucially, licensed content, for which we are going to pay.”
“The dynamics have changed in the last two years; [our competitors] are being particularly aggressive in the market and therefore we had little choice but to move into that space,” Bristow said, adding: “With this development, we are going to win more of this market back”.
He noted: “It’s very expensive to do it properly and legally. We are investing several million pounds over 3-5 years – a large proportion of that is to legally buy the content, which we have to do every year.”
Bristow admitted: “With many of the new homes, we haven’t done as well and we have started to lose some accounts in other places, but that is to be expected in a competitive market.” Loss of broadband subscribers – “not as much as people might think” – had contributed to Gibtel’s turnover flat lining year-on-year at around £42m, with 30% coming from fixed line – both broadband and telephone – and a similar proportion each from mobile and from international business outside of Gibraltar.
u-mee packages combine high definition TV, a proper landline with a local ‘phone number and FTTH broadband; they also offer a ‘Talk-app’ that allows local calls to be received on a mobile phone on any network wherever in the world customers receive 3G, 4G or WiFi connection – a popular added feature included with the higher ‘u-mee Plus’ bundle.
‘TV & Go’ (that allows live TV programmes on a smartphone or tablet, or use with a set top box connected to the internet, with 7-day catch-up and programme recording), is available for u-mee and non-customers.
For more than 15 years, Gibsat Ltd has been The Rock’s main TV provider using analogue cabling. Sheriff maintained: “Although residential customers have been the foundation of our business, it is the corporate side, where prices remain high compared with the UK and Europe, that represents our biggest opportunity.”
Convincing large eGaming businesses and others in the corporate sector that GibFibre’s product is a viable alternative is a major challenge. “We are a lower cost alternative with a similar offering to that of the two bigger players, so it will be down to how well we perform”, admitted Sean O’Reilly, who joined last year from Dublin where he was country manager for Huawai, the Chinese telecoms and IT giant that he helped establish there 15 years ago.
O’Reilly added: “There is always going to be a degree of drag – traction time – that requires a leap of faith for any new business customers that depend on the internet for their survival, but the market has been very receptive to our arrival and we feel that will be converted into customers.” GibFibre says it already has some – undisclosed – large customers, including at least three gaming firms, and others in financial services; “there are also a significant number of smaller businesses moving to us.”
u-mee Business was launched in 2017 aimed at the small office and home office (SoHo) sector – shops, lawyers and accountants – providing 100Mbps fibre internet (utilizing GPON technology, like u-mee residential fibre products) with 20Mbps upload speeds and four telephone lines with extension features, for £75pm. “We see a gap in the market here and an opportunity for us”, declared Sapphire Group chief executive, Lawrence Isola.
This differs from Sapphire’s Business Fibre product, which offers up to 300Mbps download speed with 30Mbps upload, but using direct fibre links similar to those provided to large customers in the eGaming sector, but for £250-350pm. “There has not been more than a single 3 second drop-out of service in ten years”, Isola declared proudly.
The gaming companies, on which much of Sapphire business is based, “are not growing at the same pace as previously, there are fewer of them given mergers; they generally do not want more capacity – sometimes they want less – but they certainly now do want to spend less for a strong internet service when contract renewals occur”, Isola observed.
Gibtel claims two-thirds of the eGaming market. On gaming sector concerns regarding higher than UK internet costs, Isola is pragmatic. “Prices gaming companies pay are higher when compared with elsewhere in Europe, because here we don’t have a 5m population or a cluster of 500 gaming companies to bring economies of scale… yet service expectations are the highest imaginable, and require significant continuous investment.”
Isola added: “We established u-mee two years ago as diversification to ensure we have market share and to protect profitability. Our prices have not changed despite greater competition and the significant weakening of Sterling, but we have invested £8-9m in developing the fibre network to support that side of the business. u-mee is accounting for a greater share of the Sapphire group business, while gaming is leveling off.”
However, on increasing competition, Isola rounded: “It is crazy that the substantial cost cutting that is taking place for internet services, involving all three providers, is not good for Gibraltar given its impact on profitability for each of us, and this could well affect future investment and the returns that can be expected”, Isola maintained.
He held: “Gibraltar is too small a place for three telecoms companies” and questioned “the long-term stability, reliability and resilience of service in industries that are key to our economy – realities have to be faced”.
Sapphire has one 48-rack data centre at Europort that is almost full. Gibtel launched its Rockolo subsidiary in March to handle its 400 racks at Mount Pleasant and from Spring 2017 at the Gibraltar World Trade Center.
By mid-June, Rockolo had added Gibraltar’s first locally-hosted cloud computing solution in partnership with GiBVault, a specialist provider, bringing customers “reduced hardware, software and running costs, speed of deployment, greater flexibility and enhanced productivity”, Bristow pointed out.
However, in February this year, the GRA ended a year-long investigation into whether Gibtel had breached its (Significant Market Power) SMP operator obligation
having blocked access to the Mount Pleasant data centre and “access to all ducts, manholes and other infrastructure” for GibFibreSpeed to provide potential customers with IP transit and leased lines services.
The GRA concluded its powers “did not extend to mandating operators to cooperate on a commercial level with other operators, even if this is deemed to be positive in the
electronic communications market”. Legal advice said Gibtel did not have to offer commercial hosting agreements, or give access to its data centres, to other operators; Gibtel’s SMP obligation did not extend to its customer’s equipment in the data centre.
GibFibreSpeed disagreed and is appealing the GRA decision in Gibraltar’s Supreme Court. It’s the first case of its type and the outcome of a hearing scheduled to begin on 5th March could have far-reaching impact, having also exposed Gibraltar‘s lack of a competition authority covering all aspects of business.
The Gibraltar Communications Act requires the GRA to “promote competition”, but as GRA legal advisor, Maurice Hook noted: “If any operator did something that we considered anti-competitive, there is in reality very little we can do about it.” That has prompted consideration of making GRA competition enforcement possible, or introducing wider-based competition law – something Gibtel’s Bristow said: “We would “welcome a competitions authority.”
The up-coming court case has delayed a GRA public consultation on wholesale broadband access markets; it has twice before proposed reviewing whether Gibtel is sufficiently competitive. “I suspect [the GRA] was out of sync with the EU requirement”, Bristow observed, “where no-one is policing the broadband retail market as proposed.”
Gibtel is mainly regulated on voice fixed lines. It’s mobile business, with download speeds of up to 400mps through 4G+ (faster than broadband at present), accounts roundly for 30% of turnover having only little competition from 2017 newcomer, Limba Telecoms.
When Telekom Slovenije sold in 2014 its seven years 50% Gibtel holding, the government paid £47.7m, ending 26 years of private sector involvement. Chief Minister Fabian Picardo described it as “a temporary move”, stressing the importance of finding “the right partner and not the quickest partner” in Gibtel. After three years, nothing has changed, and observers believe the State will need to reduce its stake to 49% at most.
Prospective buyers may be interested in the 30% share of revenue Gibtel gains from its international business, some through sales of capacity on its share of the upgraded Europe-India Gateway 15,000 kms-long submarine cable. Gibtel has extended the reach by a third to Singapore after securing a deal with an Asian telco and also now has customers in South Africa and Australia.
“We’ve built a European network with Points of Presence in London, Marseilles and Madrid and can reach there by going north overland or by sea through various points, or through France – it means we have so much route diversity and resilience that Gibraltar can be assured its telecommunications are safe – I don’t think our competitors are even in the same game”, Bristow observed.