Virgin Media (VM) held an analyst event last week to update the industry on its "˜ultrafast' broadband (DOCSIS 3.0) deployment and provide a glimpse of the company's strategy. Overall the message was positive and it was clear that consumers were starting to see the benefits of the DOCSIS 3.0 upgrade.
The event also revealed a couple of shortcomings which, in our view, will impact the company in the long term, while details of its overall strategy of simplifying the digital world for customers were sketchy.
Virgin Media's advantages
In all the public debate about next-generation access (NGA) networks, VM is quite right to reiterate the fact that the UK already has NGA infrastructure in the form of VM's own network. It is newer than BT's network; has a fibre to the cabinet (FTTC) architecture; customers are, on average, less than 1km from the exchange; and the last mile consists of a twisted copper pair and coaxial cable. In essence, it already has what BT is planning to spend Â£1.5 billion on just to cover around 40% of UK households.
DOCSIS benefits cable operators and customers
As with all cable networks, VM's network was built to deliver broadcast TV, not broadband, and because of this the final mile is a shared architecture - typically serving up to 1,000 households per node. These households currently have to share 2Ã—38Mbps channels.
Of course, not all 1,000 households will be broadband customers, and not all customers will be online at any one time, but even so, sharing bandwidth in this way can impact the quality of the broadband service as bandwidth demand increases.
DOCSIS 3.0 introduces four new channels of 52Mbps each, thereby increasing the potential downstream bandwidth by 208Mbps. This allows VM to offer higher-speed services (VM recently launched a 50Mbps service) as well as alleviating the sharing problem.
VM aims to migrate all of its existing 20Mbps customers, as well as the new 50Mbps customers, onto the new channels, which not only benefits these high-end customers but low-end customers too as space in the old channels is freed up. VM customers can enjoy higher speeds and improved throughput: as DOCSIS 3.0 channels can be bonded, potential bandwidth levels could theoretically reach 200Mbps.
Significant limitations still exist
Two major issues still exist with the VM network. Firstly, it only covers around 50% of UK households, which limits the potential customer base and to some extent the services it can offer.
The second issue is upstream bandwidth. DOCSIS 3.0 does wonders for the downstream bandwidth, but little for the upstream speed. The current upstream bandwidth on the 50Mbps service is 1.5Mbps. Virgin Media claims that in the near future this could increase to 5Mbps. It dismisses this limitation as a significant issue as today most consumers still operate very much in an asymmetric fashion (that is, they download far more than they upload).
In our opinion this will not always be the case. More and more consumer applications require data to be uploaded as well as downloaded, and this trend will only accelerate over time.
Simplifying the digital home - more than network convergence
VM started the presentation by stating that its aim was to simplify the digital world. With this in mind, it discussed its intention to launch a new home gateway, the V Player, which will integrate the broadband and TV networks and connect various customer premises equipment.
To truly simplify the digital home will require more than just connecting devices. The concept is a powerful one and one that Ovum buys into, but we will need more detail from VM on its strategy before we are able to say whether it has found a compelling solution.