[TokSik]

I would point out that pretty much every residential broadband service in the UK suffers from congestion and contention at some point in the network

We're not talking about other services, but about VM's service. But the same laws apply to them as well. If they are likewise selling non existent cpapcity, then they are likewise committing offences.

To expect a dedicated pipe level of service for the cost of a residential service is unrealistic

What we expect is for the contractual terms we signed up to are met in full. That doesn't mean a dedicated pipe level of service - it just means that VM need to update their hardware to provide the services they've sold, as sold to us - which is not unrealistic.

Would also point out that I not sure how the capacity of the network related to the AUP (which is what this thread is about) covering illegal and inappropriate use of the network

to quote from VM's own AUP - What is Virgin Media’s acceptable use policy?
Legal, honest, decent, truthful (SIC - shyeah right, by whom ?!!??)
That's activities that are:
.../ Or inconveniencing other internet users.
Capacity is affected by not having the hardware sufficient to meet the contractual terms sold to us. And then to impose a new AUP without re-negotiating the contractual terms sold (which is the requirement in law) is where the illegality comes in, because that bit about "inconveniencing other users" is a euphemism for "we ain't got the hardware capacity to meet our end of the contract" which in itself means that VM are trying to shift the blame for unlawfully selling capacity that doesn't exist, which then manifests itself as additional variations of the contracts already agreed in the form of new traffic shaping policies (again imposed without any form of negotiation).
So, the new AUP has a considerable effect on other policies being imposed, such as the Traffic Management policies, which is where it ties in with this discussion on the new AUP.