Virgin Media Criticise Rival ISPs and Sky for Offering FREE Broadband Deals

Cable operator Virgin Media, which likes to think of itself as a premium provider, has heavily criticised rival ISPs like Sky Broadband and TalkTalk for offering aggressively cheap “free broadband” promotions. The Liberty Global owned operator warned the situation was “completely paradoxical and ironic” because it risks damaging the case for investment in future upgrades.

At present the consumer broadband market is flooded with a variety of ever changing discounts and special offers, not least with some of the bigger providers being periodically prepared to harness their economics of scale by promoting significant discounts.

For example, TalkTalk’s unlimited Simply Broadband package (normally £3.50 per month) and Sky Broadband’s Unlimited option (normally £7.50 per month) are both currently being offered alongside 12 months of “free broadband” service, although admittedly this is flanked by the need to pay for expensive phone line rental (£16.40 per month on Sky and £16.70 on TalkTalk; although you can save a bit more on TalkTalk with prepaid line rental).

Admittedly low prices are nothing new for TalkTalk, while Sky Broadband is largely seen to be playing the same game in order to fend off against BT’s ability of offer their premium BTSport TV content for free alongside broadband. BT’s CEO, Gavin Patterson, has previously accused Sky of “literally buying” customers with its free broadband deals, which is despite BT arguably doing the same with their BTSport content (albeit in a different form).

Dana Strong, COO of Virgin Media, said (Telegraph):

“I find it completely paradoxical and ironic that this is the sector where we’re promoting and advertising the notion of free broadband access. It’s creating an impression in our consumers’ minds, in businesses and government that broadband should be free.

Broadband is an essential foundation to growing the economy in the UK. It requires investment and sustained commitment. Upgrades are not easy and they are not cheap.”

Ofcom would perhaps argue that today’s market is the inevitable result of their moves to foster greater competition and indeed many consumers do benefit from the lower prices, which no doubt includes a large number of people who might be reading this article. But the downside of cutting prices to the bone is that you’re often left with less money for investing in areas like customer support and or new broadband technologies.

Some might well also argue that this is part of the reason why the Government has needed to intervene through its Broadband Delivery UK programme in order to help roll-out superfast broadband (24Mbps+) speeds across the country, although we have a sneaking suspicion that BT might well have dragged their feet over that one irrespective of how much we all pay. Never the less it’s still an interesting consideration.

Perhaps in Sky and TalkTalk’s case the question is whether we would be seeing more 1000Mbps FTTP style deployments, such as they one they’re both currently working on with CityFibre in York (England), if we lived in a market where broadband packages were more expensive.

But if that were the case then one might also argue that Virgin Media’s position in the market would have come under increasing pressure as their rivals would have better luck at matching the benefits of Virgin’s cable platform. The counter is of course that Virgin could also have had more money for reinvestment, which in turn might have helped them to stay ahead.

At the end of the day this kind of hindsight is all swings and roundabouts and so the question becomes.. what next? So long as Sky feels itself to be at a disadvantage against BT then it will respond in the only way it can, by luring customers through attractive pricing and content offers.

Meanwhile Virgin Media wants prices to rise (i.e. obviously this would make their premium services seem more attractive vs the competition), but at the same time they’re still continuing to invest in their network through new coverage, capacity and future speed upgrades (there are rumblings of a top 300Mbps package tier for later this year).

Mind you it should be said that Sky and TalkTalk have also invested in capacity upgrades, although they’re still largely reliant upon BTOpenreach’s national telecoms network for coverage / connectivity technology and don’t yet have the money to blanket the UK with their own alternative platform (deploying FTTP in 3 cities is at least a promising, albeit slow, start).

Interestingly TalkTalk said they examined the possibility of offering a truly broadband-only (no separate line rental fee) service, but rejected it because of the way comparison websites work and the risk to damaged sales (i.e. some might perceive such a package to be more expensive than it actually is in comparison to rivals).

Sky declined to comment when we queried this matter.