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Virgin Media O2 Still in Talks with UK ISPs Over Wholesale Service

Monday, October 4th, 2021 (8:32 am) - Score 6,672
virgin_media_engineers_plan_map

A weekend report has claimed that several UK ISPs, including Sky Broadband, TalkTalk and Vodafone, are still in discussions to join Virgin Media’s (VMO2) long-awaited plans to launch a wholesale product, which could act as a direct competitor to Openreach’s (BT) national network.

According to The Sunday Telegraph (paywall), Sky (Comcast) are said to be “closing in” on such a deal and related investment, while the discussions with TalkTalk and Vodafone seem more tentative. None of this will be particularly new to readers of ISPreview.co.uk as we’ve leaked details of it before, although VM’s wholesale plans recently took somewhat of a protracted backseat due to the £31bn merger with mobile giant O2, but now the talks are back on.

The CEO of VMO2, Lutz Schueler, similarly confirmed last month (here) that they were still developing a wholesale solution for rival ISPs to access their fixed line broadband network, but he also added that they were “in no hurry” to strike any deals (translation – they haven’t yet managed to finalise any deals).

Going wholesale is a key part of VM’s future plan, but it ideally needs support from a major player (other than Virgin Media itself). Sky, which is still the market’s second-largest residential broadband ISP (and one without its own physical network infrastructure), would is thus a key target. Sky has also made no secret of their desire to work with alternative networks, but we note that they’ve yet to strike a deal to use CityFibre’s network (TalkTalk, Vodafone and others have already done this).

At present, it’s still unclear precisely what structure VMO2 will adopt for their wholesale solution and future rollout. For example, they may provide access to their entire network (mostly Hybrid Fibre Coax), or only their more recent Fibre-to-the-Premises (FTTP) estate. Equally, it’s unclear whether all ISPs would be offered roughly the same products (like on Openreach’s platform), or if they’d take a more restrictive approach (less attractive to smaller ISPs).

In any case, Virgin Media going wholesale would still represent a significant shift in the market and, in one fell swoop, could present Openreach (BT) with a major national competitor at the infrastructure level. All of this has the potential to significantly change the competitive market and may eventually require Ofcom to review their regulatory approach, depending upon the model and rollout adopted by VMO2.

Moving into wholesale would also help to support VMO2’s plan to upgrade their entire fixed line network – c.14.3 million premises in existing Hybrid Fibre Coax areas – to FTTP by the end of 2028 (here). On top of that they’ve previously spoken of a future “ambition” to expand their latest FTTP network to reach an extra 7 million homes over the next 4-5 years, although we haven’t had an update on that for a while.

By comparison, Openreach aim to make their own FTTP network available to 25 million premises by December 2026 (currently 5.2 million premises passed and rising rapidly), although VMO2’s HFC network still holds a sizeable gigabit-capable coverage advantage, but that gap is closing – VMO2’s aforementioned upgrade plan is partly a response to rising FTTP competition.

Openreach will also be hoping that their new FTTP discounts scheme (here), which was just given the nod by Ofcom (despite a fair bit of opposition), will be enough to help them to stay competitive with whatever VMO2 may offer at wholesale.

On the consumer front, it’s important to understand that a VMO2 wholesale product would NOT be the same as Virgin Media offer to homes via their own retail products. For example, we’re likely to see more flexibility on router choices, package speeds and other network features. Some quality of service aspects may also diverge, but again this all depends upon VMO2’s approach and how ISPs manage it. But for now, the wait continues.

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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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21 Responses
  1. Ex Telecom Engineer says:

    I saw the Telegraph article, and felt a sense of Deja Vu, since this has been speculated about for years. I’m not sure where the business case is for Sky investing in VMO2 Fibre rollout, with the option to build their own Fibre Network using Openreach’s PIA product. The article got the name of the German Fibre partnership buyout fund name wrong too, it’s Infravia Capital Partners,not “InfraView Capital Partners”.

    1. Mark Jackson says:

      Sky, whose main business is still TV and broadcasting, did once flirt with the idea of building their own FTTP network (several pilots were built) and at the time they were well positioned for it. But in the end, they didn’t want to spend the money and opted to continue taking lines from wholesale providers. Despite the PIA and related regulatory improvements, their thinking hasn’t changed, and in any case it would now be too late for a U-turn.

      So, they prefer the path of least resistance and risk, which means taking wholesale products from Openreach, VMO2 and possibly CityFibre in the future (again). Sky will of course expect some exclusivity or preference in return for their support, but they won’t need to spend masses of cash vs the cost of building their own FTTP. The catch is that if VMO2 give Sky everything they’re likely to want, then that may in turn make it harder to add additional ISPs (CityFibre had a similar issue early-on).

    2. Ex Telecom Engineer says:

      I understand that Mark, but the article specifically states, “Sky is closing in on a deal with Virgin Media O2 to become an investor in the telecoms operator’s full-fibre broadband rollout”, which is different from becoming a wholesale customer.
      The article then differentiates between Sky, and TalkTalk/Vodafone stating, “The Sunday Telegraph understands it is also engaged in separate discussions with Vodafone and TalkTalk about the two companies becoming wholesale customers”. The article is suggesting a Fibre partnership with Sky, rather than a wholesale relationship, with Sky having part ownership of the Fibre.
      There’s also been recent articles about Sky moving to a streaming model, which would imply no requirement for any wholesale or Fibre partnerships, since a Netflix type model doesn’t require any infrastructure ownership, just customer subscriptions.
      Until something concrete comes out, all this is pure speculation.

    3. Mark Jackson says:

      Fair point there, Sky’s agreement may well go further. But it’ll still be cheaper than doing something alone.

  2. Meadmodj says:

    I can see the benefit here for the ISPs, especially Sky. OR FTTP is going to take time and there are many areas, particularly VM areas, missing from the current OR plan for the foreseeable. Sky no doubt now have visibility of OR, VM and Cityfibre intentions and with Equinox OR pricing confirmed have a good negotiating position. But Sky users with SkyQ/Dish so their broadband requirement is not very high. So presumably it will only be those “needing” higher speed products and Sky don’t want to lose out.

    For VM though isn’t this a double edged sword. In my view they have a much poorer TV offering and may lose out to future Sky IP offerings.

    1. Dave says:

      I don’t really watch linear TV anymore and I only have Virgin TV as on my current package it’s a no brainer to have all the channels but it’s a misconception that Virgin TV is much poorer than Sky – for instance, you get most (if not all) Sky on Demand content plus a load of on demand stuff from Virgin (although it can feel like it isn’t refreshed very often sometimes).

      VM seem to be more of an infrastructure company than a TV provider so I would imagine they would welcome the opportunity to sell broadband services wholesale as this is clearly where their profits are and where they need to recoup costs.

    2. Meadmodj says:

      As always it depends on the price point and package. Yes if you go for all the options you can get mostly the same content but I would say you get more from Sky at the lower price points.

      The VM network design is primarily a cable TV one. Yes it is overlaid with broadband and this is coming closer to the customer but it would currently be an expensive network to maintain if used only for broadband. The TV revenues and higher average revenue per customer are important for VM to maintain.

  3. Andy says:

    Back in the mists of time (early 2000s), NTL did have some sort of wholesale deal in place with AOL. ISP Review had some articles about it back then https://www.ispreview.co.uk/news/EpVZyZEEVypqgaRroz.html

  4. dave jones says:

    sky isn’t known for using good routers and i think they don’t officially allow you to use a 3rd party router for their broadband currently either so i doubt we would be able to choose our own cable modem/router.

    1. Peter says:

      Sky do currently let you use your own router.
      But in terms of what Virgin will do for wholesale, like will they provide a modem for you to connect your router to via ethernet

  5. NE555 says:

    VM’s cable network is shared over the last mile and heavily congested in places. That will be a big concern to any service provider that doesn’t want its brand sullied by poor customer experience. They’d probably rather deliver a consistent 40M on Openreach copper, than 100M on VM which drops to 10M or less at peak times.

    VM does have fibre in some places, but since it’s RFoG it is still fundamentally running as a cable TV network.

    1. Ben says:

      Can RFoG and GPON coexist on the same fibre network, e.g. hypothetically could I take a Sky GPON service (using Virgin’s fibre) while my neighbour takes a Virgin RFoG service?

    2. Ivor says:

      In some forms, yes – Verizon in the US carries RF and GPON (and TDM telephony) on the same fibre. They don’t have two-way capability on the RF side, though, as it’s purely there to deliver TV channels. BT used to do something similar in the very early days, I seem to remember Ebbsfleet had Freeview + local CCTV cameras coming through via fibre too

      I’d imagine that Virgin would quickly figure out how to offer GPON to its own customers – not least of all because it means higher upload speeds, and they wouldn’t want their PON wholesale customers outdoing them

    3. Winston Smith says:

      AFAIK RFoG is a just a method of implementing the DOCSIS protocol at infra-red optical wavelengths. It still uses PON hardware but with a customer termination unit that converts to a DOCSIS cable modem compatible RF signal.

      VM could likely get the maximum available DOCSIS 3.1 performance from the FTTP portions of it’s network today. They have previously managed 2.2 Gbps up/220 Mbps down in DOCSIS 3.1 trials.

      If they were to offer wholesale access to their HFC network, they’d surely just exclude any congested portions.

    4. Winston Smith says:

      Up/down reversed in the above.

    5. Roger_Gooner says:

      I suspect that Virgin Media will wholesale only its FTTP network which is far less likely to suffer from congestion than the HFC network. Although this FTTP network covers only about 1.2m premises VM has announced a plan to upgrade the HFC network covering 14.3m premises to FTTP by the end of 2028 with RFoG being replaced with XGS-PON. In the meantime current network expansion is only FTTP as I think that HFC in-fills have been done.

  6. Buggerlugz says:

    If this goes ahead I can see it having massive negative implications for existing virgin customers in the future.

    1. VMB says:

      Sky, TalkTalk and Vodafone won’t be buying access to the network existing VM users are on. No trials or wholesale products existing or planned.

  7. aaaa says:

    virgin media are always proper fast with the upgrades but the upload speeds are still really slow actually vm man just get symmetrical gigabit

  8. Amit says:

    Interesting news, only VM’s infrastructure footprint is far less than Bt’s, if Sky was to switch wholesale partner it would be available to less people? However, I understand VMo2 are in the process of upgrading their existing Co axial network to Fibre, but does that include extending the current network? It’s nearly 30 years old in placesw

    It is indeed possible to have multiple flavours of fibre running on the same infrastructure, so it will be interesting to see what they implement. Uploads speed have always been a problem on DOCSIS because it was designed for TV broadcasting which sends far more data than it receives back upstream, fibre should remedy that.

    1. Mark Jackson says:

      It wouldn’t be about a ‘switch’, so much as a ‘complementary’ option. Sky couldn’t suddenly force their broadband base on to VMO2, but it could give a lot of FTTC-only customers the option of faster speeds via their own product on VMO2’s faster network.

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