Page last updated at 13:53 GMT, Wednesday, 25 March 2009

Virgin becomes online gatekeeper

By Darren Waters
Technology editor, BBC News website

Virgin Media modem
Virgin offers 50Mbps and is moving to 100Mbps and 150Mbps

In the battle to dictate the shape of future online use Virgin Media has, almost quietly, manoeuvred itself into a position of dominance.

It is in the enviable position of having the UK's largest fibre optic network, albeit covering only 50% of the country, offering up to 50Mbps download speeds, as well as having access to high-quality content via set-top boxes in millions of homes.

The firm is also helping bridge the worlds of TV and web with applications such as the iPlayer on its set-top boxes.

"We are giving 50% of the UK an experience of what real next-generation access looks like," says Neil Berkett, chief executive of Virgin Media.

Anyone clinging on to design principles and philosophies created two generations ago... is naïve
Neil Berkett, Virgin Media CEO

And while BT is busy spending £1.5 billion on a rival network that will offer customers between 40 and 60Mbps speeds over the next three years, Virgin is already planning to increase its top tier speeds to 100Mbps and 150Mbps.

Mr Berkett says: "I would have thought that was a fairly short to medium term opportunity.

"I'd be surprised if we didn't do something with the network next year."

Gatekeeper role

Virgin's gatekeeper role brings issues and responsibilities. From traffic management, to targeted advertising, customer relations, web TV and net neutrality, Virgin finds itself at the centre of key debates and issues.

Mr Berkett calls this "digital confidence". He adds: "We are leading this revolution in terms of next-generation access. It's not just around the speed gain, we want to be delivering real value added services around the side."

Virgin has put the iPlayer on its set top boxes

Virgin knows that if it is to remain as that gatekeeper it has to give people a reason to want to make the leap from the 3.6Mbps average speed connection available across the UK to 20Mbps, 50Mbps and beyond.

For that reason, it is working behind the scenes with content partners and hardware and software firms to broaden the attraction of the high-speed online world.

As an example Mr Berkett talks of "video 3.0".

He explains: "I can create my bucket of comedy on my set top box - some of it is pay TV, some is pay video on demand; both of these currently need to be in a walled garden. Perhaps there is also comedy from the BBC, or another URL I have found somewhere out there on the web."

Virgin is predicting a world where the open web and the walled garden of cable TV comes together to present new content offerings for consumers.

"That is absolutely the world we have got to get to and we are trialling this as we speak," says Mr Berkett.

To that end Virgin is working with companies such as Cisco, for the hardware, with Avinity, for the software, and having conversations with Project Canvas, the BBC and BT's internet TV standards forum.

Converged world

"Anybody who has a single bet in this converged world is naive," he says, stressing that the future converged world will rely on "open and compliant standards in order to succeed".

Fibe optic cables
Fibre optic networks are offering faster broadband speeds

The company is also having to deal with the abuse that comes with faster download speeds, as well as dealing with the responsibility of managing a high speed network that impacts on intellectual property rights and child protection.

"It's about ensuring everyone has got reasonable access to the power of next generation access as opposed to the few percentage of people who abuse that position.

"It's a very complex and highly emotive area."

Virgin says its traffic management is transparent and open to scrutiny. Heavy users have their downstream speeds throttled at certain times of the day when they have download a specific amount of data.

But there are other forms of traffic management emerging, including deep packet analysis; looking inside the very data that is flowing across its network in real time.

"We have an obligation having created this platform of speed and value to be able to manage it," says Mr Berkett.

But he says Virgin's traffic management policies are not just about protecting revenue streams and the holders of intellectual property rights.

"We are in conversation with CEOP (Child Exploitation and Online Protection Centre) in terms of ensuring what we do helps them," he says.

On the subject of piracy, Mr Berkett says: "There's been a whole generation of people who were born into this digital world who do not respect - not in the derogatory sense - ownership and protection of intellectual property.

"I include my children in that. That is the world we created when we launched the CD without protection. It's a world out of control.

"You need to have intelligence about your network."

Virgin knows it needs to ensure a good return on its early investment in fibre optic and take advantage of the lead it has in the market.

"I have an obligation to my shareholders to ensure I get the optimum return for the investment I am making in my network.

"I have to explore different business models to ensure they get an adequate return."

User behaviour

Those options potentially include targeted advertising based on user behaviour.

"We have to take the customer with us," he says about targeted advertising, saying the firm will be looking closely at the results of BT's trials with the controversial advertising firm Phorm.

He adds that the firm has not firm plans to launch the Phorm service itself.

He is less clear on how customers would be able to articulate any concerns about targeted advertising, saying "right now that is a hypothetical question".

In a branding sense we are going through a journey
Neil Berkett, Virgin

One other avenue of financial return is in charging content providers for high-speed access to end users was one business model among many to be explored.

"I think it is inevitable that there will be complementary business models to the subscription business model that allows this level of investment to continue. I wouldn't rule out anything."

He dismisses the concept of net neutrality as only relevant in the "dial-up world".

"We have gone through first generation broadband and are entering next generation access broadband.

"Anyone clinging on to design principles and philosophies created two generations ago and arguing they are equally applicable today... is naïve."

The company is still dealing with the customer relations' fallout of merging two previous companies, NTL and Telewest. recently revealed that Virgin had come fifth in its annual survey of broadband users in terms of customer service and reliability among ISPs.

Mr Berkett says: "In a branding sense we are going through a journey. There are other surveys where we come top of the pile."

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