If you are unfamiliar with the journey from the mid 1980’s to the creation of Virgin Media, I’m afraid a simple blog post is going to struggle to cover every detail because the story is a mess of names and mergers, of debt and equity. But we’ll try to cover the bases of how a government ambition in the 1980’s for greater competition in telecoms led to Virgin Media today with over 50% of the UK able to access their TV, Phone and Ultrafast Broadband packages with 350Mbps download speeds (but limited upload speed)
The Cable Authority (1984-1991)
In 1985 the Cable Authority was established by the Cable and Broadcasting Act 1984 to regulate the newly liberalised cable television industry. Its responsibilities were taken over by the new Independent Television Commission on 1 January 1991.The Authority had two main functions. The first was to grant licences, following a competitive franchising procedure, for the provision of services over the new broadband cable system. The second was the regulation of the programme services carried by cable systems
Source Ofcom Website
By 1991, 136 individual Cable franchises had been awarded by the Cable Authority. The bulk of these were owned by larger US based Cable operators where the technology was in fairly advanced deployments. Today there are 2 Cable Franchises in the UK – Virgin Media and WightFibre, who never sold / merged with other franchises.
Building a brand new Cable Network involved a lot of digging and civil engineering to lay both Optical Fibre and then Coax cable from various nodes to each property. This cost vast sums but banks queued up to provide unsecured lending to finance the network builds – attracted by the long term returns on offer from customer subscriptions.
Between 1991 and 2000 the franchises built their networks all based on similar designs, a series of merger and acquisitions resulted in 2 larger operators, NTL and Telewest covered around 9 million properties but with debts of over £10 Billion combined.
From a peak in the dot com bubble, by early 2000’s the share prices had collapsed to 1% of their former value. As creditors railed against this, shareholders came under pressure to accept huge Debt for Equity swaps in both companies, with NTL entering chapter 11 bankruptcy protection in the US in 2002-2003 and Telewest completing a debt for equity swap involving 98.5% of its shares going to its creditors, leaving original shareholders with nothing.
Come 2005 and NTL and Telewest are planning a merger, for complex contractual issues the end result was Telewest buying NTL with ownership of the new business 75% in the hands of NTL shareholders and 25% with Telewest shareholders, these shareholders being the former creditors of the 2 companies.
At the same time NTL was attempting to takeover Virgin Mobile in the UK, a deal which completed in mid 2006 and included a 30 year license to the Virgin brand – and so Virgin Media was born, the 1st UK Quad play service providing TV Content, Mobile, Landline and Broadband.
In 2013 Virgin Media was aquired by Liberty Global for £15Billion in cash and shares. Liberty Global controls multiple cabletv operators across Europe and the US
Broadband via Cable
Telewest were one of the earliest entrants to the ADSL market in 2000 but soon built their BlueYonder brand offering 2Mbps – 10Mbps Cable Broadband using a stand alone Cable Modem, far in excess of the ADSL speeds available in non Cabled areas.
Similarly NTL provided broadband but using integrated modems within the TV Set Top Box, this proved a very poor implementation and resulted in restrictions to 1Mbps to prevent the STB locking up. Eventually NTL switched to Cable Modems and was able to provide 20Mbps by 2006 and started trialling 100Mbps services at the same time which launched to customers in 2010.
Virgin Media continued to offer ADSL services upto 2015 with the virgin.net brand when they sold any remaining ADSL customers to the Talktalk group.
Cable Broadband Technology
Virgin Media uses Docsis (Data Over Cable Service Interface Specification) version 3.0 network to provide their services including Broadband, this uses RF technology as channels which can be combined to provide different combinations of upload and download speeds upto a theoretical maximum of 1.2Gbps download and 200Mbps upload. With Virgin’s current highest tier offering for example 16 downstream by 4 upstream channels provides 350Mbps download and 20Mbps upload and in other areas of the network 24 downstream by 4 upstream channels provides the same 350Mbps download and 20Mbps upload.
By bonding multiple channels together, Cable Broadband can keep increasing speeds without changing cabling or equipment, but the service will always be asymmetric- higher download than upload speeds. In time the Docsis 3 hardware can be upgraded to Docsis 3.1 which offers theoretical maximum of 10Gbps download and 1Gbps upload, but new core hardware and Customer Routers would be needed to support this and currently in 2019 there are no plans to deploy this upgrade in the UK.
Virgin Media has consistently led the broadband speed tables since before 2010 and historically keep pushing up both their highest speed tiers but also their slowest tiers, for example making their slowest tier 100Mbps in 2017.
While the bulk of the legacy Cable TV infrastructure built from the 1990 to 2015 was based around a Hybrid Fibre Coax network (HFC – Fibre Rings & Nodes feeding Coax drops to customers) in 2015 they announced the largest since investment programme to increase their network from 14 million properties to 17 million at a cost of £3 Billion, the programme named Project Lightning, marked a shift from building HFC networks to building FTTP with fibre direct to the property. In order to maintain a common network architecture, Virgin use a technology called RFoG (Radio Frequency over Glass) which delivers the same Docsis network as HFC using Fibre.
With RFoG, fibre is converted back to Coax at the property ingress point using a Media Converter. This system provides a flexibility to upgrade in future, while allowing for a single common Virgin customer router – currently the SuperHub3
Currently (Jan 2019) Virgin is available to just over 50% of UK homes (approx 15.1M properties) and services 5.9M live customers for broadband.
Virgin doesn’t provide any wholesale access to their network, nor are they obliged to as they have accepted no government funding to build the infrastructure.
The network is near universally located in Urban and Semi Urban areas – based on the original Cable Authority franchise areas from the 1980’s. There are a couple of exceptions such as the Test & Dun Valley area in Hampshire, where due to a historic duct ownership, local residents negotiated a build agreement with Virgin for 4000 rural homes, with 1300 properties signing up in advance and agreeing to pay a £300 community charge each.
Interestingly that initial signup rate of 31% is of great significance. Something we’ll touch on in future.