Virgin Media to stand up rival network operator to BT Openreach

NetCo hoping to eat some of the pie by opening network plumbing to ISPs

UK telco Virgin Media is opening up its fixed line broadband networks to other internet service providers (ISPs) for the first time, setting up a rival national infrastructure provider to BT's Openreach in the process.

Virgin Media, full name Virgin Media O2 (VMO2), said it has initiated plans to create a national fixed network company (NetCo), backed by its shareholders Liberty Global and Telefónica.

The as-yet-unnamed entity will be formed as a subsidiary of VMO2, and will take over the company's cable and fiber network assets, said to extend to 16.2 million premises across the country. VMO2 will then serve its existing broadband customers via a wholesale agreement with NetCo, providing the division with revenue and cash flow from day one of operations.

VMO2 made its intentions clear, saying it aims to establish "the biggest dedicated fixed network challenger in the country," offering choice for other providers as a major alternative to BT's Openreach. However, those 16.2 million households it currently services are mostly found in large towns and cities.

The new NetCo will also take responsibility for completing VMO2's current fiber upgrade program, inteded to overhaul the company’s existing cable network to full end-to-end fiber.

We asked VMO2 if this means that its several million customers with cable TV and broadband delivered via the same route are to be upgraded to fiber-to-the-premises (FTTP), but the company does not appear to be committing to this yet.

"We aren't providing details on our cable network plans at this stage and will be focused on delivering fiber upgrades and connections in the coming years," a spokesperson told The Register.

It also isn't clear how the cable parts of the VMO2 network will fit into the wholesale provider plan. Will rival ISPs be able to serve customers on a cable connection? Again, the company was less than crystal clear.

"It is expected that both our cable and fiber assets will be part of NetCo but the final design of the NetCo will depend on a number of factors, above all on what makes operational sense and minimizes complexity. NetCo will offer that network on a wholesale basis to other ISPs," the spokesperson told us.

VMO2 said in its announcement that nexfibre - a separate fiber network joint venture between Liberty Global, Telefónica and private equity house Infravia - will not form part of the new NetCo, but will operate separately with a focus on building into greenfield areas.

This doesn't stop VMO2 from claiming that the NetCo and nexfibre networks combined are expected to eventually reach about 75 percent of the country.

VMO2 chief Lutz Schüler said the move is "a logical evolution" of the company's fiber strategy.

"This network business will provide a platform for potential altnet consolidation and wholesale opportunities in future, offering widescale network choice for other providers," he claimed. "While nothing changes today, work is well underway and you'll hear more from us later in the year."

CCS Insight director of Consumer and Connectivity Kester Mann said the move should be considered a positive one for UK broadband customers, as it creates fresh opportunities for service providers and long overdue competition for Openreach.

"Attention will now turn to which providers would consider signing up with the new entity, how it could be regulated and whether there will be any response from Openreach," he said.

Richard Neudegg, director of regulation at comparison site, believes a large-scale wholesale competitor for Openreach could shake up the market, potentially giving more options for ISPs on how they connect our homes.

"Consumers having access to a choice of well-priced ultrafast broadband services will be an important part of driving take-up as well as build investment," he said.

Neudegg also reckons the new company could swallow up smaller providers in future. "There are several smaller scale alternative network providers building out full fiber infrastructure across the UK. VMO2 creating a new wholesale business is a statement of intent that it could be a potential acquirer for some of these networks in the longer term."

This was echoed by Mann, who said: "With dozens of alternative providers, the UK is ripe for consolidation and such a move would bring VMO2 crucial scale benefits."

An Openreach spokesperson said of its new rival: "We welcome competition as it's great for customers and it's what Openreach was established to enable."

It went on to claim it is "building further and faster than anyone else," but is "committed to supporting others who use our ducts and poles to build their own networks."

"We're confident that the unrivalled quality and breadth of our network, as well as the skill of our teams and the strength of our relationships with customers, will see us continue to be successful and deliver a bright full fibre future for the UK."


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