Update on disruptive new technology and fixed wireless growth
2019 is positively flying past and its worth updating everyone on the product and business model advances that are in the pipeline and that will supercharge our organic growth in 2020 and beyond.
On the satellite side, a raft of new satellite launches in the next 2.5 years, starting with Eutelsat Konnect just a few months away in December, will see us move to a completely different dimension of satellite broadband technology with a proposition more like fibre from the sky. Expect to see truly unlimited data allowances and 100 Mb product speeds by the middle of 2020, with 200 Mb and 300 Mb to follow in 2021 and 2022. We are able to do this due to exponential improvements in satellite bandwidth economics.
These more dynamic products catapult satellite broadband into a much wider addressable market where instead of being considered a “last resort” technology just for rural areas, satellite offers a compelling alternative for urban locations with poor ADSL or FTTC.
Its well documented that demand for OTT services continues to growth apace, something like 70% to 80% of internet traffic is now streaming video, and satellite has proven its ability to support the heavy lifting of video very well in the satellite TV space.
We’ve seen our organic sales of satellite broadband surge in the last 8 months with the arrival of the pan European 50 Mb unlimited product, we’re confident the gear change to 100 Mb speeds and beyond will further expand our markets and bring satellite into focus for a much wider audience.
On the Fixed Wireless side, our exciting announcement in August 2019 that our subsidiary Quickline (QL) has received £12m of new funding to accelerate the build out of next generation fibre backed fixed wireless access (FWA) networks underpins my earlier post about the importance of fixed wireless to bigblu.
Our traditional satellite broadband business model is relatively ‘asset light’ in that we buy satellite capacity from the various satellite owners, slice and dice it into market engaging products and then the customer, the government or the satellite owner pays for the customer’s equipment. We make our money by finding and looking after the customer and making margin on the airtime. The capital cost of the space and ground infrastructure to support the connectivity isn’t borne by us.
FWA is a very different model as here we are the true network operator and the infrastructure cost of building and maintaining the network is down to us. However, the high margin levels, very low churn, and higher customer lifetime value make the FWA model very appealing to us particularly if we can partner with other organisations to offset all or part of the capital cost of that infrastructure.
One of the core reasons for us raising money in Quickline, as well as the proven business model and existing profitable business, is because the business has a strong and ongoing relationship with BDUK who are using grants and subsidies to encourage alternative fibre backed broadband technologies to connect rural homes and businesses that have little chance of being connected to real fibre in the foreseeable future.
Pursuing these grants and subsidies is highly beneficial to our business model and the payback times of building new networks, but these schemes need to be cash-flowed as the build outs often occur before the costs get reimbursed by the grants.
BDUK understands that deploying our FWA technologies backed by fibre infrastructure can give a far better prognosis than FTTH in terms of cost per premise and timescale for connecting rural areas to “next generation access” (NGA) and ultrafast (100 Mb +) broadband services.
A significant amount of public money has been spent subsidising BT to roll-out fibre into many unviable areas, but the reality is alternative technologies like FWA can often give a better “bang for the public buck”.
Current Government programmes largely managed by BDUK include a new £200m Rural Gigabit Connectivity Programme and a Rural Gigabit Voucher scheme worth up to £3,500 for each SME and up to £1,500 per residential premise we connect.
Where government subsidies aren’t available QL is also now well-funded to build new networks on a case-by-case, commercial, organic basis following local demand.
QL plans to invest around £20m over the next three years, including funds provided by potential government grants and internal cash flows, targeting a customer base of around 30,000 and a significant increase in revenue and profitability.
Following the successful completion of testing in 3 pilot areas, QL is now connecting customers to its first commercial gigafast (1 Gbps capable) fixed wireless services. Making use of the latest mmWave technologies and newly released 60 Ghz spectrum, QL is offering customers in rural areas over 300 Mb performance many fibre to the home providers can’t match.
In summary, we are at a flexion point in terms of technology and product development where our all our core products are improving exponentially and will continue to do so in the short and medium term. This means our addressable market will expand and with our proven partnerships and commercial models, we are confident that organic growth will be strong for the foreseeable future.