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Virgin Media O2 UK Update on Wholesale and FTTP Upgrade Plan

Monday, November 8th, 2021 (9:15 am) - Score 8,760
virgin media street works meeting scotland

The CEO of Liberty Global, Michael Fries, has given an update on Virgin Media’s (VMO2) aspiration to launch a wholesale product for UK ISPs and their plan to upgrade existing Hybrid Fibre Coax (HFC) areas with XGS-PON based Fibre-to-the-Premises (FTTP) broadband. A trial of the latter is now taking place at 50,000 homes in 3 locations.

Firstly, we’ll touch on the FTTP upgrade plan for existing HFC areas (reflecting about 14.3 million UK premises), as Michael revealed a few little details that we hadn’t seen before. Back in July 2021 Virgin Media revealed their intention to upgrade those HFC areas to symmetric speed FTTP broadband by the end of 2028 (here).

By utilising the company’s existing fully-ducted network, which are the tubes through which fibre cables can be laid, the cost of delivery is forecast to be around just £100 per premises passed. But that excludes the usual final drop customer installation costs (after you make an order), which we think could be anything from around £50 to £100 in this case.

According to the latest commentary from Michael Fries, they’re already in the midst of a 50,000 home XGS-PON upgrade trial, which is taking place at three unspecified locations across the UK. The goal of this is to validate their engineering and upgrade costs. “I’m happy to report that so far, everything is checking out, and we’ll certainly provide more information on that in our [next quarterly] results,” said Mike to investors.

FTTP Network Expansion

As well as upgrading existing infrastructure, VMO2 has also previously spoken of their ambition to harness some of the £10bn committed over the next 5-years (as part of the merger) to fuel the expansion of their FTTP broadband network to reach another 7 million UK premises (e.g. rural or semi-rural areas). In theory, this could extend their full fibre network to c.22 million premises by 2028, which isn’t far off Openreach’s 25 million.

However, we haven’t had a solid update on this ambition since the completion of their merger, which was starting to feel a bit like they intended to sweep it under the carpet in order to focus on the FTTP upgrade plan instead. The recent decline in their FTTP built rate to just 67,000 premises passed in the last quarter (here) has only fuelled such thoughts.

According to Mr Fries, VMO2 are “still doing some work” on that ambition and “have not yet made the determination as to how fast or how far we would take that.” The CEO concedes that any expansion of their footprint “might be more dependent on a wholesale outcome,” which we’ll touch on next. Despite this, Fries suggests that next year’s FTTP network expansion “might be a little more aggressive“.

Michael Fries, CEO of Liberty Global, said:

“It could be something more dramatic. I think everybody would appreciate that we would be looking at the financial implications of that kind of buildout. I mean we’d want to know there are additional revenue sources, partners, financing sources. So more work to be done there. Nothing to announce on the bigger expansion, and that, I think, more likely would come with a clearer announcement around where we are on wholesale.”

Fries then clarified that neither Liberty Global nor O2 (Telefonica) would be thrilled with the idea of funding Virgin Media’s UK FTTP network expansion by themselves, which brings us on to wholesale – “I think it’s safe to say that [we] would not be excited about funding a 7 million-home expansion “on our own,” meaning putting up all the equity capital with no line of sight to either third-party financing and/or wholesale.”

The Status of Wholesale

The operator is well known to have been planning to make some or all of their fixed broadband network available to rival ISPs via wholesale for some years. Indeed, we understand that pretty much all the technical and practical work on this has effectively been completed (it was nearly ready to go before the VMO2 merger was announced – triggering a long delay), but reaching an agreement with ISPs has been tedious.

Last month a number of reports revealed that VMO2 were still in talks with Sky Broadband, TalkTalk and Vodafone about the launch of a new wholesale platform (here and here), with Sky potentially coming in as an investment partner. But agreeing the details around this and the tricky problem of exclusivity arrangements, which tends to hinder wider adoption by more ISPs, aren’t easy things to balance.

Mike Fries said:

“On the wholesale question in the United Kingdom. There’s nothing to update on at this point and I’ll just remind everybody that the decision to upgrade our existing HFC plant was not based upon any wholesale arrangement. So our view is it’s accretive either way. But of course, if there were wholesale, that would be even more accretive. So it shouldn’t be an overhang. It’s only upside if we were to do something in wholesale on the existing footprint.”

We should add that Ofcom is likely to take an interest in any operator that grows itself into holding a position of Significant Market Power (SMP), which is something that could be triggered by a major network expansion from VMO2. One way of tackling that is for such operators to introduce a suitable wholesale product and/or to split off their network into a separate company (VMO2 has reportedly hired Accenture PLC to develop the latter).

Likewise, we know from the Building Digital UK programme that VMO2 have expressed an interest in the Government’s £5bn Project Gigabit rollout programme. But such contracts will also be contingent upon operators being able to offer a wholesale product to the market, which is yet another argument for launching such a solution. But the first contracts under that project aren’t due to be awarded until later in 2022, so there’s still time for VMO2 to get all their ducks in a row.

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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.
Leave a Comment
23 Responses
  1. Steve says:

    I have heard Salisbury is going to be one of the first areas

  2. Steve says:

    I have heard Salisbury will be one of the first areas

    1. anonymous says:

      Inevitably VMO2 will chase Openreach and CityFibre. It would not make sense to do anything else.

  3. Nota Virgin says:

    £100 per premises passed is a lot less that Openreach who last week said the cost was coming down at £250 to £350 (correct me if I’m wrong), Even if the OR figure is the actual connection to the house cost and we add £100 to VM02 that’s still a lower figure.

    Is this because VM02 are all underground and fairly modern while OR are dealing with an ancient system of blocked ducts and overhead wires? So the average cost will take their number up?

    1. Steve says:

      That £100 figure will not happen. Different areas have different builds, and a fair few areas have congested ducts due to things like shoddy contractors being paid to remove the old drop cable when performing a repulsive but leaving old ones in. The retirement of the telco network will free up some space of course. There are also plenty of damaged/blocked ducts out there which will add to it. Some areas are completely underground including the RF distribution taps. The chambers can be quite small and will be difficult to fit a fibre joint in if they want to keep distribution underground. The other option is build cabinets, which can get quite pricey…

    2. anonymous says:

      ‘Is this because VM02 are all underground and fairly modern while OR are dealing with an ancient system of blocked ducts and overhead wires? So the average cost will take their number up?’

      Alongside some areas that are direct in ground, no Openreach duct or pole at all just buried cable, exactly this.

    3. mike says:

      Steve £100 is an average figure. Some premises will be cheaper. Some will be more expensive. I’m sure Virgin have figured that out.

  4. Sam Perry says:

    I don’t care who it is I just FTTP…

    1. El Guapo says:

      I do. I’d rather it use a proper technology instead of “RFoG”.

    2. MikeP says:

      Going XGPON will definitely be leapfrogging BT – and many other suppliers

  5. anonymous says:

    They won’t serve you so their parent company’s CEO is lying to investors, exposing himself to prosecution. Gotcha.

  6. Connor says:

    Do we have any information of what CPE they will be deploying? I assume they would want a different SKU than their regular Hubs since it wouldn’t need a DOCSIS modem.

    1. drevilbob says:

      It wouldn’t surprise me if they went back to Netgear because they have worked with them in the past

    2. Kushan says:

      My understanding was that Virgin uses RFoG, which is still DOCSIS at the consumer end, it’s just running over fibre. Maybe that has changed in recent years though.

    3. El Guapo says:

      won’t it be a regular VM hub 4 ? From the VM fibre install videos I’ve seen on yootoob they all seem to bring a fibre cable into a box that then splits out into coax cable and goes int o the regular vm hub 4.

    4. Meadmodj says:

      The proposal appears to be an XGSPON overlay in HFC areas. That would mean distributing fibre to the local VM distribution cabinets and installing a splitter(s). Those subscribing to FTTP would have a fibre installed in parallel to any coax service. This is likely to be installed like OR/Altnet with a appropriate ONT and the ISP would supply their own FTTP router.

      VM may also supply this for Residential or Business requiring higher and symmetrical speed products.

      Existing VM customers can continue with both (or either) broadband and TV channel service until VM decide on their next step.

    5. anonymous says:

      @Meadmodj Part of the business case is being rid of the HFC as soon as possible and with that in mind allowing it to run beside FTTP to a property would be bizarre.

      VM may upset that one person in a hundred that stores content on their PVR but besides that the boxes already draw a bunch of content over IP. Adding the rest of the channels to the IP platform wouldn’t be a big deal and telephony is provided over VoIP.

      There is actually a plan to use FTTP for capacity relief of HFC so some people will be offered migration. Getting their TV off HFC takes a bit more load due to those channels that pretend to be broadcast but are actually unicast.

    6. Alex says:

      They’ve used a Zyxel PX7511 before.

  7. Meadmodj says:

    OR per premises average cost includes all their commercial areas. No doubt OR costs will be lower in the typical dense HFC areas and they are rarely 100% coverage.

    Running both RFoG and XPSPON while maintaining HFC has to increase costs.

    The biggest risk for VM is that they may undermine their TV service revenue and lose retail broadband premium.

    Is this really to be open wholesale or exclusive deals?

  8. Peter says:

    TBH I would like them to finish building out towns they started with! Here in Gorebridge they have stop at building out about 60-70% of the town and I’m in the area which was left out!!!

    Strange thing is that there is some dense modern housing parts near my street with no FTTP at all. The only thing I can think about is that a bunch of it is south of 2 rail bridges.

    Sucks being limited to 50mbps of a 80/20 package.

  9. Mr Johnson says:

    Wholesale wise.
    If it brings cheaper more reliable broadband and I can ditch the Hub 3 then I’m all in.

  10. Kurtainz says:

    I’m interested to know how they will actually install the fiber to existing customers. Will they pull out the existing coax or will you have to have a second hole drilled into your house?

  11. Nathan says:

    I really hope they launch their wholesale product nationwide. The maximum speeds achievable from Virgin Media at my home in the suburbs of Swansea exceed 1Gbps. Of course, I don’t need those speeds but I make do with a 100Mbps connection.

    The maximum speeds achievable from the Openreach line coming into my home is only 25Mbps.

    The thing is, I truly loathe Virgin Media’s customer service. I’ve been wanting to leave them for someone better for a long time. But I’m shackled to them due to the speed differences. When either Openreach upgrade the cabling in my area OR VM permit other providers to use the line coming into my home, I’m gone.

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