By Simon Woodhead
When I founded this business nearly 25 years ago, it was the world’s first global gateway between the Internet and mobile phones – both of which looked like they might catch on. At the time, whilst closed-source, it was so uncharacteristically open and transparent that a marketing person threatened to make a case study in a book once (no idea if he did). With hindsight, the community engagement returned in later years with our love of open-source and the fantastic people around it. Our wish to discover, embrace and enable ordinary folk to benefit from the latest technology has been a constant though, right to this day.
What I couldn’t have foreseen was the affection people would attribute to Simwood itself, which still surprises me sometimes. We’ve built an ecosystem around what today are pretty commoditised services, with SimCon and our community Slack channels bringing real value to our customers beyond the minutes we shift for them. With our regulatory outreach and my occasional rant, we’ve touched members of the public and genuinely had phone calls thanking us. We’ve approached that in a way that tries to represent the industry and our customers rather than our own pocket – and arguably more effectively than some of the talking shops whose function it is. I appreciate that it makes us, and me in particular, ‘marmite’ to some people and I really wouldn’t have it any other way – if you don’t stand for something you stand for nothing. I don’t want us to be pointless.
The other day, a customer posted in our community slack the suggestion that we were not true to our original values and it upset me. It is probably why a week later I’m writing this. I think he’d misunderstood our talk of Simwood Residential somehow, but as he wasn’t around in 1996 the talk of ‘original values’ perplexed me. On reflection I realise how much he cares for Simwood and how he not only felt the need to speak up, but we’d given him the means to do it – a medium through which he could share his opinions with other customers. Whether or not I disagree on the values argument (and I do), I realise that his care and the outlet for it are incredibly special and are to be protected. I don’t think many for-profit organisations have anything close, certainly not in our sector.
As to values, I don’t think they’ve changed but I recognise that those who have embraced us since 1996 have seen their own in us. One constant for us has been change, so we’ll probably have been a different company potentially for each customer joining us, delivering different values to them. Other constants have been fairness and transparency, as well as the founding wishes to discover, embrace and deliver new technology to ordinary folks. I’d argue quite passionately that they’re still there but I am reassured that there are those around and indeed within the business that keep my reality in check!
However, you’ll note those values transcend product. In fact, change requires the product not to be constant. Transparency and enablement apply as easily to wholesale VoIP as they do to SMS; as they do to pretty much any technology out there. Lastly, we’re not a one-night-stand business (get in, get out, get lost), we plan for and play the long game; you could say the infinite game.
So turning to product, wholesale voice is a tough market and has got tougher. It’ll get tougher still and quite possibly won’t exist in 25 years time (25 years being our age, not my estimate – I think it’ll happen meaningfully sooner). We’ve rolled with that, making incremental changes with mixed response along the way. In a market where the volume of minutes falls every year, and where the price at wholesale has been driven down every year (more by regulation than competition) we’ve done well to grow as we have. We’ll continue to grow despite the declining market, in that I’m confident, but in a business that requires change, operating in a market that is deteriorating, I have to look to the next 25 years and act accordingly. Doing so is being true to our values, but so is being fair and transparent about it.
I explained at SimCon how margin had shifted from wholesale to retail. That hasn’t affected those who are vertically integrated (which excluding us is everyone of scale in our field, with one exception) – they’ve just seen their retail margins climb 6-7% per year compound and thought they were clever, especially in a volume declining market. By contrast, wholesale margins have fallen 12-15% compound. The result is of a typical seat sold to an end-user at wholesale we see 1% of the revenue and 0.6% of the margin – whatever your seat price that is single-digit pence! Sure, we’ve dramatically outgrown that headwind with volume and I’ve long believed one’s margin comes from optimising the buy side, but it isn’t sustainable without the ability to have the rest of the industry subsidise your costs, a privilege which only one operator enjoys in the UK.
Of course this is no surprise, the writing was on the wall in 2014 when Ofcom took away 86% of our income on incoming calls, whilst simultaneously letting BT recover its own inefficiency by increasing rates on the buy side. We’ve responded and thrived since then but one reality that showed was we had to be vertically integrated. We bought Sipcentric in 2019, 4 years later than we first tried to, and from that was born Simwood Partner. We’ve focussed a lot of effort on growing Simwood Partner since and will continue to do so because frankly that is where the margin is. Generally our customers have responded positively to that – those wholesale customers who have their own partner services are adding value in a different way and the market is big enough for all of us. Others have been able to move across, benefitting from an evolution in platform and avoiding wholesale minimum spends.
With Sipcentric we inherited Nimvelo and at the same time acquired Birchills Telecom, both reselling the Sipcentric platform directly to end users. As we said at the time, these consume services from Simwood Partner on the same price structure as everyone else, and indeed Simwood Partner consumes wholesale services on the same price structure as everyone else. Fairness matters to us.
One of our objectives for this year, is to unify those two brands under one umbrella – Simwood Direct. As the name suggests and as Nimvelo at least has historically operated, this is transactional and self-service for that portion of the market that would otherwise go to another transactional self-service option. By definition, and indeed expectation, all of our wholesale and partner customers are adding value in different ways and therefore I maintain (as I did at SimCon) that we can’t possibly be competing with you. If you’re blindly reselling what we offer and adding no value whatsoever then you perhaps need to reconsider what you’re doing, but we’re blessed with a dynamic and innovative customer base who are all doing something different. We’re all together battling the clone army, but doing so in our own individual way.
However, as a bunch of individual businesses battling the clone army, we need to work together and that is where the Simwood eco-system becomes so valuable. I have tasked our new CMO Claire, to come up with a way of turning this into a win-win. A way where we could conceivably go as far as promoting Simwood Direct on the TV and you’d welcome it because it’d be generating you leads. This needs to be opt-in of course, some may prefer us to remain a secret weapon, but ultimately it is about getting the best solution for the end-user, be that ours or be it yours. Likewise, we recognise that partners may need something different from a platform than ours offers, but we have wholesale customers that may suit better. We need to embrace that! I don’t know what it’ll look like yet, and arguably it is a bit of a challenge to set a new-starter. Facts are though, we will have direct customers and we do not want to compete with our customers, and that square needs circling better than anyone else has.
Hopefully there’s nothing outrageous here – we’re aiming to be more like, er, the entire marketplace bar one that has decided to ride the dividend and Range Rover train to zero. That’s a choice we respect but not one we’d make or expect our customers to welcome. Wholesale will remain our economy for quite some time still, and we intend to grow it much further.
Lastly, as part of our plan we need to leverage the assets we already have and the largest of those is our network. It dwarfs that of other voice-only competitors and even modestly large ISPs. We handle the most quality sensitive, but high value traffic so have always run the network accordingly. Arguably we’d have saved a few million just shifting cat pictures and porn, or running a voice network on a couple of Cisco’s from the 90s. We’ve always offered connectivity, but in a premium ‘keeping the lights on’ kind of way. We intend to offer it more widely, and will be doing so at all levels of our business – at wholesale, to partners, and direct. Arguably we should have done this years ago but of the many things that COVID-19 has changed, the need for quality connectivity and the acceleration of the need for us to move beyond voice have been right up there. Standby for news.
I’m sorry to those who read this and expected me to announce my retirement. I have a lot more fight in me yet both for our customers and for a fair and transparent marketplace (and am a lot younger than you might think!). When I do go though, I’m reassured our customers and amazing staff will ensure we stay on track.
