Virgin Media 2006 Annual Report Download - page 23

Broadband Internet
We provide broadband and dial−up internet services to customers within reach of our access network, by direct connection to our
network. We also provide broadband and dial−up internet services to customers not within reach of our access network by providing a
connection to our network via BT’s local access network. Our internet services compete with BT, which provides broadband and
dial−up internet access services over its own network both as a retail brand and as a wholesale service.
An increasing number of companies are deploying their own network access equipment in BT exchanges via a process known as
local loop unbundling, or LLU. LLU allows an ISP to reduce the recurring operating costs incurred through BT Wholesale by
reducing the proportion of traffic that must travel directly over BT’s network. LLU deployment requires a substantial capital
investment to implement, and requires a large customer base to deliver a return on investment. Carphone Warehouse (TalkTalk) ,
Orange, Tiscali and BSkyB are all deploying LLU to some degree.
BT and third party service providers use DSL technologies which, like our network, permit internet access to be provided at
substantially greater speeds than conventional dial−up access.
In addition to the increasing competition and pricing pressure in the broadband market arising as LLU players look to gain the
customer scale to make a return on their investment, there is the longer term threat of new access technology. 3G mobile technology,
other wireless technologies such as Wi−Fi and Wi−Max and broadband power line (which utilizes existing electricity networks to
deliver high−speed broadband internet services) may subject us to increased competition over time in the provision of broadband
services.
Fixed Line Telephone
We provide fixed line telephone services to customers who are within reach of our network by direct connection to our network
and, like our internet services, to customers off our network via BT’s local access network. We compete primarily with BT in
providing telephone services to residential customers in the U.K. BT occupies an established market position. We also compete with
other telecommunications companies that provide indirect access telephone services, including Carphone Warehouse under the brand
name TalkTalk, Pipex, Tesco and BSkyB.
We also compete with mobile telephone networks that may threaten the competitive position of our networks by providing a
substitute to fixed line telephone services. Mobile telephone services also contribute to the downward price pressure in fixed line
telephone services. Through our acquisition of Virgin Mobile in July 2006, we now provide mobile telephony services to
approximately 4.5 million customers.
There is also competition from companies offering VoIP services using the customer’s existing broadband connection. These
include services offered by independent providers, such as Vonage and Skype, as well as those affiliated with established competitors
such as BT and Orange. These services generally offer free calls “on net,” i.e. between users of the same service, but charge for calls
made to normal phone numbers either on a flat monthly rate for unlimited calls (typically restricted to geographic calls) or on a pence
per minute rate.
Business
The U.K. business telecommunications market is very competitive and comprised of traditional network operators such as BT,
virtual network operators such as Vanco plc, or Vanco, and systems integrators such as Affiniti, a trading name of Kingston
Communications (Hull) Plc. While BT represents the main competitive threat nationally due to its network reach and product
portfolio, other providers compete within product and geographic segments. Thus plc, Affiniti and COLT Telecom Group plc, for
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Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007