FRIDAY INTERVIEW:Ken Peterson, US telecoms investor
SITTING IN U2’s Clarence Hotel, dressed in sports jacket, slacks and open collar shirt and sipping a glass of tap water, the passer-by wouldn’t pick out Ken Peterson as a man with telecoms investments on three continents.
His Columbia Ventures Corporation (CVC) owns Irish broadband and telecoms provider Magnet and an 85 per cent stake in Hibernia Atlantic, which owns and operates a high capacity transatlantic telecoms cable.
The former lawyer became an investor in 1987 when he bought and reopened an aluminium smelter in his native Washington state. Columbia Ventures was born.
As Peterson was getting out of aluminium, the telecoms bubble of the late-1990s was bursting. In 2003, he bought the transatlantic cable that is now Hibernia Atlantic’s core asset for just $17 million (€12.4 million) from bankrupt 360 Networks, which had spent $800 million building it.
That business is now “going great guns”, with demand for high bandwidth being driven by video traffic “which has taken off like a rocket ship”, and growth in mobile devices like the iPad, iPhone and Android devices.
In 2009, with funding from the EU, Irish and British governments, Hibernia Atlantic completed Project Kelvin, bringing a spur of the cable to Northern Ireland and connecting major urban centres to Dublin and the UK. He is now exploring the possibility of doing something similar to connect Cork to the UK.
Peterson believes Ireland’s direct telecoms links to the US can be a strategic asset – we are one of only a small number of European countries that have them.
In the meantime, he has embarked on one of his biggest investments to date – Project Express, a 6,000km cable between New York and London. Costing about $300 million, Peterson hopes it will appeal to the new breed of high-frequency market traders who will pay for a link that cuts the time data takes to cross the Atlantic by milliseconds. The survey ships left harbour last week to start work off the cost of Canada on what will be the first new cable between London and New York for 10 years.
“This will be the fastest, most direct route physically possible so that the speed of light can take its fastest course,” he explains.
The most recently available accounts for Hibernia Atlantic Cable System Ltd show it had retained losses of €38.5 million in 2009. But revenues grew to €4.9 million that year while annual losses dropped from €7.1 million to €4.3 million.
The picture is more bleak at Magnet Networks. It had losses of €13.9 million in 2010 and has racked up losses of €88.3 million since CVC acquired the Dublin wireless broadband provider Leap Networks in 2004.
Peterson says Magnet tries to “bring to Ireland things that are at the forefront” of telecoms globally but admits “what we haven’t done a good job of, apparently, is letting people know about that”.
Magnet did this in two main ways – installing high-speed fibre optic networks in housing developments under construction and placing its broadband infrastructure on Eircom’s network, a process known as local loop unbundling (LLU). Although he won’t give exact figures he says Magnet has “thousands” of fibre customers and is running the “largest fibre to the home deployment in Ireland and the UK”.
The property crash put paid to any growth in that side of the business. Magnet made a big investment in LLU and submitted a number of complaints to ComReg over Eircom’s handling of the service.
“It’s been very disappointing,” says Peterson, who believes managing the market continues to present problems for the regulator.
“Since we made our investment, they have consistently allowed the incumbent to rent their service for less and less on a wholesale basis, but have refused to make the necessary adjustments for when we actually rent the line as opposed to the service.
“No-one else in their right mind would come into this market in that way at this point,” he says, arguing that the regulator and the incumbent have destroyed that business case. “This is far different from any other place in the EU.”
He claims Magnet pays five times the rates charged in France for LLU with the result that for end-users, “broadband costs more in Ireland than it should”.
Despite the significant investment to date, Peterson is not pulling back from Ireland and has just made a further investment to launch Aertv.ie. Describing it as the “really exciting next step” for his Irish businesses, it allows live TV to be viewed online.
“This is at the very front edge of what’s happening globally in media and Ireland is right there. We have been heading this direction now for a couple of years. This represents a full-fledged entry into that market.”
It currently includes the Irish channels available on Saorview, the Government terrestrial digital TV service, some international news channels and Aertv.ie – a channel devoted to original Irish content, which launched with broadcasts of the recent Hard Working Class Heroes music festival in Dublin.
“The great thing about the platform we have is the ability to make local events available to the broader community. The focus is on Irish things, which, right now, for whatever reason, are not getting the exposure that this sort of platform can do.”
The model is to sell sponsorship and advertising to fund the venture, which is being headed up by former TV3 and BBC producer Philippe Brodeur.
“We’re not State-supported, we don’t have anything to do with the current TV tax or anything like that. People have to agree, as opposed to involuntarily support media, and I’m a big believer in voluntary action.”
Peterson dismisses the suggestion that the business model could put Aertv in conflict with existing broadcasters, which sell advertising on their own online services.
“They will have to do whatever they think they have to do. That’s the point of competition. They’ll have to figure out what they are going to do.
“In Ireland people who take State money, there are obligations that come with that. And so they’ll have to continue their statutory obligations of course. There is very little broadcaster competition in Ireland.”
Peterson’s interests are now focused on telecoms investments in Texas, Washington and Australia, as well as in Ireland.
Given the scale of what he’s had to sink into its Irish businesses, it probably helps that he has a personal connection with the country – his great, great grandparents left for the US in the 1850s. But he claims he had no regrets about investing in Ireland.
“I certainly think I would have made different decisions in the full knowledge of hindsight. If I had known we were going to have the collapse of the housing market, I would have made different decisions. But you know my grandmother always said you can’t cry over spilt milk. That’s just the way that it is. We took decisions and we make the best of them as things turn out.”
ON THE RECORD
Name:Kenneth Dean Peterson jnr.
Age: 59.
Lives:In suburban Portland, Oregon.
Family: Married to Claudia, has two children (26 and 19).
Why he is in the news:Magnet has launched a free online TV service Aertv.
Something you might expect: The lawyer turned telecoms entrepreneur says he doesn't have any real hobbies other than reading.
Something you might not expect:He's the only individual ever to construct, own and operate an aluminium smelter
