Investing in fibre optics

Logic, which recently acquired TeleCayman, is expanding its fibre network enabling the voice and data provider to offer the highest internet speeds on island and new services such as LogicTV. Logic CEO Mike Edenholm talks about the telecommunications company’s strategy in Cayman.  

 

Logic is the trade name of WestTel Limited, a wholly-owned subsidiary of Bermuda-based telecommunications group KeyTech Limited. KeyTech entered the Cayman market in 2004, following the liberalisation of the telecommunications market, through a joint venture with WestStar.  

The venture, WestTel, began to offer telephone and internet services, independently from WestStar’s TV business. When the two shareholders had differences about the future direction WestTel was going to take, KeyTech bought out all the shares in the venture in 2010 and rebranded it as Logic, explains Mike Edenholm, CEO of Logic. “Since then KeyTech has made significant investments into the company.” 

In April 2012 Logic signed a licence for the provision of an island-wide fibre optics network. And in a move to solidify its position in the Cayman Islands communications market, Logic earlier this year announced the acquisition TeleCayman. The firm offers similar products and services but it is TeleCayman’s fibre network that is the main objective of the deal.  

“With the purchase of TeleCayman Limited, Logic will have a significantly larger fibre footprint enabling us to service more customers over a larger area of the island,” Edenholm says.  

The consolidation of the market expanded Logic’s reach both in terms of infrastructure and market segments, he adds. “It is an easy way for us to increase the number of miles that we had underground and also it solidifies our position with the corporate market, which is important to us.” 

Logic has focused for the past two years on making strides in the corporate segment. Through the acquisition of TeleCayman it will grow its number of customers further. But it also takes over a fully redundant fibre network. “If a customer wants two local loops, we have two independent local networks and that is exciting for us as well,” Edenholm notes.  

Larger financial services customers, like international banks or fund managers, value the network redundancy as part of their disaster recovery preparedness, as it gives them the ability to switch to an independent network, laid in different pathways and separate trenches and ducts, if one network goes down for example following a natural catastrophe or accident. 

 

Infrastructure challenges  

Edenholm says Logic, like other affiliates of the KeyTech group, is an infrastructure company, whose focus it is to provide better infrastructure. Until now Cayman is lagging behind internet speeds offered in most industrialised countries, mainly because most internet services are provided over wireless or landline DSL networks. At the same time prices are comparatively high. 

Cayman’s lack of infrastructure is driving the market to fibre. WestStar is already building a fibre network and Edenholm expects LIME to follow as well. 

“The reason we chose fibre is the price point has come way down from ten years ago. It has a strong growth curve; we can meet the demands of the public for many years to come,” he explains. 

Slow internet speeds where another reason for Logic to exit its wireless offering altogether and move all customers to fibre. The migration begins in the Seven Mile Beach area and George Town but will eventually extend to the whole island, as required by Logic’s licence agreement. 

In addition to growing its corporate market offering, the extension of Logic’s network with a $54 million investment over the next five years constitutes a push into the retail segment.  

With a fibre network Logic can not only offer the so far highest internet speeds, up to 20 megabits per second, but also new bandwidth intensive services such as internet based TV. 

Bringing up the internet speeds to 20Mbs and beyond is “just huge”, states Edenholm. The company offers a maximum of 20Mbs internet speeds as a starting point but fully expects this to grow in the future. 

As available internet speeds are going to increase significantly over time, pricing is not going to decrease much. The reason, Edenholm says, is the off-island connection of the local internet networks, rather than local operational issues. Prices in Cayman are always going to be higher than in the US, because of the off-island capacity costs, he explains.  

However, in terms of capacity both operators of off-island cables have upgraded significantly over the years and indicated this will continue to meet demand, he says.  

“I would say the price point for internet is $99 and that is where it is at,” Edenholm says and adds Logic will always offer three packages at different speeds and prices.  

LogicTV, a subscriber-based television service that launched in January of this year, is not only a significant investment but it also pits Logic against LIME which has the majority of residential internet customers and WestStar which services the majority of the residential television market.  

LogicTV packages include restart and catch-up features providing customers with a more interactive usability than standard cable or satellite options. As channels are transmitted via the fibre optics network the image is unaffected by wind or rain.  

To adequately provide customers with the ability to record multiple HD channels, the service consumes a tremendous amount of capacity on the fibre side, admits Edenholm. Typically customers are using between 50 and 100Mbs between television, internet and telephone, but this is expected to increase. As a result the fibre bandwidth that Logic brings into a home far exceeds the 20Mbs customers are charged for the internet connection.  

 

Market opportunities  

Edenholm says Logic’s significant investments in a relatively small market, like the Cayman Islands, are an indication of the company’s and its parent company KeyTech’s confidence in a recovery of the Cayman economy.  

Although the country’s historic growth rates have been interrupted, he believes Cayman will grow both in terms of the size of the economy and its population.  

For example there are some major projects, like Health City, in the works. “A fully loaded health City is 12,000 people. It’s huge and there are other significant projects on the drawing board to support that project.” 

Edenholm believes that the Cayman people want to grow, albeit in limits and in particular areas. “But the country wants to grow. And that’s important.”  

When building something like a fibre network with a lifespan of 15 to 20 years it is important to take the long view. Also in a universal licence environment those companies with infrastructure are typically the long term players, he says. “So you have growth potential and there is long-term value in owning infrastructure.” 

Edenholm who as the CEO is also responsible for Logic’s operations in Bermuda says Cayman is not just another market. “It is the market that is why I am here.”  

Because the potential growth is so high, the company’s main investments are in Cayman. 

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