Virgin Media Rides Huge PR Wave, Pledges Honest Broadband Speeds by Offering Best Effort

| Aug 5, 2009 | Consumer Broadband Services - Europe | Competitive Intelligence Report

| Analyst: Ben Tudor

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

August 4, 2009 -- Virgin Media has upgraded the ADSL 2+ service it buys wholesale from Cable & Wireless to 20 Mbps, and it dropped speed promises and delineations from its pricing. Instead, the company will sell to users on the basis of its familiar ‘M, L and XL’ packages, separated by a sliding scale of download limits.

Analytical Summary

• Current Perspective: Positive on Virgin Media’s re-launch of its National broadband service, an ADSL2+ alternative for consumers outside the company’s cable network footprint, as the operator has ditched broadband speeds as a way of dividing tariffs and gone instead for usage-based choices, in line with its cable broadband products. Its sales staff is trained to show users exactly how much speed their connection can achieve before buying, a refreshing change from the status quo, where ISPs offer a headline rate that is both unrealistic and unattainable.

• Vendor Importance: High to Virgin Media, because while it has a strong proposition inside its cable footprint, it is very much a follower in other areas, with around 200,000 National broadband customers. The company needs to try and boost this figure if possible, but it faces tough opposition from established competitors.

• Market Impact: High on the UK broadband market, because Virgin Media’s DSL speed promise is the product marketing response to OFCOM’s UK Broadband Speeds 2009 report, which criticised ISPs for delivering poor speeds in contrast to their marketing messages. In addition, the fact that a cable provider, rather than a DSL provider, is introducing this is an embarrassment to competitors. Virgin Media is publicly accepting that speed promises are subject to all kinds of variables; moreover, it is offering services that ignore speed promises and go for utility, a public admission that xDSL is a best-effort service at best. This is a subtle shift on the general position of UK ISPs, which sell on headline speeds while admitting, when pressed, that such speeds are unattainable. Consumers that could not historically afford ADSL 2+ (currently a premium product) can now pay as little as £16 a month for such a service.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Consumer Broadband Services - Europe | More information

Recommended Competitor Actions

• BT and Carphone Warehouse need to step up marketing of their own ADSL 2+ products and bring to the front any significant advantages over that of Virgin Media. This may prove difficult, but an alternate way to combat this might be to build other, more attractive bundles for similar prices.

• BT and BSkyB should point out that their pay TV services are available to ADSL users (albeit, in the latter case, via satellite for actual TV viewing), a significant strength over Virgin Media National broadband.

• O2 and Plusnet should trumpet the technical capabilities of their respective ADSL 2+ services, both of which scored better than other DSL ISPs in the OFCOM report. These companies need to make more of their performance, showing the OFCOM data as proof.

• Other ADSL operators need to consider moving away from the speed issue and build up a sales argument that rests on other, more tangible, end-user advantages. The OFCOM report has shown that DSL speed claims do not reflect usage reality for a significant number of users, and ISPs should consider following Virgin Media’s lead in responding to the findings of the report.

Recommended Competitor Actions

• End users that cannot make use of the cable network should certainly consider Virgin Media’s National broadband products, especially in light of the OFCOM report. Of the report’s respondents, 81% had received a warning for exceeding their download quota in a month. Therefore, the clarity of Virgin Media’s product descriptions may help to make a more informed decision.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Consumer Broadband Services - Europe | More information

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