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Q&A With Diego Tedesco, Director of Wholesale Fixed at Virgin Media O2 Business

On November 1 Diego Tedesco took over the day to day running of wholesale operations at Virgin Media O2 Business as its newly promoted Director of Wholesale Fixed. Tedesco’s nine years’ experience as a member of the Wholesale Fixed leadership team, most recently as Wholesale Fixed Commercial Marketing Director, will hold him in good stead as he seeks to develop the company’s wholesale offering, strengthen the partner ecosystem and build on the potential of Virgin Media O2, the corporate brand of the 50:50 joint venture between Liberty Global and Telefónica SA. 

Launched on June 1 last year, Virgin Media O2 brings together the O2 mobile network and Virgin’s fixed broadband network. It has 47 million UK connections across broadband, mobile, TV and home phone, employs around 18,000 people and has more than 430 retail stores. Its business arm, Virgin Media O2 Business, provides a variety of managed connectivity services, 5G private networks and cloud solutions, as well as wholesale services to other operators and partners. It is this circa £350 million wholesale business that Tedesco now heads up. 

Wholesale Fixed leverages the company’s network to provide partners with fixed infrastructure that they use themselves or connectivity that they use in services they sell on to their customer base. 

Examples of the former include carriers (network aggregators and ISPs) that want to build out their own network capability and sell value-add services over the top; mobile network operators (MNOs) – O2 and competitors – that use the company’s network to meet their 5G backhaul needs; and broadcasters that need reliable connectivity for the huge volumes of data they transmit. Examples of the latter include system integrators that combine connectivity with their products
in complete solutions or resellers that buy and sell-on connectivity to their customers. 

Product-wise, the Wholesale Fixed offering is split between Ethernet connectivity, which forms a big part of what  is sold through the channel and makes up more than half of revenue; high-capacity services, which underpin the network requirements of partners and blue chip customers requiring low latency, high capacity connectivity; and dark fibre for partners (e.g. MNOs) who want complete control over their fibre infrastructure. 

(“Dark fibre is basically fibre that isn’t lit,” explains Tedesco. “Typically, you would deploy a fibre infrastructure, then put optical equipment at each end to light up that fibre, defining the service you run on it. Dark fibre is when you sell the underlying fibre infrastructure without the optical equipment. This gives the buyer the ability to specify what equipment they want to put on the end and how quickly they want to ramp up the capacity of that equipment. It gives them much more flexibility around how they utilise the underlying fibre.”) 

Tedesco had barely been in his new role for a month when Technology Reseller met up with him at the beginning of December to find out about his plans for the coming year. We started by asking him about the trends shaping the fixed wholesale market. 

Technology Reseller (TR): You have not been in your new role for long, but based on your previous experience, in what areas is there room for improvement? 

Diego Tedesco (DT): During the pandemic, we did a lot of research and talked to our partners to help us understand where we need to be focusing as a business to better meet their needs. The thing that really came through from those conversations was the need for greater flexibility and the fact that in a fast paced, changing environment, and a more uncertain environment, what our partners need and what customers need is greater flexibility around the services that they buy – whether that’s not being tied into the long contract terms that have become a staple of the connectivity business; whether that’s more flexibility around ramping up or ramping down speeds on the connectivity they have; or whether that’s having more transparency around pricing. 

Ultimately, the reason they want more flexibility is to enable them to have a more balanced risk-sharing arrangement with us as a wholesale provider; to enable them to make bolder decisions; and to take a little bit more risk in an environment that probably requires it because there is so much more uncertainty. Demand for that flexibility has really shone through, and we’ve taken strides to address that. 

TR: Is that demand coming from your channel partners, from their customers, or from both? 

DT: Both. Our channel partners are asking us for that flexibility to give them the ability to better manage their estate with us and to help them sell services to their end customers. There are end customers out there who don’t necessarily want to buy a service that stays in the ground in its day one form for 5 or 10 years, because things are evolving too quickly – digital transformation is happening too quickly. They want an underlying solution and a contracting mechanism that gives them the ability to evolve and change things as time moves on. 

TR: Is this reflected in the products your reseller customers are demanding? 

DT: Ethernet is the biggest part of what resellers procure from us today, but we are seeing a trend for more sophisticated use cases for digital technology, like smart factories and robotics. Businesses are looking to deploy those technologies to help them run their businesses more efficiently and that is driving demand for greater connectivity. Ethernet connectivity may not be good enough to provide the low latency that’s needed for some of those use cases. 

So, over time we expect high-capacity services to become a bigger part of what the channel partners we work with use in selling-on services to their customers. The demands of digital technology are growing at an exponential rate and the connectivity that underpins it has to move too. 

TR: How are you addressing this demand on the network side? 

DT: Today we reach about 80% of UK business premises, so we have good penetration across the UK, and we sell a whole range of connectivity products and high capacity services, up to 100 Gigabit and beyond, where required.

Virgin Media image library, project lightning. photographed by Michael Leckie, April 2021

Given the pace of change in demand for connectivity, we are investing a lot in advancing our capability in high capacity services (HCS). In 2021, we started making multi-million pound investments in the national HCS network we have across our core sites and that’s going to continue in 2022. 

From the early to mid-part of the year, we’re looking to go beyond our core sites and out to all of what we call our metro sites – sites closer to the big cities and towns that bring that network capability closer to our customers. We’re really looking to advance that capability. 

TR: So, your customers are demanding more flexibility and more bandwidth. What else is shaping your business? 

DT: The other thing I would mention is that it’s not just about fibre. There is a lot of narrative in our industry around full fibre and the importance of full fibre, which I fully agree with. But it’s not just about fibre; it’s also about having compute power deployed much closer to customer sites, because of the much more sophisticated use cases for digital technology and the ultra-low latency that they require. 

Today, we have huge data centres built in the suburbs of towns and cities that drive that compute power. The problem is that in many cases they are hundreds of miles away from where the customer is, and by the time the traffic has flowed to that customer, latency loss means that they are unable to do some of the really

smart robotics and things they would like to do. The way around that is to put that compute power much closer to the actual business premises. 

We’re working really closely with another business in our Liberty Global/ Telefónica family, Atlas Edge, who are making real strides forward in how to build that data centre capability in a much more localised way. Combine that with full fibre connectivity and you suddenly create the ability for businesses to deploy really low latency services. We see edge compute capability as a significant, ongoing trend. 

The beauty of being part of such a big group and having Liberty and Telefónica as co-parents is that there is a huge number of potential ventures and businesses that we can draw upon to work out how can we use this capability to address some of the problem statements out in the market. Atlas Edge is a really pertinent example of that. 

TR: Are these new services you’ve been talking about being demanded by customers or are you having to push them out and educate customers about what’s possible? 

DT: It’s a bit of both. Take hyperscalers as an example. They are quite far advanced in terms of their thinking: they share a problem statement with us, they give us the exam question and we lean on the capabilities we have to help them solve it. At the other end of the scale, there are still channel partners we need to educate and make aware of what can be achieved with technology, so they can talk to their end customers about solutions through a lens of what’s on the horizon and achievable in 6, 12, 18 months, rather than being constrained by previous technology or legacy technology. 

TR: Are you attracting a different type of partner now or looking for a different type of partner that might not have a legacy mindset? 

DT: Yes, we are. One of the ambitions we have for 2022 is to pivot more towards those new types of partner. We are not going to give less focus to our traditional partners, who still have huge value for us, but we do need to start to diversify the range of partners that we work with to address the new technologies and types of service that can be deployed out in the market. 

TR: Are your competitors moving in the same direction or is a whole group of businesses just not being served as well as they might be? 

DT: We’re definitely not the only ones moving in that direction, but we are really well placed because of that richness of capability we have through Telefónica and Liberty Global. We have different bits of the puzzle that we can bring together in a smart way, and our competitors don’t necessarily have that luxury. They can look to partner with businesses with those capabilities,
but we, as part of Telefónica and Liberty Global, have it in our family ecosystem. In that respect we are uniquely well placed to make big strides forward, quickly. 

TR: Can you give me an example? 

DT: Together with Atlas Edge, we are having conversations with a number of hyperscalers about how we can enable their applications to become much more powerful than they are today, in terms of what they can achieve. The limiting factor currently is latency; while those applications can do some great things in theory, the compute power isn’t sufficient to fulfil that potential and the user experience isn’t brilliant. We’re having conversations around how we can combine the capability they have in data centres and the capability we have in high- capacity connectivity with the applications hyperscalers are building. 

TR: You mentioned that you are continuing to invest in your network.  Are you also investing in systems to provide the flexibility that customers are now demanding? 

DT: That is happening in phases. The first phase, Ultimate Flex, which we launched earlier this year (2021) demonstrated our intent to give partners more flexibility. Instead of having three-year contracts or five-year contracts for connectivity, Ultimate Flex lets you cancel with 30 days’ notice – full stop, no strings attached. It gives full flexibility on the bandwidth of that service; you can ramp it up or ramp it down with no construction charges, no install charges. 

That was us saying ‘here’s a commercial proposition that we think meets the needs you tell us you have’. It doesn’t necessarily require any investment in products or services or in systems; it just requires us to be prepared to take more commercial risk to enable our partners to win business. 

That sounds like an easy journey to go on, but it wasn’t by any means, because the value of telco businesses has traditionally been based on long- term annuity business underpinned by the concept of a minimum contract term. We’ve had to go on a real journey to change that mindset within our organisation and to explain that the things our partners place value on now are the exact opposite of what we’ve been giving them. Having a minimum term might give you theoretical value, but it’s not sustainable because at some point someone will come along and give the partner what they need. The valuation model is flawed, it is built on sand.

We’ve gone through that journey, which has allowed us to build propositions that are much more customer-centric and much more geared towards the value that partners are looking for from us. 

TR: What other plans do you haveto improve the service you provide partners?

DT: I’ve spoken lots about end customers utilising digital technologies, and I think we ourselves need to embrace that a lot more. The investments we’re making now are around building out that digital capability to make ourselves much easier to do business with. 

Our channel partners love working with us and the way we work with them is a true partnership. Where they might say there’s room for improvement is in those digital interfaces that allow them to transact with us in a zero-touch way, and we’re looking to make some significant strides in that area – investing in API capability, plugging that into our partners, giving them a very slick and straightforward way of dealing with us. That’s us eating our own lunch; not just talking about digital technologies and telling our partners about how they should be selling those services; it’s about us embracing those things ourselves. 

TR: When might the fruits of that process become apparent?

DT: The first phase, the API gateway that allows our partners to plug into some of our systems, went live a month or so ago, and partners can now go from quote through to order through that interface. 

We’re now addressing how partners want us to work with them, which isn’t for us to create all this capability and say ‘here you go’, but for us to take them on that journey and co-create feedback
on what’s working and what isn’t. That roadmap is now being built by us in conjunction with a number of partners who have signed up to be co-creators with us. We did an all-day workshop with them at the O2 last month (November) and we’ve had some fantastic feedback about how empowered they feel by being able to influence our digital roadmap. 

Over the coming 12 months and beyond, we will be adding additional capabilities informed by what partners tell us is most important to them. 

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