It looks at though the next couple of months are going to be a pretty bad for Virgin Media. In a surprise move, it has emerged that a deal with Sky could see Tiscali’s TV platform playing host to a number of Sky channels, including the channels, Sky One, Sky News, Sky Sports News etc, which were dropped from Virgin earlier this year.
It is believed that Tiscali are preparing to accept terms and rates above those which were offered to Virgin before the court negotiations took place, which will strengthen Sky’s courtside position, and makes Virgin look bad by comparison. The timing of this announcement is impeccable – just days before Alastair Darling is set to rule whether Sky should be hauled over the coals over allegations of anti-competitive behaviour.
Tiscali are crucially positioned behind Virgin in the Broadband stakes – acquisition of the contentious Sky channels, something which saw a large number of customers leaving Virgin over, could see Tiscali’s consumer base swell dramatically.
Tiscali are also rumoured to be up for buying Pipex, and if they go through with the purchase, then the size of the Tiscali customer base could well overtake that of Virgin Media by the end of the year, and would bring Tiscali into direct competition with UK Broadband leaders BT, who are also trying to push their IPTV package alongside internet and phone services.
This news couldn’t come at a worse time for Virgin Media. The recent announcement of bandwidth throttling, where Virgin reduce the connection speeds of users during peak times in order to provide a more balanced service, has disgruntled some customers, especially those who pay a premium for the faster service speeds.
Bandwidth shaping has had to take place due to the technological nature of a cable internet connection. Unlike ADSL, where the quality and speed of your connection depends on the distance of your house from the exchange, the performance of a cable connection largely depends on the browsing habits of other cable users in your area. As most people tend to use the internet at home at peak times – when they get back from school or work and at weekends – performance over a local cable network can slow down considerably.
Virgin’s recent ADSL deal with Cable & Wireless could sort this problem out in the long term, as customers may benefit from a standard phoneline connection if they live close to an exchange. Virgin intend to release new features for the digital TV set-top box, which they have been giving to customers singing up for their 8MB ADSL service, promising to offer “advanced TV services in all areas throughout 2008″ as take up increases.
However, with BT Vision very much alive and kicking, Freeview leading the way in the world of digital TV, and with the switchover due to start early next year, 2008 may be a bit too late. Virgin are going to have to seriously beef up their ADSL packages if they want to attract customers who might see themselves getting a better bundle deal with another provider.
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