Zen Internet Talks Ending the Fibre Tax and Working with Altnet ISPs

In a new interview the founder and chairman of UK ISP Zen Internet, Richard Tang, has called for the “fibre tax” to be scrapped in order to boost “full fibre” broadband and explains some of the problems of working with smaller altnet ISPs. On top of that he also warns about the difficulties of trying to regulate internet content.

There’s a story that Richard likes to tell about how Zen originally started life with a chat in the pub during the summer of 1995, back in the early days when internet access was still a tremendously slow (narrowband dialup) but fascinating new experience that less than 2% of the UK population were using.

“I asked my brother Dan if he thought the Internet would take off, and he said “yes”. We set up a tiny network in a shared office in Rochdale – six modems, a couple of Linux boxes, and a 64kbps leased line to the Internet – and then in October 1995 we opened our doors for business,” said Richard.

Since then a lot has changed and today Zen Internet is arguably not only one of the most established, but also one of the best rated consumer and business broadband ISPs in the UK market. The provider is currently home to over 500 staff, around 126,000 broadband customers and last year delivered an annual turnover of £71 million. Richard attributes much of this success to the provider’s “people-first” approach.

An Ever Changing Landscape

Naturally this also makes Richard an ideal person to ask about the current broadband market and its many challenges, not least since his “long-term dream goal” is for Zen to eventually become one of the market’s five largest providers. Obviously they still have quite a way to go on that front but they’re moving in the right direction.

In particular we were keen to know whether, given the rising choice of alternative networks (e.g. Cityfibre and the possibility of Virgin Media going wholesale), Zen would ever diversify and start working with other platforms instead of just the underlying one provided by Openreach (BT). Richard clearly welcomes the extra competition for Openreach “as a good thing” but he also has a warning.

“When it comes to the delivery of fibre networks, there is a lot more to it than simply putting the fibre in the ground. There is a massive amount of additional work needed to develop the systems, processes, products, and services … Openreach has had decades to develop and refine all these things,” said Richard. “Zen would have to do a substantial amount of on-boarding and integration work … [and] … with the exception of Virgin Media, the footprints today of the ‘AltNets’ are too small to make this … worthwhile.”

Richard also expressed concern about the Fibre Tax (business rates on fibre). At present new fibre builders are currently benefiting from a rates relief holiday of 5 years in England and 10 in Scotland, although such networks are often planned over 15-20 years. “At Zen, we need to continually upgrade our network, but the existence of a fibre tax makes some upgrade routes significantly less attractive … If the Government is genuinely keen on a full fibre future, I believe they should scrap fibre tax altogether,” added Richard.

Zen’s Chairman also stresses that hybrid fibre technologies, such as G.fast, should not be overlooked. “For a proportion of the UK (e.g. those close enough to the cabinet to get 250 Mbps or faster), G.fast could supply all the broadband speed that customers could need for the next ten years and beyond. A hybrid approach of full-fibre and G.fast could therefore achieve the same end-result quicker and at less cost,” said Richard, although he agrees that “full fibre for everyone” is still the ultimate goal.

One of several other areas that this interview touches upon has to do with the thorny issue of internet content and regulation. The Government’s Online Harms White Paper has made no secret of its desire to tackle fake news, hate speech, conspiracy theories and more via websites and social networks (here). On the one hand Richard welcomes the principle, but he notes that there are some very real problems with trying to regulate it.

“Regulators tend to work well where there can be clear measurements and you can evaluate if something crosses the line. But the grey areas in this case are immeasurably bigger when it comes to what is right or wrong. To give an example, when does a Twitter exchange cross the line from being heated to being considered bullying and one that requires proactive action?,” pondered Richard.

Check out the full interview below for more.

Interview with Richard Tang of Zen Internet

Question 1: No doubt Zen has noticed the rapid rise of alternative network providers across the UK, with most focusing upon the deployment of full fibre infrastructure. Even Virgin Media’s parent (Liberty Global) now appears to be considering the possibility of a wholesale solution for access to their network.

Like many ISPs, Zen has traditionally taken their products from Openreach’s infrastructure. Can you now see this changing in the future and would working with other networks make it more challenging to create a streamlined set of products (i.e. FTTP from multiple operators with different wholesale costs/rules in order to achieve the widest coverage)?

Richard’s Answer:

The prospect of Openreach having some full-fibre competition is a good thing, potentially offering both wholesale customers like Zen, and end users, more choice. However, Openreach has a massive head start and the competition has a mountain to climb to catch up. The full-fibre challengers have ambitious plans and are well funded; however, they have two major challenges ahead of them.

Firstly, when it comes to the delivery of fibre networks, there is a lot more to it than simply putting the fibre in the ground. There is a massive amount of additional work needed to develop the systems, processes, products, and services that are essential for the delivery of a complete broadband service. Openreach has had decades to develop and refine all these things, whereas many of these new players are still at the early stages. At Zen, it took us several years with a fair-sized software team to develop our Wholesale systems, and the opportunities to speed up this process with additional funding were limited. I believe some of the alternative full-fibre providers may have underestimated the time it will take them to implement these essential new systems.

Secondly, it will be difficult for these providers to differentiate their offering from that of Openreach, particularly given Openreach’s seemingly ever-increasing ambitions for FTTP. Zen would have to do a substantial amount of on-boarding and integration work before offering services based on an alternative full-fibre provider. With the exception of Virgin Media, the footprints today of the “AltNets” are too small to make this additional work worthwhile. And, as mentioned, we can’t yet rely on the AltNets having mature systems to integrate to, meaning more manual work to provision and manage the services, resulting in more cost and a poorer end-user experience. Even if the AltNets are able to deliver on their ambitions and achieve significant scale, I would still struggle to see how they will differentiate themselves from Openreach. The tiered discount scheme for fibre broadband from Openreach gives us a big incentive to continue to buy from them, so the AltNets would need a very compelling proposition to entice us away.

Although I’ve highlighted big challenges ahead for the AltNet full-fibre providers, I do believe that increased competition to Openreach is a good thing in the long-term – not just for end-users but also for Openreach themselves. That thought provides me with some incentive to want to support the AltNets at some point in the future.

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