Convergence may well pay off for Virgin Media

It might not be setting the world on fire, but Virgin Media is proving the slow, steady approach to business is certainly worth paying attention to.

On the financial side of the business, total revenues grew marginally by 0.4% to £1.279 billion for the second quarter. Broadband customer acquisitions bolstered the financials, though these gains were mainly offset by customer losses in TV and mobile. This doesn’t seem to be the most attractive of statements, though the management team doesn’t seem to be worried as the convergence mentality becomes more prominent.

“Our disciplined and balanced approach to customer acquisition and capital expenditure has seen a return to growth in our sector-leading cable ARPU and strong free cash flow generation,” said Lutz Schüler, CEO of Virgin Media.

“Underpinning this is the continued success of our network expansion, new initiatives to improve sales and customer service and our fixed-mobile Oomph bundles which have already seen a doubling of customers attaching a mobile SIM to their package with meaningfully higher ARPU.”

An important aspect to always consider when discussing convergence is the incremental nature; this is a strategy which casts an eye to the horizon. Quarter-on-quarter you might not see the benefits, but in a few years’ time, a few will look back and wonder how they got by without such a considered approach to customer management, acquisition and retention.

Looking at the business objectives, there are four strategic pillars; converged customer contracts, increased sales efficiencies, improvement in base management and digital transformation. None of these strategies are a silver-bullet to find the next billion, but this is looking like a business which is in a healthy position, posed for growth in the next era of connectivity.

In the broadband business, Protect Lightning (the fibre buildout programme) now passes 1.8 million premises throughout the UK. Subscriptions increased by 5,000 across the period, taking the total to 14.7 million. Video cable subscriptions are down, though with a new bundle offering launched focused on sport, this could be an interesting area of growth for the business.

Over the next couple of weeks, we strongly suspect there will be an aggressive advertising campaign to glorify the benefits of Virgin Media’s TV subscriptions. Bundling together Sky Sports, BT Sport and Amazon (separate subscription) into a single aggregated content platform might be attractive to numerous sports fans, and at a cheaper price than competitors, it has the potential to cause disruption.

This has been a pain-point for Virgin Media for the last few years. Speaking from experience, your correspondent can detail the inadequacies of the TV package, though industry analysts are increasingly confident this new approach from Virgin Media is much more comprehensive. The management team are also putting a brave face on the loss of TV subscriptions, suggesting the strategy is to move away from entry-level customers, focusing on higher-end, higher-value targets.

These are two of the convergence prongs at Virgin Media, with mobile being the final. This is another area where subscriptions declined, primarily pre-paid, though as Virgin Media is currently an ‘also-ran’ in the mobile segment there is significant room for growth if the proposition is fairly priced in.

Working with EE/BT, the opportunity is certainly there to create an effective mobile proposition. EE/BT regularly has the highest rated network in terms of overall performance, though perhaps Virgin Media’s ability to offer 5G tariffs will play a notable role here. We’re not too sure what the agreement is between the two parties, though should it be able to offer 5G services over the EE/BT network sooner rather than later, the convergence strategy may well receive a boost.

Looking at the benefits of convergence, many point to higher ARPU, though perhaps the more significant, longer-term advantage is customer retention. Virgin Media experienced 15% customer churn at the end of 12-month contracts, though many accept churn rates decrease for converged customers. Considering the cost of acquiring new customers in a saturated market like the UK, anything which can be done to improve retention is a massive bonus.

In terms of convergence, the number of fixed-mobile converged customers has improved to 19.9%, as the proportion of new customers taking mobile with cable services doubled post launch. We have asked for more details on the number of converged customers as a percentage of the total, churn rates in comparison between the two and differences in ARPU, and at the time of writing Virgin Media is yet to respond.

We suspect the numbers will be positive, though nothing that will stop the world from spinning. That said, that is not a bad thing. Convergence is about incremental gain, the slow and steady approach to business improvement.

Convergence is about setting goals a few years in the future, it’s a gradual gander forward. You might not see the benefits, but looking back, you’ll wonder how you operated without such a considered approach to business. Virgin Media is looking like it is in a healthy position.

The battle for Premier League subscribers is about to kick-off

Most might have already declared a time of death on linear TV, but for sports fans there is nothing better. Over the next couple of weeks prepare to see some aggressive ads and deals to secure subscriptions.

With the rise of content platforms like Netflix, short-form videos on YouTube and the decreasing price of mobile connectivity, linear TV has faced its challenges. It is still alive, but the digital economy is a different world and does not seem to be welcoming for traditional TV.

That said, one genre is still thriving; sports. Delving deeper, football is the one of the areas which will keep linear TV alive.

It isn’t really a topic which has been discussed over the last couple of months, but the Premier League is set to kick off in a matter of weeks. While there will be skirmishes to secure the services of the latest prima donna, in the telco world of TMT another battle is set to begin; the fight for subscriptions.

The first move has been made by Virgin Media, and it is an impressive one.

After years of watching consumers time with a sub-standard TV platform, Virgin Media finally seems to have sorted itself out. It has secured an acceptable level of content, revamped its user experience and now offers bundled packages which do look attractive. But the focus of this article will be football and why Virgin Media dining at the top table for content.

For £65 per month, Virgin Media customers will be able to secure the Bigger+Sports bundle which incorporates both Sky Sports and BT Sports into the platform as well as broadband. Another interesting element is Amazon Prime, which has been integrated into the service, though customers will have to pay a separate subscription.

Adding in the cost of Amazon Prime, the total bill for all Premier League, Champions League and Europa League football throughout the season will be £72.99 a month. This might sound expensive, but history has demonstrated fans are willing to pay a premium for access to live sports.

Another added benefit from Virgin Media is having everything in one place. There is no need to switch between services and navigate through the new platform, it is a genuine aggregator for football fans.

“Sports fans looking for their football fix next season need to look no further than Virgin Media,” said David Bouchier, Chief Digital Entertainment Officer at Virgin Media. “We’re, once again, bringing all of the football to Virgin TV in a single place with the cheapest UK packages all underpinned by our unrivalled ultrafast broadband.”

Looking at the new landscape for football viewing this year, BT has arguably fallen to the bottom of the pile. It has secured 52 matches across the season, though these are the less attractive 12.30 kick-off times on a Saturday and 15 mid-week games throughout the season. Sky Sports will host 128 matches, including all the Saturday night and Sunday afternoon games. Amazon has played somewhat of a blinder, securing the Boxing Day games.

Fragmentation of football has been an issue for years hence the strong position Virgin Media has put itself in as a genuine aggregator of football content for the up-coming season. Then of course you have to take into consideration the price.

Looking at the like-for-like deals available, it is a bit complicated. If you sign-up for 18 months, you can get Sky Sports for $18 a month, though this is on-top of the £22 a month which will need to be paid for the Entertainment package, and whatever tariff is selected for broadband services (you don’t have to do this but it makes it like for like). Once you are a customer, you can sign-up for BT Sport through the platform which costs £27.99 a month.

Suddenly watching the football is becoming quite expensive, and then you have to factor in the cost of Amazon Prime as well. You can do this the other way around with BT, costing £49.99 a month including broadband for an 18-month contract, but then you have to buy Sky Sports for £22.99 a month and then Amazon Prime.

This is of course a massive U-turn for Virgin Media. Your correspondent was a customer of Virgin Media in a by-gone year, and quite frankly, it wasn’t great. The internet service was OK, and the TV was thrown in for free as there was no justification for paying. This does now seem to have been fixed, though rumours are the service does suffer during peak periods.

The next couple of weeks you will start to see the advertising campaigns kick-in. With the Ashes starting very soon a big summer of sport can be expected. This will also be tied in with university studies heading into their new accommodation in August and September. There is going to be a scrap over who can secure the most subscriptions with sport as the headline feature, though Sky is not necessarily in pole position anymore.

Of course, this is only one element of the decision-making mix, but it is a critical one. You do have to take into account Sky and BT can offer other benefits for customers, including mobile connectivity, though access to top-flight football will certainly be a draw for the millions of fans throughout the country.

Virgin Media will most likely focus advertising on the aggregator platform, Sky will of course talk about football but also all the other sporting content it can bring to the living room. BT might persist with Kevin Bacon, leaning on its connectivity assets. The winner is far from clear, but it promises to be an interesting Summer.

Virgin Media to take a mmWave approach to ‘full-fibre’

Virgin Media has unveiled the results of a new trial using wireless to deliver fibre broadband to customers in remote locations.

In a small village in the English countryside, Virgin Media has been exploring possibilities of delivering backhaul traffic over the airways. Although this is something which Virgin Media has been doing for years, the difference here seems to be the team is toying around with mmWave as opposed to microwave.

“As we invest to expand our ultrafast network we’re always looking at new, innovative ways to make build more efficient and connect premises that might currently be out of reach,” said Jeanie York, Chief Technology and Information Officer at Virgin Media. “While presently this is a trial, it’s clear that this technology could help to provide more people and businesses with the better broadband they deserve.”

The challenge which seems to be addressed here is combining the complications of deploying infrastructure and the increasing data appetite of the consumer. As you can see below, the trial makes use of mmWave to connect two ‘trunk’ points over 3 kilometres with a 10 Gbps signal. The signal is converted at the cabinet, before being sent through the last-mile on a fibre connection.

Virgin Media

Although this trial only connected 12 homes in the village of Newbury, Virgin Media believes this process could sustainably support delivery of residential services to 500 homes. This assumption also factors in a 40% average annual growth in data consumption. With further upgrades, the radio link could theoretically support a 20Gbps connection, taking the number of homes serviced to 2,000.

The advantage of this approach to delivering broadband is the ability to skip over tricky physical limitations. There are numerous villages which are experiencing poor connections because the vast spend which would have to be made to circumnavigate a valley, rivers or train lines. This approach not only speeds up the deployment, it simplifies it and makes it cheaper.

Looking at the distance between the two ‘trunks’, Virgin Media has said 3km is just about as far as it can go with mmWave. This range takes into account different weather conditions, the trial included some adverse conditions such as 80mph winds and 30mm rainfall, but radios chained together and used back-to-back could increased this coverage and scope of applications.

With alt-nets becoming increasingly common throughout the UK, new ideas to make use of mmWave and alternative technologies will need to be sought. Traditional players will find revenues being gradually eroded if a new vision of connectivity is not acquired. Just look at the challenge CityFibre has been mounting to the status quo as evidence of the threat.

UK CSPs sign-up to empty Ofcom ‘fairness’ initiative

Ofcom, the UK telecoms regulator, has persuaded all major UK communications service providers to promise to ‘put fairness first’.

As far as empty, ill-defined and vacuous statements of intent goes this is right up there. Ofcom drafted a bunch of commitments under the heading ‘Fairness for Customers, and got CSPs to sign on the dotted line. Of course they had no choice but to go along with the scheme as failure to do so would have resulted in catastrophic publicity, but there is little to indicate this is anything more than a token gesture.

You may be thinking the angle taken in this piece is a tad mean-spirited but let’s have a look at the substance of the announcement. The starting point has to be the operative term ‘fair’ Here are some dictionary definitions:

  • Treating people equally without favouritism or discrimination
  • Treating someone in a way that is right or reasonable, or treating a group of people equally and not allowing personal opinions to influence your judgment
  • Something or someone that is fair is reasonable, right, and just
  • Marked by impartiality and honesty : free from self-interest, prejudice, or favouritism

By these definitions all CSPs have committed to is to treat all their customers equally. If there was any evidence of them actively discriminating against any of them we would surely have heard of it by now so, as a fresh commitment, it’s totally redundant.

More likely is that Ofcom is using a definition of the word not supported by the major dictionaries, but popular among politicians, marketing professionals and small children. This is a catch-all concept designed to appeal to absolutely everyone by implying everything will be better as a result of becoming more fair.

Still think we’re being too harsh? Let’s have a look at the actual commitments then.

  1. Customers get a fair deal, which is right for their needs. Providers offer customers packages that fit their needs and have a fair approach to pricing. Prices are clear and easy to understand;
  2. Customers get the support they need when their circumstances make them vulnerable. Providers understand and identify the characteristics, circumstances and needs of vulnerable customers – such as vulnerability due to a disability, age, mental illness or having recently been bereaved – and act to give them fair treatment and equal access to services too;
  3. Customers are supported to make well-informed decisions with clear information about their options before, during, and at the end of their contract. Providers design and send communications in a way that reflects an understanding of how customers generally react to information so that they can understand and engage with the market;
  4. Customers’ services work as promised, reliably over time. If things go wrong providers give a prompt response to fix problems and take appropriate action to help their customers, which may include providing compensation where relevant. If providers can’t fix problems with core services they have promised to deliver within a reasonable period, customers can walk away from their contract with no penalty;
  5. Customers can sign up to, change and leave their services quickly and smoothly. Providers ensure that customers who are leaving do not face additional barriers or hassle compared to those who are signing up to new services;
  6. Customers can be confident that fair treatment is a central part of their provider’s culture. Companies can demonstrate that they have the right procedures in place to ensure customers are treated well. They keep these effective and up-to-date.

Points 1, 2 and 6 depend entirely on the ill-defined term ‘fair’, while the other three are merely restatements of obligations already imposed on CSPs by Ofcom, so what is new here? We asked Ofcom how it will be monitoring these ‘new’ commitments and what the consequences will be of any failures to adhere to them and got the following statement.

“Many of the commitments are already underpinned by existing consumer law and Ofcom’s rules, so we will monitor practices against those and we can take action where necessary. We will also monitor complaints we receive from customers – particularly on price and service quality. The providers will be asked to demonstrate their performance on fairness and we’ll publish a progress report next year.

“Where we have concerns about an industry practice that isn’t covered by existing rules, we will work with the relevant company to resolve the issue as quickly as possible. If we don’t see sufficient action, we will consider potential changes to our rules.”

The condensed version of that statement seems to be; “We’re keeping an eye on UK operators to make sure they’re following our rules.” While that’s good to know, it’s also kind of the default position for telecoms regulator isn’t it? The progress report next year will be worth reading, if only to finally see how Ofcom measures fairness.

“I welcome the commitments the providers have made, and the action they’re taking to ensure customers are treated fairly every step of the way,” said Ofcom Chief Exec Sharon White. “Great service cannot be optional. It has to be the norm. That hasn’t always happened in the past in broadband and mobile services, but there is now a growing belief from providers that putting customers first is paramount.”

“I’m pleased that all the major telecoms providers have signed up to Ofcom’s commitments today,” said UK Minister for Digital Margot James. “They will not only help consumers get fairer deals, but will support competition by making sure providers work to the same objectives and compete on standards.”

Possibly inspired by all this vague virtue-signalling, Virgin Media has announced its own promise to be a good CSP from now on. Specifically it takes the form of a new ‘service promise’ that will give unlimited mobile connectivity to anyone whose broadband stops working, so long as they get both from Virgin.

“We know how important it is for our customers to stay connected and that’s why Virgin Media’s new service promise offers peace of mind, no matter what happens,” said Jeff Dodds, Managing Director of Virgin Media.

“It’s a simple, transparent and straight-up commitment to our customers that we’ll keep them online with superfast unlimited 4G mobile data if they experience an issue with their broadband, plus they have the option of a next-day engineer appointment to get things fixed.”

We guess all these vows, pledges and oaths are better than nothing but only just. Furthermore if everyone’s suddenly promising to put the customer first then surely that implies they weren’t previously. The Ofcom thing just feels like a cheap way for regulators and politicians to make it look like they’re doing more than they are, using vague terms and obsolete aspirations. That doesn’t seem fair to us.

Virgin Media shows off its new bundle of joy

UK multiplay operator Virgin Media has attempted to raise the stakes in the consumer and SME markets with some new products.

The consumer initiative involves bundling together everything Virgin Media offers and charging one price for it all. Not especially innovative in itself, but it seems to be the size of the bundle that Virgin thinks will be a differentiator. The ultimate manifestation of this latest effort is the VVIP bundle, that offers the fastest broadband Virgin does as well as an unlimited data mobile tariff.

“We’re combining the UK’s fastest widely available broadband speeds with a superfast 4G mobile network that’s faster on average than Vodafone, 02, Three and Sky, and a  top-notch TV line-up to give Virgin Media customers greater choice, flexibility and an unrivalled connected entertainment experience,” said Virgin Media’s Chief Operating Officer, Lutz Schüler.

VVIP comes in at £99 per month, but that’s only for the first year, after which it goes up to £139 per month. That deal is only available to new customers, which feels like an own-goal. It’s understood that customer acquisition is a priority but why not extend the same deal to your existing ones too? They probably could get it if they threatened to leave, but that’s a hassle and makes them feel exploited. This ‘new customer only’ tactic seems self-defeating and petty.

“A major overhaul in its bundles represent a renewed drive to kick-start the UK multiplay market,” said Telecoms and Media Analyst Paolo Pescatore. “This feels like multiplay v2.0 as most offers still rely on cross-selling additional services. The premium all singing and dancing bundle is very punchy compared to rivals in terms of value. This will put pressure on BT and Sky to integrate more services into a convergent bundle. More so given the huge focus on retention and reducing churn.”

On top of that Virgin has created a feature called ‘boost your bundle’, which seems similar in concept to super-sizing a fast food order except in this case you get things like mobile SIMs and increased broadband speeds instead of more chips and Coke. “With our boosted bundles, we’re offering the best of all worlds: a superfast 4G mobile network; even bigger broadband with ultrafast speeds – quicker than those included in our standard packages – and the option to spread the cost of the latest and greatest mobile handsets,” said Schüler.

Virgin Media's new bundles

Lastly Virgin is also trying to disrupt the SME broadband market with the launch of Voom 500, which claims to be the UK’s fastest of its kind with speeds of ‘up to’ (hasn’t that been banned?) 500 Mbps. “With a free upgrade to Voom 500 on offer for existing Voom customers when they take selected mobile or Cloud Voice services, our customers can stop worrying about their broadband and focus on using it,” said Rob Orr, Executive Director of Commercial Marketing at Virgin Media Business. Otherwise it will set you back £62 per month.

Virgin Media rumoured to be considering Openreach competitor

Virgin Media is sitting firmly in the middle of the rumour mill, with reports suggesting the team is considering opening-up its network as a wholesale connectivity competitor to Openreach.

For the majority of ISPs in the UK, there is very little option aside from working with Openreach. This position lead to a prolonged battle between Openreach parent company BT and the UK Government in an effort to separate the wholesale business from the group, and while the dust has settled, most feel the outcome is rather unsatisfactory. However, according to The Telegraph, Virgin Media is considering creating competition in this segment.

Should the move turn out to be true, it would be welcomed by many of the ISPs around the country. That said, Virgin Media and its parent company Liberty Media are keeping coy on the situation.

“We have the best broadband network in the UK and everyone knows it,” a spokesperson said. “We’re not surprised by this speculation but have no comment.”

While it is a slightly playful comment which will bring a smile to some faces, the firm has stopped short of out-rightly denying the report. This might lead some to believe there is an element of truth to the reports, others will simply suggest this is PR 101.

Although Openreach is still in an incredibly dominant position when it comes to the wholesale business, pockets of competition are emerging. CityFibre is leading the charge here, using an injection of funds from Goldman Sachs to built on its fibre footprint across the UK. CityFibre now has fibre infrastructure projects across 51 towns and cities, providing active and dark fibre services, most notably to Vodafone which is building its presence as an ISP.

The idea of emerging competition does seem to be spurring the sluggish Openreach into action, as the team has announced one million homes now fall into its fibre footprint. Openreach, and BT as the guiding hand, has often been criticised for lack of foresight when it comes to connectivity. For years, the team pursued fortunes via G.Fast while the industry was demanding fibre, with this inaction perhaps creating the fuel for the emerging competition.

While CityFibre still has the tag of a plucky outside bet, Virgin Media would certainly provide more food for thought. With 14.4 million homes passed throughout the UK, roughly 50% of households, it is a genuine alternative for ISPs who have nationwide ambitions.

We suspect such conversations are taking place behind closed doors in the Virgin Media offices. The UK infrastructure wholesale market is certainly primed for a shake-up, and Virgin Media has the footprint to capitalise.

Virgin Media gives some smarts to wifi

Virgin Media has unveiled a new, ‘intelligent’, router which it claims will bring faster speeds to more areas of the home.

With the telco world becoming increasingly utilitised, and advertising authorities rightly cracking down on the ‘creative’ marketing claims, new ideas will certainly be needed to capture the attention of the increasingly demanding consumers. And in fairness to Virgin Media, this is not a bad attempt.

“Delivering ultrafast broadband to help make Britain faster is what we do best at Virgin Media but making sure this translates into reliable in-home connectivity is just as important,” said Richard Sinclair, Executive Director of Connectivity at Virgin Media

“Intelligent WiFi will allow our customers to make the most of their broadband while also helping to easily overcome any connectivity conundrums around the home. With families using more devices than ever before, it’s vital they can all be online whenever needed. Whether it’s streaming UHD movies on Netflix, playing the latest games online or video conferencing, Intelligent WiFi has your back.”

Starting with the intelligence side of the router, should the software work the way it’s supposed to, this could prove to be a very interesting addition. Firstly, Channel Optimisation allows the router to choose the least congested channel to decrease the likelihood of traffic jams. Secondly, a Band Steering feature allows devices to switch between 2.4GHz or 5GHz frequency to optimise performance. Finally, Airtime Fairness suggests bandwidth will be allocated between devices depending on the demands of that device.

The term ‘intelligence’ is thrown around relatively flimsily nowadays, though should the performance of these features be at the desired level, this could prove to be a very useful product.

 

And while the ‘intelligence’ aspects are more likely to enthuse those consumers who are more geekily orientated, a new app to manage the wifi experience is answers a lot of the simple bugbears and first-world problems of connectivity.

One example is sharing wifi passwords. It might not seem like a revolutionary idea but being able to log into the app and simply send the wifi password to a friend or guest will save customers from the inevitable digging around behind the TV. This is not necessarily a feature which will win customers for Virgin Media, but enough of these little quirky features will improve the customer experience and loyalty.

Another area which the app addresses is ubiquitous connectivity. Being connectivity everywhere and all-the-time is a necessity nowadays, though consumers are becoming increasingly cash conscious. Through the app, Virgin Media customers can now connect to any Virgin Media wifi hotspots, of which there are 3.5 million around the UK.

Most importantly for Virgin Media, this take the brand outside of the customers home, and allows the company to support customers through the entire day. This is Virgin Media adding value into the customer’s lives, going beyond the assumed perimeters of a home broadband provider.

“UK consumers have an insatiable appetite for data across a wide range of devices that will continue to grow over time,” said Paolo Pescatore of PP Foresight. “As well faster download speeds, consumers want a better and reliable connection in all parts of their home. This is starting to be a highly sought after service among users.”

BT has been playing in this market for some time, which offers Virgin Media a blueprint for success. Patchy performance and an irritating log-in process perhaps gave the BT wifi play a bad name, though progress has been made across the public wifi space in recent years. Hopefully Virgin Media will have learned these lessons.

With connectivity increasingly heading towards the dreaded limitations of utility, it is becoming increasingly important for telcos to prove they can add value to other aspects of the customers life. This is certainly an interesting play from Virgin Media and should the features work, Virgin Media goes some way in proving it is more than just a utility.

What’s the point of Virgin Media’s latest broadband speed claim?

Virgin Media has claimed it can now deliver 8 Gbps broadband, but you have to ask whether there is any point aside from satisfying executive’s egos as the ‘faster than you’ mentality undermines the industry.

To be clear, Virgin Media is not the only telco that destabilises customer confidence and makes claims which are often twisted and contorted by their spin doctors, resulting in the miseducation trends of recent years, but they are the ones doing it today.

In Cambridgeshire, one of the UK’s technology hubs, Virgin Media is trialling what it describes as the ‘UK’s fastest home broadband’ service, with speeds exceeding 8 Gbps. This might sound fantastic and serves as an excellent means to distract onlookers from shortcomings elsewhere in the Virgin Media business, but why?

Why do customers need an 8 Gbps broadband connection? What services and applications could possibly be satisfied by such lightening speeds? In the future there might well be demand for such services, but right now there are arguably other things Virgin Media should be concentrating on.

This is the current issue with the telco industry on the whole, and why the telcos will struggle over the next couple of years; the obsession with ‘bigger, meaner, faster’ is unhealthy and is limiting the ambitions of the telcos themselves.

All of this comes back to the relationship with the customer. Every telco is obsessed with being the fastest around, as it is commonly believed this is what the customer wants, and therefore all messaging is geared around this ambition. Advertisements are flooded with imagery and claims which are unrealistic and more often than not, un-needed.

Instead of focusing on a single test which claims PR plaudits for hitting 8 Gbps in a very specific area of the UK, why not concentrate on delivering a more satisfactory service across the board? You correspondent used to be a Virgin Media customer and can assure you promised speeds were never met. The telco industry’s obsession with wowing the world with headline figures is compounding the misery of mistrust.

If Virgin Media wants to succeed in the broadband world and be more than a quirky challenger with a famous brand ambassador, it should aim to create a wonderful experience for all customers, not chase shallow headlines. This is of course a wonderful example of what is possible in the world of tomorrow, but customers are getting screwed today.

Customers don’t care what the maximum speed of a service is, as long as it is more than what is required for a good experience. If a household requires 50 Mbps to make everything work, does it really matter whether the top speed is 55 Mbps or 5 Gbps. All this obsession does is lure the majority of customers into a false promise of performance and create problems for the future.

Looking at the bigger picture, the telcos with a mobile offering are going to have to move away from this obsession with speed before too long. As it stands, customers who have a stable 4G connection can pretty much do anything they want. There are very few (if any) consumer applications which exceed the capabilities of 4G. And if there are, we suspect there are other factors involved.

This leads us onto one of the biggest questions telcos will face at Mobile World Congress in a couple of weeks’ time; how will they sell 5G to the consumer?

There are of course plenty of reasons to be excited by 5G, but as a consumer why would I be bothered? The applications which will require 100 Mbps or more are not widely available on smartphones, while few connect laptops to the internet outside of wifi. We strongly suspect telcos will market 5G on the grounds of ‘faster is better’, but most will look at the premium and likely decide they have fast enough.

Virgin Media’s 8 Gbps broadband trial is perfectly representative of the industry we work in today. While there is always a need for progress, there are more cogs spinning in the machine than just the speed one.

The unhealthy obsession with ‘bigger, meaner, faster’ is falsely reinforcing the belief that telcos are going a good job, both across the mobile and broadband segments. At some point, someone is going to have to sit down and realise there is more to the world of telecommunications than speed.

EE and Virgin Media fined for ripping off customers when they leave early

UK telecoms regulator Ofcom has fined EE and Virgin Media millions of pounds for excessive early-exit charges.

Churn (loss of customers) is a constant worry for communications service providers and the best way to reduce it is to provide such a good communications service that subscribers don’t want to leave. Another way is to make it so odious and costly to leave that most people just can’t be bothered with the hassle and it seems EE and VM went a bit too far with the latter strategy.

Ofcom says it’s OK for CSPs to attach conditions to the early exit from contracts, but that those must be ‘clear, comprehensive and easily accessible’. Furthermore Ofcom stipulates “Communications providers shall ensure that conditions or procedure for contract termination do not act as disincentives for end-users against changing their communications provider”. It thinks thinks that’s what happened with EE and VM, which is why it has fined them £6.3 million and £7 million, respectively.

“EE and Virgin Media broke our rules by overcharging people who ended their contracts early,” said Ofcom’s spectacularly-named Director of Investigations and Enforcement, Gaucho Rasmussen. “Those people were left out of pocket, and the charges amounted to millions of pounds. That is unacceptable. These fines send a clear message to all phone and broadband firms that they must play by the rules, in the interests of their customers.”

VM doesn’t see it in quite the same way and is appealing the ruling. “We profoundly disagree with Ofcom’s ruling,” said Tom Mockridge, CEO of Virgin Media. “This decision and fine is not justified, proportionate or reasonable. A small percentage of customers were charged an incorrect amount when they ended one or more of their services early and for that we are very sorry.

“As soon as we became aware of the mistake we apologised and took swift action to put it right by paying refunds, with interest, to everyone affected. For those few people we could not locate, we have made an equivalent donation to charity.  We also reviewed our internal processes and systems, and improved our customer communications to make sure that this does not happen again.

“We wholeheartedly reject the claim by Ofcom that our ETC levels dissuaded customers from switching. This unreasonable decision and excessive fine does not reflect the swift actions we took, the strong evidence we have presented, or our consistent, open and transparent cooperation with the regulator.  We will be appealing Ofcom’s decision.”

EE hadn’t sent us a statement at time of writing, nor had it issued a press release. Read into that what you will but the fact that Ofcom reduced its fine by 30% in return for it not kicking up a fuss would seem to be significant.

Mockridge’s moan can be interpreted in a few ways. Taken at face value it’s easy to feel some sympathy. If indeed it was a small, innocent mistake that VM moved to correct as soon as it was aware of it, then the fine does seem excessive. If, however, VM knew what it was doing and thinks it should be able to get away with it just by saying sorry after it was caught, then it doesn’t.

At the very least the relative fines seem disproportionate. EE over-billed 400,000 of its customers for a total of £13.5 million in early exit charges over a six year period, while VM only rinsed 82,000 of its punters for £2.8 million in less than a year. Surely the scale of EE’s breach was far greater and it looks like it’s being too generously rewarded by Ofcom for its capitulation.