OptiComm is a telecommunications carrier, and the single largest privately owned and operated provider of fibre-to-the-premises (FTTP) networks in Australia. The company designs, constructs, operates and maintains fibre networks for business and residential developments.
In 2009, OptiComm was selected by the National Broadband Network (NBN) to roll out the initial stages of the broadband network in Tasmania – and delivered under budget. Today, the company provides network access to over eighty estates across Australia and is contracted to service approximately 180,000 dwellings. This is a fast growing company and has gone from nothing, seven years ago, to an annual turnover of approximately $20 million today. We spoke with OptiComm’s Chief Regulatory Officer, Phil Smith.
OptiComm got its start when Phil worked as a consultant for a company called Belden, a US manufacturer of speciality cables for electronics. He met Paul Cross, the then CEO of the Belden’s Melbourne factory and, around 2005, when the FTTP market was coming alive in Australia, the two joined forces.
“By then Paul had completed a management buyout with a couple of business partners, changed the name to Optimal Cable Services, and acquired the old Melbourne factory,” explains Phil. “He came to me and said that he believed there was an opportunity in the fibre-to-the-premises market.”
The new company would supply the industry with cable coming out of the factory in addition to the distributorship of Alloptic, a leading Gigabit Ethernet Passive Optical Network (GEPON) product. By late 2005 it registered the name OptiComm with the intent of getting into the tele-communications market. In 2007, the company attained a telecommunications license, and things really began to take off.
A joint venture was then entered into wherein Hills Limited purchased fifty per cent of the shares of OptiComm. At that stage, OptiComm was a small startup and getting a big name on board enabled the team to gain some initial working capital, enabling them to sign contracts with large developers. The early FTTP providers were vertically integrated so residents only had the choice of one retail Internet and phone provider, and developers were not happy with that.
“That’s when we started the Open Access model,” Phil explains. “Right from the beginning we came up with the concept of what is now called Layer 2 Open Access. It’s a business model that the National Broadband Network (NBN) adapted and has gone forward with nationally.”
In contrast to traditional telecommunications networks, an Open Access model has separate retailers and owners of the network. The organisational separation allows multiple service pro-viders to compete over the same network, discouraging monopolies and spreading the cost of building and maintaining the base infrastructure across a number of providers.
When the NBN was ready to be rolled out, Minister for Broadband, Communications and the Digital Economy Stephen Conroy, had said to the electorate that he would get Tasmania up and running first. “This was going to be very difficult for a start-up company, so we approached NBN Co and were engaged to design, build and operate the first stage because NBN Co didn’t have the staff and were not ready to do any construction work. At that stage we were already implementing networks.”
Stage one of the Tasmania installation took place in 2010 and it became a crucial part of the Gillard campaign for that election. Soon, the National Broadband Network’s wholesale, open access network was going after the very market in which OptiComm operated: the greenfield market. Greenfield projects are those that involve new buildings or infrastructure and are not constrained by having to work around existing structures.
“So, by 2012, we had been competing with NBN for the greenfield market. There are a couple of other players out there, but OptiComm is significantly bigger then our next rivals. Possible changes with the imminent release of the Vertigan committee report will hopefully see the scaling back of some of the NBN’s work in the greenfield space. So we are looking forward to some positive outcomes for our company.”
At the moment, even within the current market where NBN is giving away networks and OptiComm has to sell its networks to developers, the company is still making headway in that market space. The key differentiator is that it offers value added services like Wi-Fi, television and security services.
OptiComm’s primary customer base is property developers, but a secondary client is the retail service provider that sells internet, phone and pay TV services to end users. “If you want to think of it in the analogy of water pipes, we provide the pipes and the retailers provide the water. We design and build infrastructure that retailers can then run their services across and, for that, we charge wholesale access and back haul fees. It’s exactly the same process that NBN uses and they do what we do.”
The project that defines the capabilities of OptiComm is Sydney’s Central Park complex. When completed, the Frasers Property Australia joint development with Sekisui House will have close to 2,200 apartments and about nine hundred student accommodations as well as four levels of shops. With 235,000 square metres of commercial, retail and residential space, it is the largest multi dwelling unit on one campus anywhere in Australia.
While parts of the complex will still be under construction over the coming years, there are five residential blocks that are already active on the network. The apartments have a number of services that include the metering of water and electricity. The data is all sent out over OptiComm’s network as are building services like security and TV cameras and digital signage in the retail area.
“Each apartment also has a video intercom access control system that goes over our network so, when somebody buzzes the front door, we know about it. They have free-to-air television as well as pay TV (Foxtel), internet and phone – which is what we build a network for. We also have Wi-Fi hot spots in the foyers of those apartments.”
A lot has changed since the inception of OptiComm. Hills Limited decided that it more than just a fifty per cent stake in the company; it wanted it all. A number of super funds were also interested. “The private equity bid eventually won out, which we are really quite happy with. It’s a lot of people investing in what is a long term infrastructure play that very much suits super funds.”
OptiComm had been using Hills for its logistics, accounting, legal, administrative work and human resources. The company has taken over these responsibilities for itself. It will be warehousing its own products that are distributed to its construction teams.
“In terms of logistics… we have a number of products that we use to build our networks. A lot is directly supplied to our installers. The stuff we have to buy and hold for a short period of time, we will be doing our own warehousing in Melbourne.”
OptiComm works with a number of key property developers including Lend Lease, Australand, Villawood, Frasers Property and Sekisui House. Many of the estate projects are long term and might go twenty years before the being fully completed.
Most new estates have a sales rate varying from just a few homes a month to twenty-five to thirty a month. Up in Queensland is an estate of potentially 25,000 homes. Even at the higher sales rate, it is going to take a long time to finish the contract.
“We are adding to that number of estates all the time, so our potential continues to grow. We started in 2007 so, seven years later, we have only finished three estates, and the rest of them are ongoing. If we stopped selling today, we would still have a lot to do.”
Today, OptiComm has a strong national presence. “Our finance division is in Brisbane; marketing in Sydney; our new head office and chief operations officer will be in Melbourne; and our engineering and design team is in Perth, so we are very well spread out. We also have project managers and sales people across all different states.”
Phil says that the essence of OptiComm is that the company is in this for the long haul. “It’s all about providing a very high level of high quality networks that will go the distance because we will look after them long term and make sure that they operate effectively through the service level that we have in place.”