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Hints of Virgin Media UK Wholesale in Liberty Property Request

Friday, April 9th, 2021 (12:35 pm) - Score 7,896
virgin media fibre trench and cable duct

A new request to Ofcom for Code Powers from Liberty Property Co II Limited, which is a subsidiary of Liberty Global, has indicated that it intends to “utilise Virgin Media’s wholesale products” in order to facilitate the “construction and operation of a broadband network” across the UK.

Securing Code Powers from Ofcom is something that network operators often do in order to help to speed up the deployment of new fibre optic networks and cut costs by reducing the number of licenses needed for street works. Last year another company called Liberty Networks made an identical request (here), although they’ve since re-named themselves as Virgin Media Networks Limited.

Regular readers will recall that Liberty Global’s CEO, Mike Fries, has made no secret of his ambition to potentially make some or part of Virgin Media’s gigabit-capable broadband network available to other ISPs via wholesale, with Sky Broadband often being in the frame as a potential launch partner. However, the ongoing efforts to merge O2 and Virgin Media need to be settled before that can really progress (due by mid-2021).

Similarly, O2 and Virgin Media have already spoken of their “ambition to accelerate investments” and connect a further 7 million homes (via FTTP) to their broadband network “in the coming years” (here), which may potentially include bidding on contracts for the Government’s new £5bn Project Gigabit scheme (this requires networks to offer a wholesale option). Ofcom may also raise an eyebrow if they built much further without adding a wholesale solution.

Interestingly, the latest Code Powers submission by Liberty Property Co II makes a clear mention of their desire to utilise a wholesale product from Virgin Media, which of course doesn’t fully exist yet and hasn’t been officially announced. On the other hand Virgin Media do provide some Ethernet / backhaul style services to other operators, but that’s not quite the same thing, and it’s unclear precisely what wholesale products would be utilised below.

Extract from the Code Powers Submission

“The Applicant is a subsidiary of Liberty Global plc (company number 08379990) a multinational telecoms provider whose companies include Virgin Media in the UK.

The Applicant seeks Code powers to facilitate the construction and operation of a broadband network across the UK. The proposed network would be used to provide high-speed, low-latency connectivity services between network edge locations (such as buildings and cabinets) and interconnection points with local access networks as well as equipment hosting facilities. The proposed network would serve businesses and consumers.

The Applicant intends to utilise Virgin Media’s wholesale products and the Openreach Physical Infrastructure Access (PIA) service [existing cable ducts and poles] to deploy parts of its network in Virgin Media’s and BT’s infrastructure. Where this is not possible, the Applicant will deploy its own infrastructure, including on public land.

The Applicant is willing to provide wholesale access to its network to other telecoms providers, subject to reaching satisfactory commercial terms.”

At this stage we still think it’s best to take this as another hint of Virgin Media’s future direction rather than a confirmation, although exactly how all of this will be handled remains subject to change until an official announcement is made. We have asked Virgin Media to clarify the intent above, but we probably won’t get much from them.

Last year we predicted (here) that Liberty Global would split their existing Hybrid Fibre Coax (HFC) and FTTP broadband network off into a new company and then sell access to rival UK ISPs via wholesale, albeit with Virgin Media being given special access as the anchor tenant. In one move this could create serious competition for Openreach at a national scale.

Meanwhile, Ofcom intends to consult upon the request until 10th May 2021, although they almost never reject them.

Leave a Comment
13 Responses
  1. Avatar Adam says:

    This would be good news for the wholesale market, wonder how long it would be before all the altnets fold into either Virgin or Bt when economies of scale stop them being profitable.

    1. Avatar Ben says:

      In addition to the networks you mentioned, I can see CityFibre (and possibly Hyperoptic) having sufficient scale to be sustainable. But you’re right – there’s clearly going to be some consolidation at some point in the future.

    2. Avatar Nick says:

      No I am sure all the altnets will get gobbled up by Vodafone and made part of the former Cable and Wireless network which it acquired in 2012, Vodafone makes as much use as possible with the C&W network.

      I can’t see the CMA allowing BT or Virgin Media buying these because both companies already serve residential areas where as Vodafone’s C&W infrastructure mainly serves business areas.

      Altnets are like how Cable companies started off and now they are the all one but only Virgin Media.

  2. Avatar CarlT says:

    These products have been ready a while just waiting for the right timing as far as the commercial and regulatory markets go 🙂

    Be really interesting to see what’s released, how and customer reaction. Lots of potential here to produce some really good solutions.

    1. Avatar Ben says:

      I’m looking forward to potentially seeing some of Virgin’s FTTP freed from the shackles of RFoG.

  3. Avatar Chris says:

    In areas where Virgin Media (VM) have cabled they dominate the market with around 40% market share. It’s in every ISPs upmost interests to ensure that VM do not expand to an “extra 7 million homes”. That’s probably why despite years of talks with ISPs came to nothing – the disadvantages of assisting this giant expand don’t outweigh the advantages. It would make much more sense to partner with a wholesale provider, and thats probably a part reason why Vodafone, Talktalk, Zen etc chose CityFibre over VM despite the CityFibre network currently being in its infancy.

    Besides, the O2/Virgin deal is structured in a way that’ll saddle the combined operation with a crippling mountain of debt (£17.60 billion) from day one, maintaining current customer service standards let alone simultaneously investing billions in national 5g and many more billions in PTTP expansion…. is all a tough ask.

    With the parent companies Liberty Global and Telefonica already having a contractual option to float and dispose of this beast in 3 years time, I wish not, but very much fear, that Lutz Schuler has taken on a poised chalice.

    I’d love to hear all your thoughts on these points that inexplicably are rarely discussed in the media.

    1. Avatar NC says:

      Wow I didn’t know that much debt is being combined – didn’t see that anywhere when the merger was announced.

      Regarding VM wholesale – I do think that it would be wise for VM to open up, even if that does cause some churn in the short term – if Openreach now expands “like fury” VM could find themselves priced out if they allow themselves to be the sole infrastructure and ISP provider. Virgin may have 40% in one area today because Openreach/BT speeds are woefully behind. I.e. BT max speed of 11mb or Virgin up to 500mb. Those are the areas that Openreach/BT are going to target first.

      I doubt a float in 3 years time would recover the initial costs – safe to see this continuing for a long time.

    2. Avatar CarlT says:

      It’s actually going to be more debt than that, over £18 billion, however the debt to equity ratio will improve from debt of just under 68% of market cap to 57% of market cap.

      O2 are adding way more value than they are debt.

  4. Avatar MilesT says:

    In my area of London a Virgin wholesale solution would be a disaster, especially if sold via an existing major provider like Sky Broadband (or any who currently offer service via a phone line). The reliability of the aging Virgin cable network is poor and repairs take a long time i.e. failing MTBO and MTTR (my local nextdoor is full of complaints)

    1. Avatar CarlT says:

      Lots of issues in London not actually related to the network but within people’s homes.

      Much of the network is well within expected service age.

      Tricky one to solve without either spending a fair amount of money or allowing VM to disconnect customers placing noise onto the network.

    2. Avatar JP says:

      Hold on, how do the customers place the noise on to the network? I thought Virgin managed their network?

    3. Avatar AQX says:

      @JP Customers can do it too, for example using non Virgin compliant cabling.

    4. Avatar CarlT says:

      Unterminated cabling, unterminated splitter ports. Those are the usual suspects. They can pick up RF noise from nearby and act as aerials taking it into the VM network.

      When the source of the issues is in an apartment block that’s a nightmare as VM have to get access to isolate which unit then gain access to that unit to check the cabling.

      There are ways to prevent a ton of this that I hope VM will address in time. They’re going to need to change things anyway for future services.

      In more extreme cases it’s also possible to intentionally pour noise onto the network across a massive frequency range at extremely high power.

      Happy to discuss this further.

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