Virgin Media Plots £3B Invasion of BT Turf
Superfast broadband is coming to more neighborhoods near you, seems to be Virgin Media's message to BT today.
Raising the stakes in the UK's high-speed broadband market, the plucky cable operator has announced plans to spend £3 billion ($4.6 billion) on extending its superfast network to another four million homes and businesses by 2020.
That will make Virgin Media Inc. (Nasdaq: VMED) a serious threat to BT Group plc (NYSE: BT; London: BTA)'s broadband ambitions. According to its latest earnings report, Virgin's cable network currently reaches 12.63 million homes -- about half the UK total. Following the upgrade, Virgin would be able to provide services to about two-thirds of the UK population.
This is bound to be a worry for BT because Virgin's highest-speed service of 152 Mbit/s is about twice as fast as BT's premium offer. Competition is tougher for the fixed-line incumbent in areas where Virgin is also present, and there will be a lot more of those areas five years from now.
Naturally, BT was immediately keen to play down the Virgin threat. "Their plan doesn't seem to cover rural areas or huge swathes of the UK," said the operator in a statement emailed to Light Reading. "BT's fiber network … already covers 22 million premises and is growing by the week."
As it also pointed out, BT is planning its own network upgrade using a technology called G.fast, which has been designed to supercharge the final copper connections running into customer premises. Using G.fast, BT reckons it will be able to provide 500Mbit/s services to most UK homes and businesses over the next ten years, and speeds of up to 1 Gbit/s for more demanding customers. (See BT Puts G.fast at Heart of Ultra-Fast Broadband Plans and BT Plots G.fast Rollout, Mobile Launch.)
Nevertheless, BT has yet to even carry out field trials of G.fast. Its plans for a commercial launch are heavily contingent on the outcome of pilots that will take place in the towns of Huntingdon and Gosforth this summer. Only if these prove successful will BT start work on a nationwide rollout in 2016, with the goal of providing speeds of a few hundred megabits per second to "millions of homes and businesses" by 2020.
Clearly, BT would hardly have made public its G.fast ambitions if it were not reasonably confident about the viability of its scheme. Yet Virgin's announcement will dramatically increase the pressure on the former state-owned monopoly to bring those plans to fruition.
In the meantime, Virgin has also been trying out higher-speed technologies. Last September, it began testing 1Gbit/s services in the village of Papworth in Cambridgeshire. Moreover, its sights are firmly set on the emerging DOCSIS 3.1 cable standard, which could eventually support speeds of up to 10 Gbit/s, according to Virgin.
BT can only dream about that kind of capability while it continues to resist investing in FTTH networks.
As for where Virgin's new infrastructure is set to materialize, a Virgin spokesperson says the cable operator is focusing on areas within close reach of its existing network.
"That will be quicker and more efficient," he says. "We'll be looking to provide full coverage in towns and boroughs where we currently pass around half of homes and businesses. The need for us to extend our reach has been plain to see for a while."
Even so, deployment plans will be driven partly by demand, says the operator, which is inviting individuals and businesses to go online and register their interest in receiving a Virgin service.
Next page: Regulatory implications