Virgin Media Moots New Alternative Full Fibre ISP for UK Rural Areas

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Cable TV and broadband operator Virgin Media (Liberty Global) is reported to be examining the possibility of creating a new company in the UK, which could compete with Openreach (BT) in rural areas by building its own Gigabit capable Fibre-to-the-Premises (FTTP) network (open access for other ISPs to harness).

At present Virgin Media tends to only focus their 500Mbps+ cable network on the more lucrative urban areas, which has so far enabled them to cover over half of all premises across the United Kingdom. This could potentially reach around 60% of premises once their Project Lightning network expansion completes.

One other benefit of the above approach is that it has so far kept them out of Ofcom’s regulatory crosshairs, although this might change if they were to build significantly beyond their existing coverage plans. One way around that would be to setup a new company, via Liberty Global, and then position Virgin Media as the anchor tenant ISP on that network.

Funnily enough this is the sort of approach that “multiple people with direct knowledge of the plan” have told FT (paywall) is now being considered by Liberty Global. The operator is even said to have appointed investment bank LionTree to help establish the Joint Venture (JV) business.

The plan is currently said to be at an “early stage” and could be partially built by harnessing Openreach’s existing cable ducts via their Physical Infrastructure Access (PIA) product. The PIA solution, which allows rival ISPs to run their own fibre through Openreach’s ducts, has recently been revised to make it easier / cheaper to harness. Ofcom also plans to further improve its flexibility by removing the existing access / usage restrictions (here).

The suggestion is that the new company could potentially reach an additional 2 million UK premises, although it would need to attract a fair bit of private investment and potentially also public funding in order to achieve that. Luckily there seems to be no shortage of investors willing to throw large sums of money at alternative “full fibre” (FTTP) networks, even unproven ones, so it’s a fairly safe bet they’d be able to secure some support.

No doubt some of this may depend upon what the next UK Prime Minister, which now seems highly likely to be Boris Johnson, will do. Boris has already set the welcome, albeit seemingly impossible, target of achieving nationwide full fibre coverage by 2025 (here). Regardless of possibility, this would also require a significant funding boost of several billion pounds and Virgin / Liberty will no doubt be ready to bite.

At this point those with a long memory may note some glaring similarities between the above plan and what was proposed all the way back in 2011 (here). Back then Fujitsu UK, TalkTalk and Virgin Media jointly proposed to build an alternative open access FTTH network to 5 million “rural” homes as part of an early Joint Venture under the original Broadband Delivery UK programme.

The idea was ultimately abandoned in 2013 (here) after it became abundantly clear that nobody was going to award a contract to the unproven venture, particularly since it required a large amount of public investment to even get started and hadn’t yet built any independent rural networks of its own (Fujitsu proposed to invest up to £2bn of its own money). As above, today’s market today is significantly more favourable.

Finally, we note that the above plan talks a lot about “rural” coverage, but if they’re focusing upon the final 40% of areas (i.e. those not intended to be reached by Virgin Media) then there are still a lot of city suburbs, major towns and large villages to cater for first. We suspect the plan may not involve much in the way of truly remote rural areas (i.e. roughly the final 10% of premises).

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