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Virgin Media UK Warns BT Against Anti-Competitive FTTP Discounting

Monday, October 19th, 2020 (8:56 am) - Score 13,608
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Broadband ISP Virgin Media UK has warned the market regulator, Ofcom, against allowing BT (Openreach) to sign “deeply discounted and long-term” wholesale agreements for “full fibre” (FTTP) services with rivals ISPs, which they claim might make it harder for alternative networks to compete against the established giant.

The latest remarks stem from the cable operator’s submission to Ofcom’s on-going Wholesale Fixed Telecoms Market Review 2021-26 (WFTMR), which has only recently been published in public after being privately submitted to the consultation several months ago. As you might expect all of the new submissions are playing to each company’s vested interests.

NOTE: BT plan to invest £12bn to help Openreach rollout FTTP to 20 million UK premises by the mid to late 2020s (here). Virgin Media is also talking about adding 8 million more UK homes (here).

For example, last week saw budget ISP TalkTalk criticise Openreach for their alleged failure to sign long-term discount deals (wholesale), which they say would help boost take-up of their gigabit speed Fibre-to-the-Premises network (here). On the flip side TT is concerned about the removal of regulation from Openreach’s older copper lines (here), which could result in more expensive legacy services (i.e. pushing people on to fibre).

In response, Openreach reminded TT that they had a “legal obligation to treat all of our customers equally” (i.e. being too generous on FTTP pricing could breach UK competition rules). Fast forward to today and we now have Virgin Media arguing an opposing position to the one being put forward by TT, which reflects their wider interests.

Suffice to say that Virgin’s angle here is different because they’ve both built their own closed network infrastructure and run their own ISP on top. At the same time the operator currently appears to be considering the launch of a new wholesale division and a major network expansion that could rival Openreach, which means that whatever is good for Openreach might potentially end up being bad for Virgin. Cityfibre share a similar position.

Virgin Media’s Statement to Ofcom

Wholesale partners are critical for both challengers and Openreach, but these desires are unlikely to be complementary. We suspect most altnets will prioritise relatively dense areas with attractive CPPs as well as areas where Openreach’s existing network performance is below its national average i.e., where FTTC technology is struggling to cope with customer demand.

These factors are likely to be important considerations for Openreach’s own prioritisation, alongside targeting areas of Virgin Media coverage to improve competitiveness. As a result, rather than complementing one and other, altnet build locations and Openreach fibre rollout are likely to materially overlap and so directly compete. In these scenarios volume- and term-based discounts can have the effect of foreclosing competition.

If a larger retailer negotiates a deeply discounted and long-term deal it is unlikely to focus on committing to a partnership with an alternative infrastructure provider if such a deal should jeopardise the discounts received from Openreach. If Openreach were successful in securing the large majority of its wholesale customer base on long-term arrangements, it is difficult to see how competition from altnets would not be adversely impacted.

Openreach have already moved to facilitate their ISP clients by offering special FTTP discounts, which has enabled providers to benefit from price reductions when they help to drive take-up (example). Earlier this year we also reported that the operator was exploring a potentially even bigger discount scheme by the end of this year (here), but that has yet to materialise and there’s clearly a hot debate over this side of things.

Suffice to say that Ofcom’s job in all this is to try and find some balance between the many opposing views, which enables Openreach to get a return on their investment by pushing forward with FTTP, albeit without giving them so much freedom that it potentially causes harm in other parts of the market. It is not an easy task.

Ofcom have said that they are “alive” to the issues raised above and will act to “restrict” any discounts that are too aggressive (here), although Virgin Media complains that the regulator remains “rather opaque in how it would decide whether to act and what any remedy might be.”

An Ofcom spokesperson told ISPreview.co.uk:

“Our plans are designed to support competitive investment in faster broadband, from a number of different networks. Some forms of long-term, wholesale discounts can act as a roadblock to investment from rival companies. We’ll be able to review these types of agreements and restrict them if necessary, to prevent any practices that stifle competition.”

An Openreach spokesperson told ISPreview.co.uk:

“We’ve been encouraged to see strong demand from our wholesale customers as we work to build the biggest and best full fibre network in the UK. Openreach exists to promote competition in the market, and we take our legal obligations very seriously, so we’re working closely with customers to develop attractive propositions which safeguard that competition.”

Lest we also forget that Openreach still has to balance all of this against needing to ensure that FTTP isn’t so cheap as to make it harder for them to recover their planned investment. Meanwhile cheaper FTTP packages are of course something that consumers will welcome, although in fairness most of them are already very affordable, particularly given the improvement in speed and reliability.

UPDATE 9:49am

Added Openreach’s full comment above and one for Ofcom too.

Leave a Comment
29 Responses
  1. Avatar ianh says:

    Fine line to walk here

    – You let them, a price war breaks out, customers get cheaper fibre but no new players will want to lay fibre, eventually prices will rise when someone wins the price war

    – Don’t let them, prices remain fairly stagnent rising with inflation because everything is funded by debt these days BUT the market is wide open for new players to come in and compete on price like CityFibre and the 6 million other companies that have launced in the last few years.

    It’s a tough one. Personally i’d have tiered discounts based on the size of the vendor, but i can poke holes in that too. I also think its rich that Virgin don’t allow wholesale access to their own network!

    1. Mark Jackson Mark Jackson says:

      Don’t allow wholesale access.. yet. Watch this space.

    2. Avatar James™ says:

      @Mark,yet??? Hmm interesting. I suspect Sky to be part of it.

    3. Mark Jackson Mark Jackson says:

      Sky have shown the most interest in it, yes. I’m sure Liberty Global would want more than just Virgin Media to be the retail anchor tenant for any new wholesale proposition. I suspect Sky are also negotiating with Cityfibre too, so there will no doubt be a decision on this at some point.

    4. Avatar Jonny says:

      It will be interesting to see how VM manage different providers on their network, hopefully they come up with something better than their current way to service business broadband customers.

    5. Avatar Sheepcentral says:

      BT have the monopoly if you live in a rural area, despite being subsidised by local councils to provide superfaSt broadband, they fail to provide any infrastructural maintenence and will only do so if households agree to shift onto business 5 year contracts. Zero sympathy with BT and welcome others who will bother to sort the disgrace of inequities in digital connectivity in the UK. Paying more than £100 per month for broadband only and still regular outages.

    6. Avatar John Lumb says:

      The refusal by VM to allow other ISP’s to use their fibre optic cables makes this a joke in my opinion. They promote superfast speeds but provide substantially less in fact in some cases lower than the national average and their customer service is very poor as well.

  2. Avatar joe says:

    V hard to take VMs point seriously. DO we foresee tiresome JRs incoming…

  3. Avatar occasionally factual says:

    Once Virgin and CityFibre et all are put under the same controls on pricing for infrastructure as BT Group are then Virgin can complain.
    I have never like the idea that Virgin who cover over 50% of the market are not price controlled. And many of their customers are unhappy with that situation too as many have zero chance of getting an equivalent service in their locality currently.
    Now that BT and others are overbuilding the Virgin network with FTTP, Virgin is getting its knickers in a twist again. Just because it can see that it isn’t going to be able to price gouge the consumer for much longer.
    So if Virgin want BT hit by more regulations then it is only fair if they have the same applied to them.

    1. Avatar SymetricalAccess says:

      Well said. Virgin media should just sit down, be quiet and concentrate on improving their crippling asymetric speeds, unreliable network and abysmal customer service instead of trying to remove the competition so they don’t have to bother. Else be subject to the same regulation.

    2. Avatar A_Builder says:

      @SymetricalAccess & @SimonR

      I’m sort of inclined to agree.

      VM went around shouting about their Zoom whatever and actually invested very little in their network.

      OR equally invested pathetic amount in the last mile (compared to the income they were reaping).

      Alt Net come along and shake the two ogres to wake them up.

      OR wakes up and goes on a high fibre diet.

      VM slumbers on for a bit wakes up and cries “unfair” all thees other people are investing stack of cash, we don’t want to do it on the same open market terms.

      OR is presumably discounting to give the ISPs the incentive to switch people from copper to FTTP so OR can feel the goodness of not having to fix copper line faults. I can’t really blame them.

      Maybe VM shouldn’t have been the last investor at the party?

  4. Avatar James Johnson says:

    When Virgin complete their DOCSIS upgrade they’ll became the major provider of 1Gbps capable infrastructure.
    Virgin don’t care about alt nets. They’re just trying to reduce competition in what will be their 55% coverage of the UK.

  5. Avatar Buggerlugz says:

    Why don’t OFCOM make Virgin unbundle their fibre to other resellers then? After all they made BT do that with ADSL back in the day. Problem solved.

    1. Mark Jackson Mark Jackson says:

      Some of this stems from history, with Virgin Media’s network being built entirely by private investment. The fact they cover only a little over half of premises, nearly all of which are in commercially competitive urban areas, is another issue to consider.

      In short, VM is not currently deemed to have Significant Market Power (SMP) and its presence is more beneficial than harmful to competition. But where this starts to strain is when they build out further after 2021.

  6. Avatar SimonR says:

    Is this the same Virgin Media that threw their weight around in Southampton when Toob announced their plans? https://www.ispreview.co.uk/index.php/2019/07/david-vs-goliath-virgin-media-threatens-rival-uk-full-fibre-isp-toob.html

    To quote another article – Nevertheless the CEO of Virgin Media, Lutz Schüler, recently warned that he intended to “fight back” against smaller alternative network providers and “will use everything to keep them out of our city”

    Maybe Virgin should sit down and shut up. Their arrogance in the above made me think about leaving them. And this hypocrisy has just decided it. Just as soon as the VF Gigafast pipe outside lights up, obviously…

  7. Avatar Meadmodj says:

    Can’t win. One week we have Talktalk complaining that OR will not agree to FTTP volume discounts, OR insisting that they need to be equitable to all parties and the following week Virgin then complain that this will undermine their wholesale network ambitions.

    My view is that Ofcom should simply declare these areas as commercially competitive and that the market will dictate. Ofcom should simply concentrate in geographical areas where a specific provider has a monopoly on Ultrafast+ services including VM.

    1. Avatar James™ says:

      I agree. In my area, the average FTTC speed is only about 40mbps due to the way the infrastructure is laid out and the distance from cabinets. or in my case, my current house doesn’t even have an OR line installed. VM has a significant advantage due to the speeds they offer and now that Gig1 has been available for a few months now.

      I’d like to see VM open up to wholesale as OR isn’t including my town in the Fibre First program but all the villages around are getting it.

  8. Avatar Virgin Customer says:

    Virgin are just worried because:

    1. They want to continue increasing broadband charges with inflation busting increases year on year except for 2020 (They dont want BB under £35 is their ideal). They are scared because reductions for retentions deals for TV to keep customers are actually just discounts off the broadband inlfated prices. Leased lines are more, but you get better upload speeds generally and latency – but the world on fast lines with FTTP changed overnight with competition from many of the other FTTP Altnets. Its not longer comparable to “if you had a leased line its way more expensive”. FTTP with some of those is more competitive and thats where TalkTalk sit and want to remain to be.
    2. If they do their own wholesale offering they want to still maximise return and not to compete as BT could potentially go further in cuts than VM to compete.

    At the moment, compared to FTTP areas, Virgin hold people back with the paltry upload speed and latency compared to majrity of FTTP providers. This affects offsite backups for consumers and cloud based storage.

    There is still no word on whether VM are going to apply a software update to their DOCSIS 3.1 infrastructure that improves latency significantly (reported on ISPReview before) but they were taking out some analogue monitoring equipment to help in this area though.

  9. Avatar James K says:

    It is a difficult one. For me, I’ve been with Virgin for 5 years. Where I live, we can get up to 500Mbit via Virgin or 3Mbit xDSL with any other provider. Virgin had us over a barrel and would inflate their prices and not offer much of a discount as they know we have no other options. October saw FTTP open up for us, so I signed up originally for BT as they were doing 900Mbit for £59.99. It was installed, I called Virgin to cancel and straight away they offered me £47 for 500Mbit whereas before, they didn’t even want to lower it a bit.
    Anyway, chose to keep FTTP but i’m in the process of moving to Zen’s FTTP (within my 14 day cooling off period). Zen said they couldn’t compete with BTs deep discount – nor could any of the other providers, but I still chose to go with them due to UK based support.

    So for Virgin to moan about aggressive FTTP pricing is so hypocritical!

    Currently with BT (Zen take over on the 29th) I am getting between 910Mbit and 1.1Gbit for my speeds, according to fast.com. Upload is a consistent 110-115Mbit.

    1. Avatar Spoffle says:

      BT also has UK based support for their FTTP customers.

      I’ve been with them since September 2019 and I’ve had zero problems. The only times I’ve had to call them were to upgrade my line from 300Mb to 900Mb, which was a farce, but it was also right as COVID lock down started and every company’s customer support started majorly struggling.

      With an FTTP connection, I honestly don’t see the point of paying more for Zen.

  10. Avatar Billy Nomates says:

    Considering the lack of development and funding into FTTP they should absolutely be allowed to put subsidised fibre in the ground. If VM doesn’t like it, they should do the same. Otherwise it’s going to be 2050 and we’ll still be muttering about places without fibre.

  11. Avatar William Ulstermanne says:

    “let nobody be in any doubt these are crocodile tears you are crying, Mrs Bunfield…….” – William Ultsterman, From the Cheddar Cheese and Pineapple on a Stick Chronicles

  12. Avatar cdh1981 says:

    Sort out capacity and other issues on your own network before worrying about what others are doing, VM.

    You’re one of if not the most expensive broadband provider in the UK (for certain package configurations anyway), so you’re not competitive on price or reliability. No wonder you’re worried about better, possibly cheaper competition.

  13. Avatar FibreBubble says:

    Virgin + o2 are big enough to look after themselves.

    Virgin has grown fat on regulatory mollycoddling.

  14. Avatar Jazzy says:

    As an accountant it makes me laugh at all the remoaners wanting an EU level playing field, forgetting that such a move is a form of price fixing and then yelp when companies like Virgin scream because a company makes pricing cheaper, leading to cheaper prices for consumers. Level playing fields and tricks like this by Virgin are not in the interest of the customer.

    Marketplaces are there for a reason, to be competitive as for companies to survive in competitive markets, save jobs and retain customer loyalty. Something Liberty fail to understand

    1. Avatar Spoffle says:

      The fact that you said “remoaners” means the rest of your comment has no value or worth. Maybe try to be a bit more mature in future, yeah?

  15. Avatar Chris says:

    So virgin don’t like it because up to now they had the best speed and that allowed them to keep their prices up. Now that others will have good speeds on lower prices they’re afraid that they’ll lose clients and start complaining? Well it was something to be expected and to be honest after being with virgin for more than 5 years only because they had higher speeds i think it might be nice to have an alternative.

  16. Avatar John Leonard says:

    I’ve just changed from Virgin to G-Network FTTP and couldn’t be happier: faster speed for less money. When I rang to cancel my Virgin account, I was transferred to the “we’ll try and make you stay” person who was rude, patronizing and aggressive. When I told her why I was leaving, she claimed, falsely, that Virgin could offer the same service and when I queried their slow upload speeds, she stated that she’d seen my usage data and I had no need for a faster upload speed and I was being stupid to want it. Needless to say, the conversation did not end well. The next day, I got another call from a rather more conciliatory person who asked why I was leaving and when I told him, asked what upload speed I was getting. I told him it was just under a Gigabit and he said “Oh” and hung up. They’re obviously beginning to worry about the competition from other companies, but the aggressive attitude of their customer services was deeply unpleasant. Not the best way to win friend and influence people.

  17. Avatar Stewart H says:

    Virgin Network was in stalled in our estate 25 years ago.
    I resisted their annoying attempts of bombarding me with letters to sign up for nearly 20 years. But I had to admit defeat as my previous internet providers, Sky, BT, etc appear to get slower and not coping well with more computers and smart TV’s.
    I signed up for one of their packages TV/internet/phone.
    After a couple of years the price rose about 50%. To reduce cost I cancelled TV and phone.
    They said I need phone line to contact them, I don’t. Money for nothing.
    Costs now reduced to £33 a month until Jan.2021 when I expect it to rise again. Just for internet.
    BT said they haven’t installed Fibre in my location yet, but they have be saying that for the last 20 Years. Not likely to happen in my life time.
    It’s a case of being help to ransom or opt for a less superior internet connection.

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