Virgin Media Plays the Numbers Game in U.K. Broadband Market

LONDON, November 1, 2010 – The United Kingdom’s first widely available 100 megabits per second fiber-to-the-home broadband service will be launched in December by the country’s dominant cable television operator Virgin Media, leading to a war of words with arch rival BT, the country’s former incumbent telecommunications carrier.

The service initially will be rolled out in parts of London, the south east of England and Yorkshire at a costly of $70 per month, leading BT to suggest that it will be expensive. Yet BT is not much cheaper.

While Virgin Media’s service will provide 100 Mbps downstream and 10 Mbps upstream, BT’s alternative fiber broadband service available now provides 40 Mbps downstream and 2 Mbps upstream at a cost of £$55 a month including the compulsory line rental. Meanwhile, BT is planning a faster service with 110 Mbps downstream early in 2011, but could charge more.

Virgin’s move prompted Michael Phillips, product director at consumer web site Broadbandchoices.co.uk, to question whether people would abandon existing much cheaper packages that still meet their current needs. He agreed though that Virgin Media was successfully exposing the inability of providers still reliant on telephony cabling to reach downstream speeds of 50 Mbps or more that will be needed for multi channel high definition TV services.

Virgin’s move, as well as BT’s with its own fiber installation program, also reveals the futility of pretending it is possible to close the broadband gap between urban and rural locations. While recent initiatives in the United Kingdom and elsewhere will succeed in giving rural subscribers access to bandwidth adequate for existing high speed services, it will inevitably be longer before they in turn reach 100 Mbps downstream speeds. Indeed, Virgin Media has stated that its 100 Mbps will be available to half the U.K. population within two years, but this will almost entirely be people in cities, towns and suburban areas. Similarly, BT’s program will give just 40 percent of the population – around 10 million homes – access to its 40 Mbps download service by about the same time late in 2012.

Ultimately, there is hope that rural areas will eventually catch up, but only when fiber has reached every home, just as copper does now. This is already close to being achieved in relatively small densely populated countries like South Korea but it will take many years in countries such as Australia with large remote areas and few people. The roll out of copper took half a century in many countries, and while fiber deployment is likely to be quicker, it will still be the case that the digital divide will get worse before it gets better.