Virgin Media 2009 Annual Report Download - page 30

Service Levels, which are levels of service that we and Virgin Group wish to achieve over time, to
create new service measures and increase the demands on certain existing measures, covering a range
of matters including customer satisfaction, customer advocacy, complaint levels, call center performance
and staff satisfaction.
A failure to meet our obligations under the license agreement could lead to a termination of the
license. If we lose the right to use the Virgin brand, we would need to rebrand the affected areas of
our business, which could result in increased expenditures and increased customer churn.
Our operating performance will depend, in part, on our ability to control customer churn.
Customer churn is a measure of customers who stop using our services and controlling churn is a
key element of our operational performance. Our customer churn may increase as a result of:
• customers moving to areas where we cannot offer our digital television, or DTV, services;
• the availability of competing services, some of which may, from time to time, be less expensive
or technologically superior to those offered by us or offer content that we do not offer;
• interruptions to the delivery of services to customers over our network and poor fault
management;
• a general reduction in the quality of our customer service; or
• a general deterioration in economic conditions that could lead to customers being unable or
unwilling to pay for our services.
An increase in customer churn can lead to slower customer growth and a reduction in revenue.
Our inability to obtain popular programming, or to obtain it at a reasonable cost, could potentially have a
material adverse affect on 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.
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 HD, some sports programming and interactive content, exclusively to its digital satellite
customers and not to us. Ofcom has been conducting an investigation into the U.K. pay TV market and
is expected to issue its final statement in early 2010. Ofcom’s proposed remedy, if implemented, could
reduce the wholesale prices we are charged for BSkyB premium TV content and improve the
availability of BSkyB HD premium content, which would enable us to offer more competitive and
innovative consumer offerings. See ‘‘Our Business—Regulatory Matters—Regulation of Television
Services.’’
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