Virgin Media Kickstarts $4.75B UK Upgrade

UK cable operator Virgin Media says Manchester will be the first city to benefit from the £3 billion (US$4.75 billion) expansion of its high-speed broadband service to homes and businesses that are currently outside its footprint.

Virgin Media Inc. (Nasdaq: VMED) will spend £75 million ($119 million) on connecting another 150,000 premises in the city, bringing its total coverage up to 450,000 premises and is to begin work on the first 20,000 of the new premises this week.

The Manchester project will see Virgin and its construction partners create around 500 new jobs.

The update comes after the cable operator, which runs the UK's third-biggest broadband network by customer numbers, revealed in February this year that it would spend a total of £3 billion ($4.75 billion) on extending its superfast broadband network to another 4 million homes and businesses by 2020. (See Virgin Media Plots £3B Invasion of BT Turf.)

Virgin's network is currently available to about 12.6 million homes -- just half the UK total -- but it would be able to serve around two thirds of the population after the upgrade, making it a much stronger rival to UK fixed-line incumbent BT Group plc (NYSE: BT; London: BTA).

Although BT's broadband network is more widely available, Virgin claims that its highest-speed offering of 152 Mbit/s is about twice as fast as BT's premium service.

While Virgin is using the cable-based DOCSIS 3.0 standard to support its broadband services, BT is using a mixture of fiber and copper.

The incumbent does not believe there is a business case for replacing last-mile copper connections to customer premises and has instead looking to "supercharge" these links through the use of G.fast technology.

BT has previously indicated that it expects to be able to provide 500Mbit/s services to most UK homes and businesses over the next ten years using the G.fast standard, which works by extending the range of frequencies over which broadband signals travel. (See Virgin Media Plots £3B Invasion of BT Turf, BT Plots G.fast Rollout, Mobile Launch and BT, Allied Telesis Foresee Broadband Future.)

But even if G.fast lives up to that promise, BT may still be playing catch-up when it comes to broadband speed: Virgin reckons the emerging DOCSIS 3.1 standard will eventually support services of up to 10 Gbit/s.

Virgin also boasts a speed advantage over Sky and TalkTalk -- the country's second- and fourth-biggest broadband operators respectively -- both of which rely on BT's network to provide retail services.

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Connection speed remains a key battleground for broadband operators and could become even more important in future, with Virgin insisting that data usage on its network is growing at an annual rate of 60%.

In February, Virgin said its expansion plans would focus on areas close to its existing assets but take into consideration local demand, inviting individuals and businesses to go online and register their interest in receiving a Virgin service.

"Our message is simple: help us to cable your street," said Tom Mockridge, Virgin's chief executive, in a statement accompanying today's announcement. "If you want to switch to broadband speeds twice as fast as you can get today, simply register with Virgin Media to 'cablemystreet'."

BT and Virgin are also battling it out on new fronts given the changing shape of the UK's telecom landscape.

Both players, for instance, have entered the mobile market through wholesale agreements with EE , the country's biggest mobile operator. (See BT Threatens Price War With New 4G Offer.)

BT is now trying to finalize a £12.5 billion ($19.8 billion) takeover of EE, while Virgin owner Liberty Global Inc. (Nasdaq: LBTY) is holding talks about a possible asset swap with Vodafone Group plc (NYSE: VOD), which operates the UK's third-biggest mobile network by customer numbers. (See BT, EE Defend $19.9B Merger Plans and Vodafone in Asset-Swap Talks With Liberty.)

Analysts have previously suggested a deal could see Vodafone acquire Virgin Media from Liberty in exchange for its broadband and mobile businesses in Germany. (See Vodafone Could Buy Virgin Media, Quit Germany, Says Analyst.)

— Iain Morris, , News Editor, Light Reading