Virgin Media 2008 Annual Report Download - page 21

offered over a DSL broadband connection, is available nationally and Tiscali has continued to expand
its service coverage beyond parts of the London metropolitan area. BSkyB also offers a
video-on-demand service over a broadband connection, Sky Player TV, which provides live streamed
TV and video-on-demand on a subscription basis.
There is also a growing demand for full-length video content via broadband connections to the
personal computer. Content owners, online aggregators and television channel owners are increasingly
using broadband as a new digital distribution channel direct to consumers. Current business models
tend to be on a pay-per-transaction basis. While this represents a potential disintermediation threat to
pay television platforms, we believe that the actual demand and willingness to pay for broadband
distributed content is unlikely to represent sufficient revenues and benefit to content owners to displace
pay television as a preferred distribution channel in the medium term.
Telecommunications is a constantly evolving industry and there are a number of new and emerging
technologies which can be used to provide video services that are likely to compete with our DTV and
video-on-demand services. These include DSL services mentioned above and third generation, or 3G,
mobile telephony. We expect that there will continue to be many advances in communications
technology and in content. These advances, together with changes in consumer behavior, and in the
regulatory and competitive environments, mean that it will be difficult to predict how our operations
and businesses will be affected in the future.
The U.K. government has stated that it will terminate ATV transmission by 2012. Consumers
wishing to receive television services will have to convert to DTV, currently available via cable, digital
satellite, DTT or DSL. However, when ATV transmission is terminated, the DTT signal and network
may be strengthened. This will enable DTT to be made available to additional customers’ homes that
cannot currently receive a signal. It may also provide additional capacity to allow the Freeview channel
line-up to be expanded to include new channels.
Fixed Line Telephone
We compete primarily with BT in providing telephone services to residential customers in the U.K.
BT occupies an established market position as the former state-owned incumbent. We also compete
with other telecommunications companies that provide telephone services, either directly through LLU
or indirectly, including Carphone Warehouse under the brand name TalkTalk, BSkyB, Tiscali, Orange
and Tesco.
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 competitive price pressure in fixed line telephone services.
There is also competition from companies offering voice over internet protocol, or 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 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 areas) or on a pence per minute rate.
Business
The U.K. business telecommunications market is characterized by strong competition and ongoing
consolidation. The market is comprised of traditional network operators such as BT and C&W, virtual
network operators such as Vanco plc, or Vanco, and systems integrators like 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, the acquisition of THUS Group plc by C&W in 2008 has
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