OK, first of all – a little history. Virgin Media and O2 are currently awaiting final regulatory approval to merge into a single new company. The deal was proposed by parent companies Liberty Global and Telefonica back in May 2020, but has only received a ‘provisional’ thumbs up from the Competition and Markets Authority (CMA) so far. Should the deal be approved in the next few weeks – as Virgin Media and O2 believe is likely – it could see well-established broadband companies like BT, Plusnet, EE and others face an onslaught of new competition. And it could see Sky customers enjoy the 1,000Mbps speeds that, until now, have been reserved for Virgin Media customers.
That’s because the newly-merged Virgin Media-O2 looks set to establish itself as a competitor to Openreach and allow third-party companies to use its broadband infrastructure. For those who don’t know Openreach, a subsidiary of BT, manages a large swathe of the UK’s landline and broadband infrastructure, including internet packages from BT, Sky, EE, TalkTalk, Plusnet, Shell Energy, Vodafone, Post Office, and more.
While there are some broadband start-ups that leverage their own full-fibre cables to offer breathtaking speeds, like HyperOptic, Community Fibre, GigaNet, and more, these remain quite localised. While some are rapidly expanding, they don’t offer anywhere near the same footprint as BT, Sky and TalkTalk.
But while broadband companies with the most coverage are able to compete on price, bundles, and freebies …since they are all reliant on the same cables from Openreach, they’re unable to beat one another on speed. And that’s where Virgin Media-O2 wants to offer something new.
Openreach currently has some 4.5 million premises connected with its next-generation gigabit-capable fibre broadband. In comparison, Virgin Media is on track to connect 15 million homes by the end of this year. Following the appointment of a CEO for the new joint Virgin Media-O2 firm, superfast broadband connection to an extra one million premises before Christmas 2021 was also promised, bringing the total to 16 million homes.
Virgin Media to merge with O2 ‘within months’, what will it mean for existing customers?
And now we have our first clue that those 16 million homes might soon be able to buy their broadband packages from other companies, including established brands like Sky and TalkTalk as well as all-new ventures, instead of just Virgin Media. Spotted by the brilliant team at internet-obsessed blog ISPreview, a new request to regulatory body Ofcom for Code Powers from Liberty Property Co II Limited, a subsidiary of Liberty Global – the parent company of Virgin Media broadband and telly in the UK, indicates that it intends to “utilise Virgin Media’s wholesale products” to facilitate the “construction and operation of a broadband network” across the UK.
Ofcom intends to consult on this new request until May 10, 2021.
Should the proposal get the go-ahead, it does seem like the chess pieces are starting to come together for Virgin Media-O2 to truly challenge Openreach. More competition is likely to be a good thing for customers. If new broadband providers are able to piggyback on the full-fibre cabling already buried under streets across the UK, they have the ability to scale much quicker.
Some tipsters suggest one of the first partners to leverage Virgin Media’s super-fast network will be Sky. The company has previously announced ambitions to offer its Sky Q telly bundle over a broadband connection – so there’s no need to drill a satellite dish to the outside of your home to tune-in to its selection of paid-for channels, movies and sports fixtures. However, these plans have gone quiet since the initial announcement back in 2017.
With millions of home connected with gigabit-capable broadband (that’s around 15x faster than the average home broadband connection in the UK right now) Sky might soon be able to realise its four-year-old plan.
The UK Government had pledged to bring gigabit-capable broadband connections across the country by 2025 during the last general election. However, that promise was quietly watered-down by Prime Minister Boris Johnson last year. Confirmed in the national infrastructure strategy, the Government back its commitment from 100 percent of homes to 85 percent of premises within the next five years.
Gigabit-capable connections provide speeds up to 1,000Mbps. Given that Netflix only recommends 5Mbps for High Definition streaming and 25Mbps for 4K quality video, these future-proofed broadband connections are more than enough to handle working from home, videoconferencing, boxset binges at the weekend, catch-up of live broadcasts, downloading updates to smartphones and games on next-generation video game consoles, and uploading back-ups.
Glacial home internet speeds continue to be a problem – something the requirements to work from home and stay inside during the national lockdowns has thrown into relief. According to research published in September 2020 by Cable.co.uk, shows the UK is now 47th when it comes to downloads with an average speed of 37.82Mbps. At that rate, it should take roughly 15 minutes to download a feature-length movie in High Definition (HD).
The UK manages to trump 174 other countries globally but falls way behind 46 other nations in the speed league, including 21 in Western Europe. This puts the UK among the slowest in Europe when it comes to average broadband speed. To make matters worse, Britain has lost ground since measurements were taken back in 2019.
Commenting on the UK specifically, Dan Howdle, consumer telecoms analyst at Cable.co.uk, said: “While around 60% of the UK has access to the Virgin Media network and can get speeds of up to 516Mbps, and there is limited availability of smaller networks such as Hyperoptic offering gigabit speeds, the Openreach network remains the anchor that keeps average speeds in the UK comparatively low. Entry-level fibre packages and ‘fast’ fibre packages on Openreach have been set at around 30-35Mbps and 60-70Mbps respectively for more than five years now with no significant changes beyond how those speeds are advertised.
“As shown by the domination of smaller countries and regions at the top of the table – Liechtenstein, Jersey, Andorra, Gibraltar – it is obviously far easier to upgrade a country or territory to full-fibre the smaller it happens to be. However, the UK still finds itself a long way behind many nations of equal or greater size. Ultimately, the UK, specifically Openreach, is comparatively late in its rollout of pure fibre networks, which is causing the UK to stagnate, while other nations gain ground.”
Of course, the latest plans from the Virgin Media-O2 joint venture and rapid expansion of its full-fibre network could change that. To find out what the merger could mean for existing Virgin Media and O2 customers, read our in-depth analysis.