UPD Virgin Media Slams UK Government for Gifting BT a Huge Public Subsidy

The Chief Operating Officer (COO) of cable and broadband giant Virgin Media, Andrew Barron, will today tell the House of Lords Select Committee Inquiry into the UK’s national superfast broadband strategy that BT are effectively being subsidised by government policy and thus “freezing out new entrants” from the market.

The governments Broadband Delivery UK (BDUK) office has so far set aside £530m (plus a further £300m after 2015 that could be found by using some of the TV Licence Fee) to help 90% of the people in each local authority area gain access to a superfast broadband (24Mbps+) service by 2015 (the last 10% would be given at least 2Mbps).

Sadly most of the alternative operators have since dropped out of this process, with some often pointing towards BT as having an unfair competitive advantage (example) or saying that the “sums simply did not stack up” (Fujitsu). As a result BT are now the only major operator left in the process, with Fujitsu’s interest having since diminished to bidding for just Cumbria and North Yorkshire.

Fujitsu’s project, which is strongly supported by Virgin Media, TalkTalk and Cisco, originally intended to develop their own 1Gbps capable superfast Fibre-to-the-Home (FTTH) based broadband network that would reach 5 Million homes in rural areas by 2016 and act as an alternative to BT’s national platform (albeit by using BT’s own cable ducts and poles).

Andrew Barron, COO of Virgin Media, said (The Guardian):

“The noble ambition of locally procured rural broadband networks is protracted and likely to favour the incumbent, freezing out new entrants. The outcome of current government policy is likely to be the subsidy of already dominant infrastructure in areas where we are not, to the sum of hundreds of millions of pounds of public money.

If we agree competition is the best way to encourage further sustainable investment, and that embedding dominance in markets is bad for consumers, we must also accept that providing the vast majority of available public funding to an incumbent is not in the UK’s best interests.”

In fairness Virgin Media has also taken a fair degree of criticism over the years, often for refusing to open up its own cable network to wholesale access by rival providers; but then their platform wasn’t originally built with public money. Similarly Virgin Media does not have the same national responsibilities as BT and has kept its predominantly urban focused cable coverage at around 50%.

Likewise we should not forget that BT also plans to push a huge amount of new match-funded investment, possibly up to around £1bn more than their current £2.5bn commitment, to help achieve the government’s target. On the other hand it’s clear that BDUK’s process, where for most areas the only real bidder is now BT, has some extremely significant flaws.

Understandably Virgin Media and most non-BT ISPs would prefer to see the public money going towards promoting alternative infrastructures or to at least give rivals a fair chance. At present the bar is set so high that it would be very difficult for any operators, other than BT, to bid competitively.

UPDATE 12:33pm

BT has just sent us their official reply.

A BT Spokesperson told ISPreview.co.uk:

“BT would be more than happy to compete directly with Virgin for BDUK funds but we doubt that will happen. That is because Virgin have steadfastly refused to provide open wholesale access to their network – a key BDUK requirement – and because they have shown no interest to date in supplying rural areas with broadband. This is in contrast to BT who offer broadband services on a wholesale basis to 99 per cent of UK premises. Fujitsu have announced their intention to bid for funds and so there will be a competitive process. We are already seeing this in several part of the UK“.