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Interview: Dana Tobak, managing director, Hyperoptic

Monday, October 20th 2014 by Dean Reilly

As one of a small number of broadband providers offering gigabit connections, Hyperoptic focus on supplying ultrafast internet to multi-resident new builds, shared existing properties and businesses.

We caught up with Hyperoptic managing director Dana Tobak to find out more about the past, present and future of the gigabit broadband provider.

Tell us about how Hyperoptic got started and how you found yourself in your current role in the company?

Hyperoptic was founded by myself and my business partner Boris (Ivanovic, chairman). We knew each another from university days, so many, many years ago. Prior to Hyperoptic we had started Be, but actually the story starts prior to that when Boris was running a company in Sweden called Bostream in about 2000 to 2004.

Essentially that company did both local loop unbundling – using essentially the same technology that’s being used in BTs fibre to the cabinet they were doing ten years ago – as well as doing fibre to the building, because in Stockholm fibre is a lot more readily available in the streets than here in London.

They were doing fibre to the building and they were doing local loop unbundling. They were the first ones to launch 26Mbps in Europe, so they were a fantastic leader, a fantastic kind of “it’s all about speed, it’s all about next generation” etc. and Sweden is of course a very good place to do that. It’s very well-received.

Essentially when that company got sold, we were chatting, generally, as friends do and he was saying: “Well, I’m thinking about what the next thing should be” and I was like: “Yeah, I’m kind of at a place in my career…” so he said: “Well how about we do what Bostream was, but in the UK – and you run it?” and I said OK! So that was the start to Be, if you will.

I wasn’t a veteran of the broadband industry at that time, but I had come from a systems development background where I had previously worked with Oracle and Sapient Corp. I had opened up the Sapient office here in London, had managed their Germany office for a while, so basically my background was in running businesses.

So we started Be in 2004, hired a core group of people who also worked at Bostream, so it was a bunch of people who already knew what we needed to do. We got used to how BT processes were different from Telia processes when it came to doing local loop unbundling, but I think Be is well-known in history in the sense that we were the first to launch a 24Mbps product here, and despite journalists at the time saying “what would anyone ever need 24Mbps?” – I kid you not, Boris was in absolute shock.

When he launched the 26Mbps in Sweden, years the journalists there were saying “Well, why can’t we have 100Mbps like those guys have in Korea?” It was a completely different mindset. But nevertheless, when we launched with Be we built up a very loyal following of customers.

O2 did come and buy us less than a year from the year launch of service. I stayed on with O2 for a time in order to help with the integration – and the brand did continue as a separate brand. After that, I left to fit in some personal things like getting married and having my first child, so that was all good.

And then Boris and I always said – even at the time we sold Be – that the next big thing was going to be fibre, because the one thing that’s brilliant about this industry is that you know it’s going to continue to evolve. It’s not like people are going to go one day “no no, it’s ok, we’re happy with this speed”, that’ll never happen.

So we did the Hyperoptic business plan in 2010. At that point, Tom Williams joined, he had been at and running Be after I had left. I spoke to him and said “hey, come and do the start-up thing again, it’s much more fun”. I’d known Tom from a previous life, so it was Tom and I, in a two-person office for the first four or five months, basically doing RFPs (Request For Proposals) with the vendors, starting to build a sales funnel, getting together a business plan and so on and so forth.

Then we started hiring the team in earnest in 2011, and our first building – it was very exciting, at Price’s Court in Wandsworth – went live in October 2011.

We received our funding from George Soros (Chairman, Soros Fund Management) in May of 2013, which was based on his team’s bullish approach to fibre here in the UK and seeing what an opportunity there was, and also the way in which we approached the market which was not only building a new network that wasn’t just reselling BT products, but also getting customers on our network as part of gaining revenue and good business practice.

With the money we received from Soros we expanded what we call our sales team, but really it’s a network acquisition team, and what they need to do is go out to freeholders and developers, and get permission to put our network into their properties, and once we do that our normal marketing engine takes over where we’re actually selling ISP services like any other ISP: go online, call the call centre etc.

It’s a more complex business than Be was. We have to get property managers, building managers, freeholders, developers on board. We hit our head against the wall quite a few times, but the good news is that for the most part, we’ve broken through a lot. When the guys call someone, they don’t go “Hyper-who?” they actually know what Hyperoptic is.

Since you’ve got to include new build developers and deal with councils over the potential disruption installation could cause, do you see them as part of the target audience you need to win over, or are they just something you need to leapfrog over to get to your actual target audience – the consumers?

It is a tricky question, and one we’ve been working through for the last few years. It depends – that’s the quick answer. Prices Court, our first building, the building itself is what is called a RNC – which means it’s where the residents have actually purchased the rights to the freehold.

In that situation, the head of the residents association, who is also the head of the company who owns the building, was really excited about what we were doing. He got it. He really got what we were doing, he was happy to be the first to do it, really eager to tell everyone about it – he was so keen. In that case, he had the ability to sign, so in that case it was appropriate that this was the first thing to happen.

The next thing is when we deal with something called an RTM (Right To Manage), where the residents have earned or petitioned for the right to chose their own property manager. So the freeholder might still be someone else, but the property management company is appointed by and works on behalf of the residents rather than the freeholders.

These are another group that’s a bit easier to manage, because when we go to speak to the concierge, he works for the residents, not some big guy who lives in Monaco. So in those cases again, he’s happy to introduce us to the right people. He’s happy to talk to residents, to send mail outs for us, he’s happy to be part of the process.

He’ll also usually have a connection with the freeholder and he’ll say to them “Please just sign this – its what the residents want”.

Then it gets a bit more complicated when it’s the normal model, when the freeholder or property manager may or may not care about the speed the residents have in the buildings. Or they may care: some are happy to oblige and don’t want to be bothered.

Some require more residents pushing on our behalf, and that’s really how the next phase of buildings came into being. In that situation the residents were getting really poor broadband, or they just got it, or they were from technical fields.

They would go to the property managers and say “Have you signed the Hyperoptic document yet? Have you signed it? Have you signed it?” – and finally they signed it. That was kind of the next tranche of buildings coming through. Through that whole process the benefit of this evolution is that we’ve gained that credibility and that whole portfolio of buildings.

So when we started having a conversation with Barclay about their first building, which was Queen Mary’s Place, we weren’t going in saying “Well, we’ve never done this before…” it was done like “Look at this building, look at this building, look at this one”. So in this case we were talking to the developer and the freeholder. So to return to your point it was expanding with regards to who we had to interact with.

But what’s interesting is when you go into a new build, when developers decide that they want to buy a plot of land and apply for permission, usually the developer hires an architect firm, they hire contractors, they hire experts to advise them on the different services that are going to go into the buildings, so there’s a lot of people involved throughout the life of a new build to decide what services should be available, how should they be put in place, where the cables go, how much it costs.

So through the process of talking to the developers about their new build, we’ll come across the next set of stakeholders, the contractors, the architects, the influencers who come to bear. So our relationships have grown in terms of the different types of people we’re speaking to.

The new builds, actually, have the most delicate relationship in stakeholder management than the retro-fits do. The benefits of retro-fits is that you residents saying they want this, but with new builds, some of these developments are sold as or before they’ve started digging in the ground, so some of the developers wonder why they should care about having the best fibre. They’ve already sold these units. The good news is that as some of these new builds have gone live with really poor broadband, the customer services guys hear it.

They’re now going back to the development guys and telling them, although they don’t care because they’ve sold their units, you’re going to have a huge headache if that building doesn’t go live with fibre. So that’s bringing people back going “Erm… Hyperoptic, can you come back, please? I’ve been told I have to get fibre. Can you come and help me please?” so the dynamics are absolutely fascinating. From a personal perspective it’s been a tremendous learning experience.

Is the ethos that we’ve talked about what’s brought you to essentially incentivising, rewarding and recognising the work that individuals do to get their buildings online?

Absolutely. There’s two roles that a champion can take: one role is where they bug the building manager about getting documents signed. That’s a champion that helps us get the building live.

We really appreciate those people because obviously the potential benefit to us and to the other residents in the building is really hard to measure. What we do is we look at a building and if we see we really wouldn’t have got these so quickly without their help, with give them 1Gb free for a year.

We just think that’s worth it – and they’re usually really psyched about it, and that makes it all worthwhile. We’re also working on other champions who, once the building is signed, go around trying to solicit people to register interest. Now that’s a bit easier to measure.

We can go on our website and see we’ve just had another 20 registrations of interest, so then we’d measure the benefits that we give to those people based on the value they’ve provided. I think most of the smaller fibre providers look for the role of champions.

I know Gigaclear for example ask people in villages to go around their local area and knock on people’s doors, collecting signatures etc. It’s important, because it’s hard to appreciate how many people are ready and willing to leave their current provider, and what we find is in some buildings we get 70% takeup.

Not a lot of providers offer symmetrical broadband. You do. Is that because of feedback from customers that uploads would be as important to them as downloads? Is it customer demand? Is it a prediction that’s come true?

The main driver is the technology we’re using. At Be, when we implemented a flavour of ADSL called ADSL2+ NxM. What it did was stole a little bit of the downstream to have a bigger upstream.

The one thing about Be, which Sky apparently is struggling with now, is that our customers had the highest upload speed of anyone, because we were the only ones who implemented that. We had on the 24Mbps product, people could get between 1 and 1.4Mbps up.

Others were getting between 500kbps and 750kbps up – quite a big difference. You could see in the community at the time, meaning the forums and chatrooms – the pre-Twitter age – people really appreciated that. But we have to be honest: Be had a particularly techie set of customers…

Understandable for the product you were offering. If you build it, they’ll come.

Exactly, exactly! We had a very strong group of followers and that was brilliant. With what we’re doing now, it’s just natural to the technology. We’re doing point-to-point between our active kit and the customers’ active kit. It’s what it’s capable of. That is the product that’s offered.

That makes it a lot different from the technologies that Virgin and BT are using. Virgin for example use something called DOCSIS (Data Over Cable Service Interface Specification) which is a bit better than ADSL and can give a little bit more to upload, but you have to take that away from somewhere.

It could be your television channels, it could be your download, but it has an asymmetric matrix to it. With BT, fibre to the cabinet is basically another flavour of ADSL which is called VDSL, and this is a faster version of ADSL. Again, it has an asymmetric nature. I can’t remember if it was O2 or one of the other providers who considered putting a synchronous product out there, but with us it just felt natural.

We don’t expect everyone to take our 1Gb product, but we just like to know that when people come onto our network, when they need it, if they need it, if they just wanted the best available, it’s there.

We kind of expect most people to take the 100Mbps product. I have a 1Gb at home, and I can certainly tell the difference between that and other products. It’s hard to beat, the instantaneous gratification. I send a large email from home and bang, it’s gone. I upload stuff to Dropbox and bang, it’s gone.

Having that symmetric option really completes the experience. Steve Jobs always said he didn’t like doing focus groups because people would tell him what they wanted – and he wanted to tell them what they wanted, and they’re going to like it better.

If you go up to the average person and ask if they’re going to want 100Mbps upstream, they’ll look at you like you’ve got horns or something. We don’t necessarily have the funds or inclination to educate everyone on that.

As a personal user but also in the position you hold at Hyperoptic, the answer might be the same or you might be able to separate them: is there a priority for you on speed over reliability?

On the personal side, the one thing I can say on my old Virgin line is that on Friday evenings, sometimes things would be too slow for. If I had to choose one over the other, it’s more important to me that it’s there. With my hat as MD, I don’t have to make the choice because fibre networks are far more reliable.

They can turn their Christmas lights on – even the bad types – fibre just isn’t susceptible to that kind of interference. We manage our networks so if usage is going up, we’ll increase capacity.

Our customers don’t have to choose between speed and reliability. I’m not better than Sky or TalkTalk necessarily. I’m just choosing to use technology that has better reliability, capability, consistency, across the board, all the time for my consumers.

How would you pitch Hyperoptic to a new customer?

Let me prefix this with the fact that, at least for the moment, we’re focusing on large residential builds. That being said, I’d ask if they’d heard of Hyperoptic. I’d tell them we’re absolutely the UK number one in providing fibre services, including the UK’s fastest at 1Gbps into large residential blocks. If you’re lucky enough to live in one of those, call us up and we’ll make it happen.

Dana Tobak is managing director at Hyperoptic.

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