Virgin Media Ties Quad Play Together with Own-brand Netbook Offer

| Jul 17, 2009 | Wireless Services - Europe | Competitive Intelligence Report

| Analyst: Ben Tudor

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

Event Summary

July 15, 2009 -- Virgin Media has introduced a netbook-based tariff offering mobile and fixed broadband, telephony and TV services in a number of different bundles. The company has also dropped the price of its headline 50 Mb service and is trialling increased upload speeds – boosted to 10 Mb from 1.5 Mb.

Analytical Summary

• Current Perspective: Positive on Virgin Media’s Freedom netbook promotion, as this ties together a lot of the company’s strengths as a multi-play provider. No other operator in the UK can offer all of what Virgin Media is offering in these deals, making this a disruptive move. In addition, mobile operators have dominated the netbook + dongle market, leading to ‘cookie cutter’ bundles that lack differentiation.

• Vendor Importance: High to Virgin Media, as the operator has all of the tools for the quad play job, and it needed to make better use of them. The company’s Virgin Mobile subsidiary has been underutilized in Virgin Media’s multi-play portfolio, which until earlier this year was a straight triple play. Now is the time for the two companies to show their combined power.

• Market Impact: High on the wireless services market, because mobile network operators dominate the bundled netbook market with products that lack the extra dimension of multi-play in many areas. O2 UK and Orange have shown willingness in the past to bundle mobile and fixed broadband (the former more than the latter) and Vodafone UK has failed to bring Vodafone Italia’s Station device to UK consumers – not least because its broadband offering lacks capacity.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Wireless Services - Europe

Recommended Competitor Actions

• BT should use this offer as further ammunition in its argument to persuade OFCOM to allow it to bundle services together. If ever there was an example of a competitive environment for bundled services, this is it.

• BT could also consider pushing for Virgin Media’s access network to be opened up to wholesale, citing what appears to be significant market power. However, such a campaign is likely to have significant negative connotations if the former incumbent pushes for this publicly.

• BSkyB needs to get its mobile act together. An alliance with, for example, 3UK could provide significant benefits for both companies. BSkyB should also look to offer bundle bolt-ons for retailers such as Phones4U and Carphone Warehouse, which can assemble multi-play bundles at point of sale.

• Mobile operators need to raise their games against this competitive offer; simply offering mobile broadband and netbook bundles is unlikely to cut it against a quad play bundle of similar monthly cost but significantly improved value. Orange and O2 need to make use of their xDSL infrastructure to build more complex bundles, and others should look into already-extant proofs of concept from the likes of NDS, which successfully marry DTT, PVR functions and VoD delivered over the Internet.

• Mobile operators should consider subsidizing netbooks; while this may be an anathema, they should look to offer better value than Virgin Media’s somewhat bloated package. Virgin Media is also only offering a relatively small data allowance at a relatively minor bitrate; it is time for operators with significant network investments (HSDPA) or fixed WiFi infrastructure to make a lot of noise about the quality of their data connections.

Recommended End User / Customer Actions

• Consumers need to be wary of introductory pricing offers on the Freedom Netbook, and mindful that ‘M’ and sometimes even ‘L’ options on Virgin Media’s site are actually the ‘S’ option. Consumers should measure their current expenditure on all products the bundles cover and work out whether taking a Freedom Netbook bundle actually represents a saving.

• Virgin Media is not subsidizing this netbook; similar bundles without the netbook can be had from Virgin Media’s site for between £12 and £10 less per month, a saving of £240 - £288 over a two-year period (or, the cost of a netbook). Potential customers should consider this when buying the service.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Full report in Wireless Services - Europe

Top