A bit of background..

Just over ten years ago, I was frustrated with a company called Nynex. They operated the cable franchise in my area and became to be known as Cable & Wireless, NTL, and now Virgin Media. The reason for my frustration was that I wasn’t able to get their ‘cable broadband’ service and they had no clear idea of when this would be available in my area. And then came BT, which started rolling out ADSL services quite quickly. So, I became an ADSL user, and hence the interest in ADSL news and information which resulted in the setup of ADSLguide.org.uk.

Virgin Media Swirl

Until the mid noughties, BT was the company that everyone was watching, pushing the boundaries of broadband speeds beyond its 0.5 – 2.0 meg days to ‘up to 8 meg’ services, but at this point Virgin Media, a company that unified the assets and strategies of diverse cable operators, set about becoming the market leader on broadband services. This change in strategic position was long overdue as Virgin had access to a network that used different set of underlying technologies and thus had (and still has to a great extent), a technological advantage when it comes to speed with its footprint reaching over half of the country. BT’s key strength on the other hand was a wider reach, but because it has to provide its services on a wholesale basis to competitors under a regulated environment, this is of limited benefit to its shareholders.

By starting to take advantage of its network infrastructure, Virgin Media has not only taken the lead on 20Mbps rollout, it was first to offer a widely available 50Mbps service and will be first to offer 100Mbps to half of UK homes. It is also able to deliver the best like-for-like speeds because its network isn’t affected by the signal degradation that ADSL services suffer from.

There are certainly good questions to be asked about what one needs 100 or even 50 Mbps for at the moment, but pushing the  boundaries is important as it helps to pull the entire market up, and encourages innovative new applications to be developed which can use that bandwidth. Indeed the take-up of the 50 meg service is not very high, but it does help Virgin market itself as the provider of the fastest broadband services.

So why does Virgin Media need to think about this when BT’s FTTC services aren’t even going to keep up with Virgin’s current ’50 meg’ service? BT services are more flexible as you can buy it from various providers who can bundle it with many other solutions providing you a range of services suitable for your requirements. This may mean faster upload speeds, multiple IPs, etc.

There are four key features which I feel Virgin Media ought to be looking at, in order to increase take-up of their fastest services (and therefore increase their margins):

1. Offering static IPs and routed IP blocks for customers

Many of the ‘power users’ who are prepared to pay up to £38/month for a super-fast broadband service would also be looking for either a small block of IPs or at the very least a static IP address. This makes it easier to access one’s network remotely, or configure your own VoIP service, something these ‘geeks’ are quite likely to want to experiment with. This has been one of the reasons I have not considered it as an option personally.

2. Increasing upload speeds

The fastest upload speed on a Virgin Media service is 1.5 Mbps (on the 50 meg ‘XXL’ service). Whilst this is well within the range of competition for premium services, it’s certainly not something to shout about. Virgin should be looking to try and extend this to the 5-10Mbps range; this would mean ADSL providers would struggle to deliver anything similar for quite some time.

3. Getting the community to promote it

PlusNet have done very well in getting their own users to be their best advert for the service by engaging with them and helping them to help others. They provide discounts to those customers who refer others, and if you work with the early adopters, then they will often be the same people who find themselves being asked to recommend a service provider to friends and family.

4. Offering better business broadband services

Virgin Media Business is a unit that offers services to businesses, including some competitive leased-line alternatives. It also offers a 10 and 20Mbps business broadband service, although isn’t something it promotes heavily as many business users are unaware of it. It also doesn’t offer the fastest 50Mbps service to businesses. There is a significant market for small businesses who want better upload speeds in particular, as well as blocks of IP addresses. By extending the residential offering to businesses, and making sure it’s promoted, they could grow the high value market significantly.

Whether it chooses to do this via its existing VM Business division, or through channel partners (similar to the way Fluidata provide the wholesale version of the BE/O2 network to ISPs) is of course something they need to consider carefully; however their network asset is still not used to the fullest extent I suspect, unless it has significant capacity problems in its access network which haven’t become apparent due to the low take-up of super-fast broadband services.

Conclusions

Virgin Media have a unique opportunity with their network, an asset no other service provider had access to at the moment, just like they had in the early 2000s; they have started to exploit this resource. I’m not a huge fan of the ‘fibre optic broadband’ advertising campaigns, but the approach is very clever.

However, unless they ensure they stay ahead of the game, they may find others will be chipping away at this and sooner or later, fibre networks will be spreading and they lose this competitive advantage. By then, not only should they be looking to keep up with competitors (or indeed stay ahead), their customer base itself may be their unique resource.

Most importantly of all, it’s not all just about the downstream speed.

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2 Responses


  1. Carl Thomas on 22 Sep 2010

    Great article Seb, and really agree with you on a number of your points. I think VM have a strong consumer focus and that is prevalent in their marketing message. This will only increase as they start to use their network more and more to underpin their IPTV offering.

    With the launch of VMBusiness, they seem to understand the potential of the buisness market. However they still have problems fully embracing the key issues that businesses have with broadband. Their support/provisioning systems are still very dependant on their NTL brand, where little investment is being made. Also, their reluctance to embrace a true wholesale model imho has hindered their development, as if they provided access to other ISP’s and Network Operators, their return would have increased suitably, making it an easier business case for network expansion and business focused products.

  2. Philip on 31 Mar 2011

    Seb, like you I always thought that Nynex (we’re talking about East London here, aren’t we?) would be a great competitor to BT. All the way back to the days of paying £1000 for a 1200bps modem, then £300 or so for a 14.4kb modem!

    How wrong we were!!

    But they (and all the companies that bought them: C&W, NTL, Virgin) just DON’T GET IT.

    Shame, isn’t it…..


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