Virgin Media Business is one of those companies we don’t hear nearly enough about, so when the opportunity came up for us to speak to its executive managing director, Mike Hallam, we jumped at the chance to get up to speed with this European telco.
Speaking on the unique market position of Virgin Media Business’s wholesale division and the types of customers it serves, Hallam shared: “Virgin Media Business is well positioned to serve the many facets that it does serve, and those are broken down into carriers, being your sort of obvious partners, such as CenturyLink, Verizon and Talk Talk — those types of partners. Then we also have MNOs, the mobile network operators. We also have broadcasters, so the likes of Sky, and also Arqiva. We also have the more regional resellers, which we call business partners.”
Expanding further, Hallam says that Virgin Media Business does one of three things for various partners — and that’s sell to, through or with those pools of customers.
“What I mean by that is, when we sell to those partners, predominantly in the carrier end of the market, we would sell a networking solution for their business. It may be backhaul, it may be access, but we're doing that very successfully, given our network footprint.”
This tier ranges from high capacity services to 10G Ethernet, all the way through to dark fibre.
“Then as you step down and look at the opposite end of that market, which is your business partners, with the likes of virtual WAN, where they are attracting themselves to an enterprise market or public sector market, we are giving them a layer of connectivity that helps them support their end customer solution,” continues Hallam.
“Our biggest point of differentiation is in our commercial agility, and we present our offerings on a very bespoke basis through individual partner relationships rather than it just being almost a set menu.”
Though 2020 is now well and truly behind us, for most of the world the effects of Covid-19 can still be felt, some of us still in the strictest of lockdown. Looking back on how Virgin Media’s wholesale business fared during this period, it’s not an unfamiliar story to the rest of the market.
“Did we see a dramatic drop-off in new business when we first entered lockdown? Of course we did. It was an impact that most businesses felt immediately, but we also saw an uplift in terms of businesses requiring bandwidth upgrades.”
One of the biggest benefits of the pandemic for Hallam was that the business no longer saw the levels of disconnection happening.
“All of a sudden customers, instead of transitioning to new solutions, they stopped, and that was a very good thing in terms of sustained revenue — as opposed to replacing old for new, which clearly is the normal sort of treadmill that we're all on.”
Overall, Hallam says that the business responded to the market when it started to see some of those green shoots with people returning to offices, but also businesses starting to return to some form of normality.
“We went out to our wholesale partners with what I believe to be very responsive offerings and propositions that allowed them to go and attract their end customers to come and buy their solutions.”
From a market-wide perspective, Hallam says that though he doesn’t see any particular technology or product at the forefront, a general acceleration towards digitalisation is the biggest trend he sees.
“We are seeing an awful lot of increased demand and the advancement of technology has sort of leapt forward,” he says.
“So, the way that businesses have had to transform and react to more homeworking or remote working, and just a very different set of technologies and solutions that allow them to do that, will ultimately mean that businesses that were probably sceptical about moving to cloud, I think that is the biggest acceleration that's happening in the market.”
As for emerging technologies such as 5G, AI, machine learning and Internet of Things, the area where Virgin Media Business has done the most work is 5G.
“We have very strong relationships with mobile network operators, and we are very deeply involved in both Vodafone and H3G's transformation of their networks to cope with the obvious demand of 5G as it starts to sort of take off,” Hallam explains.
“But one of the things that both of those businesses have been very open with us about is that they really have very little understanding of just how demanding 5G is going to be from a data perspective.”
Historically, such companies have been focused on building the most robust and scaleable network, which in turn requires a distinct change of strategy in the way that they manage their networks. They are used to taking managed services from the likes of Virgin Media Business or BT and using those services where they don't need a big networking engineering.
“Whereas, I think that the way that they're now viewing 5G is that it is a more optimal financial model for them to build their own networks, that they manage much more closely, so that they can tune the capacity as and when they need to in order to respond to the demands of 5G,” Hallam adds.
“I think that is a very distinct shift in their approach, so I think 5G is probably the one that, for me, is going to emerge as a real scaleable solution.”
According to a Nielsen report in the summer of 2020, the number of gamers playing video games increased owing to the Covid-19 pandemic, growing the most in the US, by 46%, followed by France (41%), the UK (28%), and Germany (23%).
In tandem, TV and social media engagement also surged, with in some cases a 60% increase in the amount of content being watched.
These trends are global, and streaming in particular has made it to the forefront of Hallam’s watch list.
“One of the things that we have experienced throughout Covid is a very distinct shift in network capacity, and that plays in the popularity in gaming. But I think one of the big consumers of data across both our network — and I know some of my large customers’ network — is that of Netflix, which again is content.”
As conversation continues, the discussion turns to the relationship between over-the-top (OTT) operators and telcos, one that over the years has always been tumultuous.
“The Netflix model is very clever because they clearly are using our network, Sky’s network and BT’s network at zero cost to Netflix, on the premise that they have a subscriber base that is subscribing to them. It consumes an incredible amount of data across those relevant networks so that's been probably one of the largest growth areas, one that would probably be pre-Covid as well.”
Over time, however, that relationship is only likely to change further as OTTs/content providers continue to venture further into the world of network ownership. Hallam agrees.
“We work closely with some of those names, so they are definitely starting to think differently about how they network,” he says. “I think that will shift in terms of them using other networks, to them having their own network solutions, but I think that will probably be more from a sort of backhaul basis.”
But the working relationship doesn’t end there; Hallam says that they are likely to continue to “use the likes of ourselves and BT where they require either access, or a little bit of aggregation”.
Like many in the space, Virgin Media as a group recently reported on its five-year sustainability plan (2015-2020), a topic that telcos and the various vendors in its supply chain are taking more and more seriously.
Milestones include a 42% reduction in its carbon footprint (scope 1 and 2) against its 2014 baseline, and steps towards zero waste to landfill, down to 3% compared with 9% in 2018.
For the next five years the company has pledged to work with experts on carbon mapping and reduction to understand its carbon footprint across scope 1,2 and 3, so that it can establish a carbon reduction strategy informed by science-based targets. This is turn will put Virgin Media on the road to net zero over the next five years.
“This is a huge priority for Virgin Media,” explains Hallam. “We are working on a new five-year strategy that will look at how we support vulnerable people and communities as well as new environmental targets set for the business. We are looking to make those public announcements during 2021.”
Sustainability aside, 2021 is set to be a continuation of what has been a surprisingly good period for Virgin Media Business, driven in part by the accelerated roll-out of 5G.
“Believe it or not, we’ve had a staggering 2020 in terms of growth, and we intend on keeping that momentum going,” says Hallam. “A lot of that growth comes from the development of the 5G market and working very closely with those mobile network operators and some of the other large network builders.”
Most interestingly, Hallam hints at also working with the increasingly prevalent smaller connectivity and fibre providers, particularly in the UK, that are giving the bigger players like Openreach a run for their money.
“We are also working with some of the upcoming rural broadband solution providers,” says Hallam. “We are helping them a lot with their aggregation and core networking and that's where we're seeing a lot of growth in the market.”
