(Image Credit: iStockPhoto/Aslan Alphan)
Virgin Media has lodged a formal complaint with state aid officials in Brussels, challenging the value for money of the UK government’s £68 million BDUK (Broadband Delivery UK) scheme. In its submission, the company argues that the taxpayer-funded programme risks inefficient spending and unnecessary network overbuild in markets that are already competitive and receiving substantial private investment.
To support its position, Virgin Media compares the UK market with several European countries. It notes that the UK’s broadband market is less consolidated than markets in France, Spain, Italy, the Netherlands, and Sweden. At the same time, Britain records one of the highest average download speeds among G7 members and generally lower advertised prices, suggesting that competition is delivering strong consumer outcomes.
Virgin Media highlights that the UK already enjoys a relatively high penetration of “superfast” broadband (defined as 30Mbps or above), at around 32%—a level higher than many other EU markets cited in its complaint. The company argues that this demonstrates existing market dynamics are improving coverage and speeds without the need for large-scale public subsidies.
The complaint stresses three sources of recent and planned network investment that, in Virgin Media’s view, reduce the likelihood of market failure and lessen the need for government intervention:
- In February 2015 Virgin Media announced Project Lightning, a private investment programme committing £3 billion to extend ultrafast broadband to an additional 4 million premises, increasing its total reach to about 17 million homes. The company presents this as the largest private broadband roll-out in the UK in at least a decade.
- New fixed-network investors have emerged, including CityFibre, Gigaclear and Hyperoptic, while mobile operators continue to expand 4G coverage, reaching roughly 98% of premises. Satellite providers also deliver baseline connectivity—typically around 24Mbps—to the entire country, which the company says reduces the number of genuinely unserved areas.
- BT’s fibre-based roll-out, branded as BT Infinity, has reached approximately 22 million premises—more than double its original 10 million target at launch. BT has also announced plans to deploy G.Fast technology, which extends fibre to the distribution point (FTTD) and could reach an additional 10 million premises in cities by 2020, according to Virgin Media’s summary.
Government and industry reaction to the complaint was immediate. The Department for Culture, Media and Sport described Virgin Media’s claims as “groundless,” saying the company chose not to bid for BDUK funding because it would not accept obligations to grant other ISPs access to its infrastructure. Virgin Media counters that the BDUK scheme could deliver substantial benefits to BT—estimating a potential £320 million to £869 million in returns after the first seven years once a “clawback” or gain-share mechanism is applied—claiming that after the initial sharing period, BT would be able to retain additional revenues.
BT rejected Virgin Media’s figures, saying the company lacks a proper understanding of how the BDUK contracts work. A BT spokesperson stated that the contracts prevent excessive returns, that the seven-year gain-share period is aligned with EU state aid rules, and that any surplus revenues are not split on a simple 50/50 basis. According to BT, the majority of any excess funds would be returned to the public sector to further improve coverage.
In addition to the complaint over the scheme’s economics, Virgin Media urges the government to remove regulatory barriers that raise deployment costs. The company points out that up to 80% of its deployment expenses can be attributed to digging trenches and navigating planning and permitting processes. Reducing such “red tape” would, Virgin argues, create better conditions for private investment and lower the cost of expanding networks.
Virgin Media also welcomed the government’s decision to trial subsidies for the upfront installation costs of satellite equipment as a targeted, cost-effective measure to provide affordable, reliable connectivity where terrestrial networks are uneconomic. The company considers such targeted support preferable to broad supply-side subsidies that could duplicate existing commercial investments.
The complaint is now under consideration by the European Commission’s state aid officials, and Virgin Media has requested that the Commission oppose any extension of the UK government’s national broadband subsidy scheme. The intervention signals a broader industry debate about the appropriate role for public funding in broadband rollout when private investment appears robust and multiple technology options are already serving most premises.
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