The European fiber markets have always had a different flavor from those in the US. While the underlying drivers from 5G, IoT, virtual reality, and the like are the same, the response has been a bit different. Meanwhile, you have Brexit and a host of regulatory differences affecting things as well. With us today to help us keep track of events across the pond is euNetworks CEO Brady Rafuse.
TR: When we last touched base, euNetworks was just becoming privately held. How has the business evolved since then?
BR: I would say we keep on keeping on. We really focus on what we can do well and stop doing that we can’t. We are a horizontally-integrated bandwidth infrastructure company that
sells focused products to target customers. We try to earn our customers’ loyalty through consistently over-delivering on one or two key benefits and as a result be the category owner for bandwidth infrastructure services in Western Europe. Conversely, we are just about completely out of the SDH market and are pretty close to being out of the IP-VPN market too. We've got some colo capability in Germany and we've got some key customers in there, but colocation as a product is not really what we do nor core to our growth. We are focusing on delivering and growing the core business we're in. I'm happy the way things are moving along. As we say, traffic doubles every year.
TR: Where have you been expanding your infrastructure lately?
BR: We've been pretty opportunistic in picking up a lot of duct around our territory. We also built a new route from London to Slough that is really important because Slough is just so important in the world’s data center fabric. We do a lot of that sort of opportunistic network development on the basis that we've got a pretty high degree of confidence that we’ll win business as a result.
TR: Are you planning to expand into other parts of Europe? Are there opportunities to the east?
BR: We’ll continue to look both north and south, a little bit east, but not very east. We’re really a Western European bandwidth infrastructure company with good reason. At the end of the day, if you start spreading too far to the east, you're in very different environments and you don't necessarily know what the local dynamic is and how all of that works together. I think we'll continue to take the opportunities up as we see them, working very closely with our customers. But I think we're getting quite close to the edges of what we would say is our defined marketplace.
TR: What is driving your network expansion projects currently?
BR: Customers are looking for suppliers who can offer high capacity routes that provide them with the resiliency that they need, and this may require as many as 5 fully diverse routes between A and B in order to achieve this goal. This plays to a number of our strengths including our experience in the design of low latency routes between locations (effectively the shortest distance between 2 points) and our ability to respond quickly and creatively both commercially, and technically to meet customer needs.
TR: Has the introduction of SDN and NFV into nextgen networks affected how you do things?
BR: A bit. I hear and read so much stuff about SDN and NFV and how it is a game changer. But for a fibre based business like ours, if you know where your network goes and if your data is in the right place then what is it that is magical about these "technologies" that makes everything so much better? SDN and NFV "work" only if full end-to-end physical connectivity is already provided. We know that things that take the longest time to get there are cross-connects and fibre, nothing else, and we believe we are one of the best in the industry at executing our physical works. Of course there are certain elements of how we think about networking that you can fit into an SDN model - for example, bandwidth on demand and path computation, both of which we do, but not by us buying lots of SDN controllers kit and deploying them on our different network platforms. What it comes down to for us is if we know what our physical and logical inventory is, we constantly keep it up to date, and we are absolutely maniacal about the way we think about our data, then the benefit of SDN is marginal today. As customers demand more flexible network solutions this may change and we believe that our existing ability to undertake most of the features and functions of SDN in our current systems environment for our Layer 1 and 2 services will hold us in good stead as the SDN landscape continues to develop. But, in a straight race between SDN and the relentless execution of the fundamentals of our business, there is no contest.
TR: We hear all the time about how the demand for 5G and other new technologies is just over the horizon. Are you seeing that demand show up in European bandwidth markets?
BR: No! It’s one thing about Europe that I cannot triangulate. We’ve seen Verizon pay seven times the market cap for Straight Path, buy XO for $1.8bn, contract for $1BN+ of Fiber with Corning and a further $300m for Fiber with Prysmian. Crown Castle have bought Wilcon and Lightower. On Telecom Ramblings you had a piece about the Japanese mobile players spending $45bn+ on 5G. I'm just not seeing that level of investment in Europe, and I cannot comprehend it. Of the countries we do business in, only the Scandinavian countries and Ireland are above the OECD average for mobile broadband penetration. I think it is a massive problem for Europe. For whatever reason Europe has ended up at the back of the pack and I believe that will have a considerable impact on our global competitiveness.
TR: So you think the European tech and telecom markets are ripe for disruption at the moment then?
BR: I think so. I do. I don't see the innovation and I think that innovation is critically important to the future of Europe. The investments we see in the US on a city by city basis are just not what I see reflected in any sort of uniform way in Europe. Obviously it’s not homogenous and there are pockets of innovation; but on a macro level it’s just not happening with the speed and the intent of elsewhere. It wouldn't surprise me if someone came from completely left field and just completely disrupted a number of these markets. If a driverless car is going to throw off 25 Gigs of traffic, are we just going to not have those in Europe? It doesn't make any sense. Somehow you're going to have to transport that data, and fiber is the only way to do it that's been invented so far.
TR: So what has Brexit and all that has gone with it meant for you?
BR: I remember coming into the office on that Friday morning and it felt like the whole of London was in a state of shock. We have so many foreign nationals working in our business here in our London HQ, and right across all our offices. You see all the team and you think, “what can this possibly mean”? Then you realize there was no plan at all. I don't really know where we end up with it all, but don't be surprised if it sounds like people are making it up as they go along. Because they are definitely making it up as they go along. That being said, the rules around Safe Harbor, nations’ attitude to data sovereignty have had much bigger impacts on us than Brexit. So far.
TR: How does that affect euNetworks?
BR: Whether it's Snowden or WikiLeaks or fake news or whatever it happens to be, people are very, very antsy about the sovereignty of their data. Lots of companies who set out to have just one or two European hubs are now building out their infrastructures almost on a country by country basis. For us, that works out pretty well.
TR: How does the M&A landscape look today in European fiber infrastructure?
BR: It's complicated, because in Europe there are not that many pure fiber-based companies. We are just working very hard on being a bandwidth infrastructure company. We don't want to be a cloud company, and we don't want to be a managed service provider. We are a horizontally-integrated bandwidth infrastructure company that sells focused products to target customers. We concentrate on making sure that we have got the leanest production system we possibly can have and look after our customers as best we can. Otherwise the market really lacks homogeneity. But whether it's Brexit or whatever, there's a degree of uncertainty still in Europe which people are trying to get their heads around. I feel like I have been telling you for decades that there must be consolidation, so I won’t say that again. But interesting times ahead as the PTTs, Voda, Liberty, Colt, Interoute and Level 3 (CenturyLink) define their futures on a pan-European basis.
TR: One person’s focused business model is often another person’s M&A target, so have you been getting knocks on the door at all?
BR: There's always someone who's knocking on the door or wants to have a conversation. In the eight years I've been here, I must have had 100 conversations. Conversations are free, but it's fair to say that we’re happy with what we're doing. The investors are happy with the trajectory we're on. We think we've got a pretty unique asset, and I think we've got a good degree of confidence on a plan which sees us continue on this same trajectory. So there isn't any need for us to divert from that course as we stand.
TR: Thank you for talking with Telecom Ramblings!