Virgin Media 2013 Annual Report Download - page 13

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I - 11
Content owners, online aggregators and television channel owners are increasingly using broadband as a new digital distribution
channel direct to consumers. In 2012, a free-to-air internet-connected TV service to U.K. homes was launched by YouView, a
joint venture which includes Arqiva, BBC, BT, Channel 4, Channel 5, ITV plc, or ITV, and TalkTalk. Consumers are able to
purchase a box from retailers or get a free subsidized box as part of a bundled package (TV, broadband and telephony) with
providers BT and TalkTalk.
Residential customers may also receive digital terrestrial television, or DTT, which is delivered to customer homes through
a conventional television aerial and a separately purchased set-top box or an integrated digital television set. The free-to-air DTT
service in the U.K. is called Freeview. This service is provided by a consortium of operators, including the BBC.
BBC and ITV also offer a free-to-air digital satellite alternative to Freeview service, known as Freesat. Freesat offers
approximately 120 subscription-free TV channels, including selected HD channels such as BBC 1 HD, ITV HD and Channel 4
HD. Freesat also offers a range of digital video recorders under the brand Freesat+. A new range of Internet connected digital
video recorders under the brand Freetime offering access to catch-up TV services was launched in 2012.
Residential customers may also access television content by means of IPTV. BT TV, a combined DTT and video-on-demand
service offered by BT over a DSL broadband connection, is available throughout the U.K. BSkyB also offers live streamed TV
and video-on-demand services over a broadband connection, through its Sky On Demand and Sky Go services. In addition, Netflix,
LoveFilm, Google, Apple and others have launched IPTV products.
The communications industry is constantly evolving 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 digital cable and digital cable-on-demand services. These include
the DSL services mentioned above and next generation LTE services. We expect continued advances in communications technology
and in content, such as ultra HD.
Fixed-line Telephony
We compete primarily with BT in providing telephony services to residential customers in the U.K. BT occupies an established
market position as the former state provider. We also compete with other telecommunications companies that provide telephony
services directly, through LLU, or indirectly. These include TalkTalk and BSkyB, and mobile telephone operators such as EE,
Vodafone and 3 U.K. Our share of the fixed-line telephony market in the U.K. is 14%.
We compete with mobile telephone networks that offer consumers an alternative to fixed-line telephony services. Mobile
telephone services also contribute to the competitive price pressure on fixed-line telephony services.
In addition, we face competition from companies offering VoIP, services using the customer’s existing broadband, mobile
data and Wi-Fi connections. These services are offered by independent providers, such as Vonage, WhatsApp and Skype, as well
as those affiliated with established competitors such as BT and EE. These services generally offer free calls between users of the
same service, but charge for calls made to fixed-line or mobile numbers either on a flat monthly rate for unlimited calls (typically
restricted to geographic areas) or based on usage.
Mobile
In the mobile telephony market, we face direct competition from mobile network operators (MNOs) such as O2, EE, Vodafone
and 3 U.K., and other MVNOs, such as Tesco Mobile, Lebara, TalkTalk and ASDA. We also compete with fixed-line telephony
operators, with companies offering VoIP services, and from the growth in online communication, as described in “Fixed-line
Telephony” above.
EE became the first U.K. mobile network operator to launch 4G in October 2012, following approval from the U.K. Office
of Communications (Ofcom) to use its existing 1800MHz spectrum. Vodafone, O2 and 3 U.K. launched their 4G services during
2013; the launch of 4G services may introduce new competitors into the market or strengthen the position of existing competitors.