The network operator, which is incorporated in Bermuda but has its operational HQ in Egham, UK, combines a retail comms activity targeting mid-market business customers in its home country with a fiber backbone that traverses six European countries: UK, France, Germany, Netherlands, Belgium, and Switzerland.
The fiber backbone is a legacy from the days of the telecoms boom, when Viatel and many other start-up carriers were empire-building in anticipation of exponential growth in the demand for bandwidth. That era ended in telecom’s nuclear winter (2001-2004), resulting in Chapter 11 proceedings for Viatel in May 2001. It emerged from bankruptcy a year later, with a longhaul network of 72 fibers, giving it enough capacity to carry all of Europe’s comms traffic, as have many of our competitors, according to CEO Lucy Woods.
The business focus in 2002 was initially retail comms in the UK and Switzerland, with the Swiss operation being sold to Swisscom in 2005 at around three time return, said Woods, enabling the recovering company to concentrate entirely on the UK. With the six-country fiber network largely lying fallow, Viatel took steps to generate some revenue from it in February by leasing half the asset for 100 years to Global Voice Group Ltd, a Singapore-based company that has just launched a dark fiber business called euNetworks on the back of it.
In addition to the 25m-euro ($32m) up-front payment, that deal also brought Viatel five fiber pairs on Metro networks in seven European cities (London, Amsterdam, Utrecht, Rotterdam, Frankfurt, Hamburg, and Dusseldorf), which is half of the total Metro mesh networks GVG acquired when it bought Metromedia Fiber Network in 2005. Just as importantly for a recovering company, GVG also agreed to pay half the operating costs of the backbone network from the second year of the lease.
Having developed its retail business around data (connectivity, hosting, and security), Viatel branched out into voice services in May, and with no legacy switched voice revenue to protect, opted to offer VoIP only, with aggressive pricing and services that Woods claims put the company ahead of the game in the UK.
Its three VoIP services fall into two categories: a toe-in-the-water VoIP gateway card for legacy PBXs to enable outbound VoIP calling, and VoIP over a Viatel IP VPN, whether as a managed service or run by the customers themselves. We insist on the managed VoIP service going over one of our VPNs in order to guarantee QoS, said Woods. There are currently technical problems if we try to deliver our VoIP service over other people’s VPNs. She made no secret, however, that if such issues can be resolved, it would open up a much larger market for Viatel, which would then be able to target other carriers’ mid-market customers with its VoIP services. That’s on our roadmap, she said.
Beyond that, Viatel would like to upgrade the optoelectronics on its backbone network so as to re-enter the wholesale market. That market has evolved to people buying individual wavelengths, but to sell them we need to update our circa-2000 electronics, said Woods. She said the cost of a complete update throughout the network would be between 5m and 6m pounds ($9m and $11m), and that one alternative would be to do it in stages, country-by-country. The ambitions are modest on this front, however. We’d just want to hit breakeven so as to be generating some revenue from that side of the business, she said.
While its focus has been and still is primarily on SME since the return from Chapter 11, Viatel continues to offer services to corporate customers, and a recent significant development has that Vodafone Group Plc, which has been a customer for several years, has gone public with the fact that it is reselling DSL and leased-line connectivity from Viatel in the UK.
