Startup Aims to be the “Bulb of Broadband”

Broadband startup Cuckoo has closed a $6 (£4.3) million funding round as it aims to disrupt the UK’s telecoms sector.

Founder Alexander Fitzgerald drew inspiration for the company when he worked as a PR advisor for the challenger energy supplier Bulb. He saw how disruptor companies like Bulb and Octopus Energy drove the Big Six from a 90% market share to just 55% in just five years and wondered if something similar was possible in the broadband market.

Currently, 90% of UK homes receive their broadband from just four companies: BT, Sky, TalkTalk and Virgin Media.

Fitzgerald also noted the low levels of customer satisfaction with their broadband providers. Complaints about broadband providers are 40% higher than complaints in other sectors, including mobile and energy. 

A large driver of complaints about broadband is the “loyalty penalty.” Broadband companies hook customers with attractive introductory rates and then hike their prices when their contract term ends, sometimes by as much as 89%.

Cuckoo aims to solve these problems with straightforward broadband tariffs and customer service powered by new technology. It sells broadband packages over Openreach’s infrastructure, which reaches 90% of UK homes.

“We are the consumer software layer of broadband supply. We don’t own the wires or route the network traffic. We acquire, bill and service customers more efficiently through building the latest technology and having no legacy systems,” Fitzgerald said.

Cuckoo sells one broadband package, delivering the fastest speed your house can receive (on Openreach’s infrastructure), at £29.99 per month, with no hidden fees. Packages are bought on a flexible rolling contract basis, with no exit fees. Cuckoo says its deals save households an average of £130 per year on their broadband bills.

Cuckoo currently has 10,000 customers and has posted 250% growth so far in 2021. It expects the new funding, from RTP Global, JamJam Investments and individual investors, will help them reach "tens of thousands of people across the country."

Being broadband’s Bulb is a lofty goal. Bulb was recently named Europe’s fastest-growing company, with revenues soaring 1,159.3% between 2016 and 2019. It now provides energy to around two million UK households, up from just 200,000 at the end of 2017.

Meanwhile, Octopus has achieved a valuation of $2 billion. It provides energy to 2 million UK households and has millions more served through its innovative Kraken customer service platform, being adopted by energy providers around the world.

But Cuckoo thinks customers who have already ditched their high-street bank for a digital challenger and abandoned the traditional energy giants for startups will jump on an alternative broadband provider. 

“Banking, energy and broadband. It makes sense that the industries would be disrupted in that order. If you’ve switched your banking to Monzo or Revolut, your energy to Octopus or Bulb, it makes it more likely you’ll switch the last one too,” Fitzgerald said.