Virgin Media 2007 Annual Report Download - page 34

Moreover, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses
and similar disruptive problems. We do not currently have a formal company-wide disaster recovery
plan, however, we are in the process of creating plans for key areas of risk in the business.
Unanticipated problems affecting our systems could cause failures in our information technology
systems, including systems that are critical for timely and accurate customer billing, or our customer
service centers or interrupt the transmission of signals over our cable network. Sustained or repeated
system failures that interrupt our ability to provide service to our customers, prevent us from billing
and collecting revenue due to us, or otherwise meet our business obligations in a timely manner, would
adversely affect our reputation and result in a loss of customers and revenue. Improvements to our
revenue collection processes may not be successful or may not yield enhanced revenue collection.
Inefficient collection could result in an increase in bad debt.
Our inability to obtain popular programming, or to obtain it at a reasonable cost, could potentially materially
adversely affect the number of customers or reduce margins.
For the provision of television programs and channels distributed via our cable network, we enter
into agreements with program providers, such as public and commercial broadcasters, or providers of
pay or on demand television. We have historically obtained a significant amount of our premium
programming and some of our basic programming and pay-per-view sporting events from BSkyB, one
of our main competitors in the television services business. BSkyB is a leading supplier of programming
to pay television platforms in the U.K. and is the exclusive supplier of some programming, including its
Sky Sports channels and Sky Movie channels, which are the most popular premium subscription sports
and film channels, respectively, available in the U.K. We buy BSkyB wholesale premium content on the
basis of BSkyB’s rate card terms and pricing, which can be changed on 45 days’ notice by BSkyB, and
not under a long term supply contract. Our agreement with BSkyB to purchase its basic programming
channels expired on February 28, 2007, and we lost the right to carry those channels. As a result, we
experienced increased churn and higher customer retention costs in 2007.
In addition to providing programming to us, BSkyB competes with us by offering its programming
directly to its digital satellite customers. As a result of BSkyB’s ownership of this content, it is able to
charge us a price for its content that makes it challenging for us to compete with BSkyB’s own retail
pricing and still maintain a profit margin on the sale of that premium programming. BSkyB also offers
content, such as high definition, some sports programming and interactive content, exclusively to its
digital satellite customers and not to us.
In addition to BSkyB, our significant programming suppliers include the BBC, ITV plc, Channel 4,
Channel Five, Viacom Inc., HBO, Discovery Communications Inc. and Turner, a division of Time
Warner Inc. Our dependence on these suppliers for television programming could have a material
adverse effect on our ability to provide attractive programming at a reasonable cost. In addition, the
loss of programs could negatively affect the quality and variety of the programming delivered to our
customers, which could have a material adverse effect on our business and results of operations and
increase customer churn.
Unauthorized access to our network could result in a loss of revenue.
We rely on the integrity of our technology to ensure that our services are provided only to
identifiable paying customers. The number of devices available in the U.K. which facilitate theft of
service has increased. Any unauthorized access to our network could result in a loss of revenue, and
any failure to respond to security breaches could raise concerns under our agreements with content
providers. We continue to work on controlling unauthorized access to our networks.
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