Virgin Media 2013 Annual Report Download - page 12

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I - 10
provider or network. In addition, our capacity is dimensioned to support peak consumer demand. In serving the B2B market,
many aspects of the network can be leveraged at very low incremental cost given that B2B demand peaks at a time when residential
consumer demand is low, and peaks at lower levels than residential consumer demand. As such, we believe we have an advantage
over competitors who serve either residential or B2B customers but not both.
We also face intense competition in the mobile services market, which is primarily driven by increased pricing pressure from
both established and new service providers, evolving customer needs and technological developments.
We offer most of our products on a stand-alone basis or as part of bundled packages designed to encourage customers to
subscribe to multiple services. We offer broadband internet, fixed-line telephony and mobile telephony and data services throughout
the U.K., and currently offer television services exclusively in areas served by our cable network. Our primary competitors are
BT, British Sky Broadcasting Group plc, or BSkyB, TalkTalk Telecom Group plc, or TalkTalk, Vodafone Limited, or Vodafone,
EE and Telefónica UK Limited, which operates in the U.K. as “O2.”
Broadband Internet
We have a number of significant competitors in the market for broadband internet services. Of those competitors, BT is the
largest, serving 32% of the total broadband internet market in the U.K. We serve 20% of the total broadband market in the U.K.
BT provides broadband internet access services over its own DSL network both as a retail brand and as a wholesale service.
BT is currently rolling out fiber-based broadband, primarily using FTTC, and has recently announced its intention to expand fiber-
based broadband deployments, which will allow its retail arm, and its wholesale customers, to offer ultra high speed broadband
services. Where fully deployed, operators are able to offer download speeds of up to 330 Mbps. BT Openreach, a division of BT,
is also expanding BT’s fiber-based broadband to most of the U.K., including its fiber-to-the-premises, or FTTP, on-demand product.
BT Openreach manages BT’s local access network and provides competitors, including us, access to BT’s networks.
Operators such as BSkyB, TalkTalk, EE and O2 deploy their own network access equipment in BT exchanges via a process
known as local loop unbundling, or LLU. This allows an operator to reduce the recurring operating costs charged by BT 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.
In addition to the competition and pricing pressure in the broadband market arising from LLU, we may be subject to increased
competition in the provision of broadband services from mobile broadband and technological developments (such as long-term
evolution, or LTE, and 4G mobile technology) and other wireless technologies, such as Wi-Fi and Worldwide Interoperability for
Microwave Access, or Wi-Max. For example, EE has also announced that its 4G coverage has reached 70% of the U.K. population
and that it is on target to reach 98% of the U.K. population by the end of 2014.
Television
We are the largest cable television provider in the U.K. in terms of the number of video cable customers and the sole provider
of video cable services in all of our network area. Our digital television services are available to approximately 46% of U.K.
television households and serve 14% of the U.K. television market. Our digital television services compete primarily with those
of BSkyB, which is the primary pay satellite television platform in the U.K. with approximately 9.8 million subscribers, or 36%
of the U.K. television market. BSkyB owns the U.K. rights to SD, HD and 3D versions, as the case may be, of various sports and
movie programming content. BSkyB is both our principal competitor in the pay-TV market and an important supplier of basic
and premium television content to us.
In August 2013, BT, a principal competitor that offers very high-speed DSL (VDSL) broadband services, launched its own
premium BT Sport channels, providing a range of sports content including football from the English Premier League and, from
the 2015/2016 football season, exclusive rights to the UEFA Champions League and the UEFA Europa League. The BT Sport
channels are available over BT’s internet protocol television (IPTV) platform, BSkyB’s satellite system and our cable network.
BT is currently offering customers who subscribe to their broadband service free access to the SD version of BT Sport channels
over BT TV, BT broadband and satellite.