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Virgin Media Expand UK Cable Broadband Network – 17Million Premises by 2020

Friday, February 13th, 2015 (7:26 am) - Score 8,969

Cable operator Virgin Media (Liberty Global) has today announced a massive £3bn expansion (called “Project Lightning“) of their existing 152Mbps capable cable broadband, TV and phone network, which will extend the reach of their fixed line services to an additional 4 million homes and businesses (total of 17 million) by 2020, as a nervous BT looks on.

A total of 6,000 direct new jobs, including 1,000 new apprenticeships, are anticipated to be created over the five year period and in a move that Virgin Media are calling the “single largest investment in broadband digital infrastructure in the country for more than a decade“. By comparison BT set aside £2.5bn for their own commercial rollout of FTTC/P over a similar period (that began in 2009/10).

It’s claimed that the move could add an extra £8 billion of value to the UK economy and consumers and crucially today’s investment is all coming from private and not public sources. Never the less the Government has been quick to claim credit.

Prime Minister, David Cameron, said:

I welcome this substantial investment from Virgin Media which is a vote of confidence in our long-term economic plan to support business and create jobs by building a superfast nation backed by world-class infrastructure. These 6,000 new jobs and apprenticeships will mean financial security and economic peace of mind for thousands more hardworking families across the country. Together with this Government’s rollout of superfast broadband which has now reached more than two million UK homes and businesses, this additional private investment will create more opportunities for people and businesses, further boosting our digital economy and helping secure a brighter future for Britain.”

Tom Mockridge, Virgin Media’s CEO, said:

Millions of homes and businesses will soon be able to benefit for the first time from broadband speeds at least twice as fast as those available from the other major providers. Consumers and business owners who want to make the switch to better broadband speeds now have an alternative; you can call on Virgin Media to ‘Cable My Street’.

In virtually all of the areas we have identified for expansion, BT is the only option available right now. Its ageing copper telephony wires are not capable of the ultrafast connectivity that Virgin Media delivers. Soon we will offer unbeatable services to even more homes and businesses across the country.”

At present Virgin Media’s cable network covers around 44% of the United Kingdom (12.5 million premises), while BT’s FTTC/P platform reaches almost 22 million premises or around 70-75% coverage. Clearly Virgin’s move is targeting BT’s current coverage and aiming to erode their grip in new areas, although a figure of 17 million suggests that most of this expansion will still be very much an urban focused development. Meanwhile BT will fight back with 500Mbps G.fast tech in 2016/17 (here).

In addition, Virgin Media also confirmed what we’ve already reported before, that their parent company Liberty Global is preparing trials of next gen Gigabit capable DOCSIS 3.1 technology across Europe for later this year. This technology could “extend Liberty Global’s speed leadership” up to 10Gbps (peak shared capacity – homes should expect considerably less) when it is fully deployed in the future.

Meanwhile, in the short-term, we also keep seeing rumours about Virgin Media’s desire to offer service speeds of up to 300Mbps using existing technology (Euro/DOCSIS3.0) before the year is out, but this has not yet been confirmed.

It’s important to note that today’s expansion announcement is in addition to their existing work, which is bringing 110,000 additional homes across east London, Glasgow, Sunderland and Teesside within reach of their service.

Crucially Virgin said that their new project will prioritise areas for upgrade according to demand from local homes and businesses (naturally focusing on areas closest to their existing network) and thus communities are being asked to register their interest.

UPDATE 8:31am

Virgin Media told ISPreview.co.uk that they predict the new network expansion will give them a UK coverage of around 60%.

One potential problem with this is that Ofcom might now start to view the operator as having Significant Market Power (SMP) in urban areas and we put this question to Virgin Media, although they appear to be adamant that the network expansion will not make them subject to new regulatory measures. Indeed we’d be surprised if they hadn’t discussed it with Ofcom already, although we are asking the regulator and will update again.

On the roll-out itself, Virgin Media told us that there are areas of London, Birmingham and many other places which currently only get poor connectivity and those are the places where they’re most likely to target first, assuming the demand exists (they expect demand to be high). Some extra FTTP will also be deployed, but Virgin aren’t yet giving any clear indications of scale (i.e. it’s mostly still an expansion of their cable network).

UPDATE 9:30am

A spokesperson for Ofcom said they wouldn’t comment on today’s news regarding regulation, except to say, “We welcome Virgin Media’s announcement that it intends to expand its cable network. It demonstrates the vibrancy of the UK communications market, and should result in increased competition and greater choice for consumers.”

It is however worth pointing out that Ofcom don’t measure SMP by geographic reach alone (e.g. KC’s SMP dominance of Hull), although no doubt they will take a closer look at Virgin in a few years time when the next market review is conducted. Otherwise Virgin Media’s financial results are out and they include a bit more about the above project’s funding.

VM Network Expansion – Financial Implications

The U.K. Network Extension will be completed in phases and will initially focus on the most accretive expansion opportunities. Depending on a variety of factors, including the financial and operational results of the earlier phases of the programme, the U.K. Network Extension may be modified or cancelled at our discretion.

Assuming the full completion of the U.K. Network Extension, we estimate that we will incur total incremental property and equipment additions ranging from approximately £2.9 billion to £3.1 billion from 2015 through 2020, including expenditures related to (i) the build-out of our network, which we estimate will account for approximately 80% of our total investment, and (ii) the purchase and installation of related customer premises equipment.

We expect that these expenditures will be predominantly funded through debt financing and will positively impact our organic revenue and operating cash flow growth, with meaningful and escalating benefits beginning in 2017. The U.K. Network Extension will also increase the percentage of revenue represented by our aggregate consolidated property and equipment additions over this time frame.

Including the full estimated impact of the U.K. Network Extension, the inclusion of UPC Ireland and assuming no changes to our current long-range capital plan, we expect that our aggregate consolidated property and equipment additions as a percentage of our revenue will range from (1) 21% to 23% during 2015 and (2) 25% to 28% during the period from 2016 through 2020.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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