Virgin Media is promising to provide the fastest broadband service available across the United Kingdom. The cable company will begin rolling out a 100Mbps broadband service by the end of 2010. It could allow a one hour television show to be downloaded in just over half a minute, while a high-definition movie would take under eight minutes. If that is not enough, they are experimenting with a 200Mbps service. The talk of fibre optic broadband makes for good headlines, but customers should read the small print to understand what they are actually getting.

“There is nothing we can’t do with our fibre optic cable network, and the upcoming launch of our flagship 100Mb service will give our customers the ultimate broadband experience,” said Neil Berkett, the chief executive of Virgin Media. “The launch of Virgin Media’s 100Mb service will be a historic moment and will mean the UK will be comparable to other leading broadband nations.”

“Not only are customers seeking higher speeds, they’re paying for higher speeds,” said the chief executive in an interview. “There is very much a need for higher speed broadband,” he said, but conceded that “It’s very much in its infancy still.”

Nearly all of its 3.8 million cable broadband customers are now upgraded to packages of 10Mbps or higher. It can currently deliver cable broadband to around half the homes in the country, passing around 12.5 million households.

Although the number of users of 20 and 50Mbps premium products has increased over 45% in the last year, growing to over half a million, although only 41,000 customers are on the most expensive 50Mbps package.

With only 1% of its current customers taking top tier broadband, representing a fraction of a percentage point of those that could receive the service, some might question whether there is real consumer demand for much faster broadband, at least on the terms offered by Virgin Media.

Offering speeds of 100Mbps makes for good headlines and puts Virgin Media out of reach of competitors using copper telephone lines, but it is clearly not yet a mass market product.

Virgin Media continues to talk about its fibre optic network, although the section from the street cabinet to the home is delivered over a conventional coaxial cable. That Virgin Media should be allowed to its “fibre-optic broadband” continues to mislead the public and demonstrate the technical ignorance of the Advertising Standards Authority. The company is careful not to make that claim in its investor announcements, which are governed by the Financial Services Authority.

The total broadband allocation is technically shared across the homes in a street, subject to the number of cable channels allocated to carrying data, which currently only represents about 10% of the capacity. Capacity is being freed up by dropping analogue television channels but it remains finite, whereas the bandwidth of fibre is far less restricted. However, the cable company is still well-placed to extend its hybrid fibre-coaxial network to deliver fibre to the home through its existing conduits should that be an issue.

It is also notable that the cable network is asymmetric. Upload rates are much slower than downloads. On a 20Mbps connection the maximum upstream speed is only 768 kilobits a second, while a 50Mbps connection still only gives 1.5Mbps. The company is experimenting with faster upstream speeds, up to 20Mbps. On all but the fastest speeds Virgin Media also applies traffic management which may throttle rates by up to 75% for the heaviest users at peak times.

Virgin Media sees the synergy between broadband, television and telecommunications services. It is working on a new interface with TiVo to deliver entertainment services more seamlessly.

“The journey moves from having the fattest pipe if you like, the fastest broadband, to having the best applications,” said the chief executive. “From a consumers’ point of view they’re really getting what cable was originally set up to be, which is fantastic access to the digital world.”

Virgin Media appears to be turning the corner and slowly growing subscribers on the back of its broadband offering. It added 63,600 new cable broadband customers and 56,900 new digital television subscribers in the last quarter, while shedding 22,000 analogue users. That is still some way behind Sky, which added 172,000 television subscribers in the same period.

Operational performance is improving, but Virgin Media is still burdened by billions in debt. It managed to halve its annual pre-tax losses to £337 million and said it hopes to break into profit in the next two years.

Virgin Media is understood to be close to selling its loss-making television channels to its satellite competitor, which is superficially surprising. The reality is that Virgin has been unable to differentiate on programming in the face of strong competition from Sky. It is clear that the cable company sees its competitive advantage in connectivity.