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Ofcom analyst briefing The Communications Market Report 2012
18 July 2012
1
Agenda Market Overview and growth of connected devices James Thickett, Director of Research and Market Intelligence
The telecoms industries Ian Macrae, Principal, Strategy
The audio-visual industries Jane Rumble, Head of Media Research and Market Intelligence
Internet and web-based content Andrew Jackson, Convergence analyst
2
Market overview and growth of connected devices
James Thickett, Director of Research and Market Intelligence
3
One of three Communications Markets Reports
4
Total industry revenues stable over five years
Note: Ofcom/Operators. Figures are in nominal terms
40.7 42.0 42.5 41.2 40.5 39.7
10.6 11.0 11.2 11.1 11.7 12.3 1.1 1.2 1.1 1.1 1.1 1.2
52.4 54.2 54.8 53.4 53.4 53.2
0
20
40
60
2006 2007 2008 2009 2010 2011
Radio
TV
Telecoms
£billions 1 year
5 yr CAGR
- 0.3% 0.3%
3.5% 0.6%
4.9% 3.0%
-1.9% -0.5%
Communications industry annual revenue
Page 23 Figure 1.1
Total
5
£110.50 £108.15 £104.43 £102.89 £100.15 £97.62
4.8% 4.8% 4.7% 4.7% 4.6% 4.6%
0%
1%
2%
3%
4%
5%
0
50
100
150
2006 2007 2008 2009 2010 2011
£ pe
r mon
th (2
011
pric
es)
Radio
Television
Fixed internet
Mobile services
Fixed voice
% of total spend
Average consumer spend on communications services has been falling since 2006
Page 32 Figure 1.12 Source: Ofcom / Operators
6
Fixed voice and broadband remain most popular bundle of services
27%
19%
2% 9%
29% 29%
40% 39% 46%
50% 53% 57%
0%
10%
20%
30%
40%
50%
60%
Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012
Other
Fixed voice, dial-up and multichannel TV Fixed voice and multichannel TV Fixed voice and dial-up
Fixed voice, broadband and multichannel TV Fixed voice and broadband
6
Proportion of households taking bundled services
Source: Ofcom research
Page 31 Figure 1.10
Source: Ofcom research, Q1 2012. DAB take-up from RAJAR Q1 2012.
7
98% 92% 84% 76% 72%
55% 47% 43% 39% 17% 10% 13% 11% 5% 0%
20%
40%
60%
80%
100% +2 +1 -1 +2 +5 +1 +1 +12 +5 +5 +7 -4 +10
Percentage point change vs 2011
Take-up of key services and devices
Page 27 Figure 1.4
Take-up of connected devices
Take up of connected devices grows
8
27%
3% 2%
39%
10% 11% 5%
0%
20%
40%
60% Q1 2011 Q1 2012
Source: Ofcom research
Page 27 Figure 1.4
9
Source: Ofcom research, Q1 2012
Households owning at least X+ devices
85% 72%
56% 40%
27% 15%
0
25
50
75
100
Prop
ortio
n of
hou
seho
lds(
%)
On average, each UK household owns 3 different types of internet-enabled devices
1+ 2+
3+
4+
5+ 6+
Page 241 Figure 4.23
10
129 125 116 124
0
100
200
Fixed Mobile
2010
2011
Source: Ofcom/operators
Volumes of outgoing fixed minutes and mobile minutes Minutes (billions)
Fixed and mobile call volumes both down for first time ever
Annual Change -10.0% -1.1% Page 296
Figure 5.15
Number of texts per person has more than doubled in four years
11
Average monthly mobile messaging volumes per person
70 90 115
141 172
200
0
50
100
150
200
2006 2007 2008 2009 2010 2011
Source: Ofcom / operators
Messages per month +16.6%
Page 352 Figure 5.79
12
Source: BillMonitor
Smartphone data use
Median monthly data use (MB)
Mobile data consumption on smartphones has doubled in 18 months
71
154
0
100
200
Jul-10 Jan-12
Page 292 Figure 5.10
Social networking is up while email switches to mobile
13
3.1
1.0
1.7
3.3
0.8
2.1
0
2
4
Social networking on PC/laptop
Email on PC/laptop Mobile internet
2010
2011
Hours per month Average monthly use per person of telecoms services
Change between 2010 and 2011
+5.3% +24.7% -19.1% Page 335 Figure 5.57
Texting is most popular form of communication on a daily basis
14
Methods used at least once a day to communicate with friends and family, % adults
1 8 9
12 26
29 30
32 47
49 58
0 10 20 30 40 50 60
Post (letters/cards/packages) Micro blogging (e.g. Twitter)
VoIP (e.g. Skype) Comments on websites
Instant messaging Voice calls on fixed landline
Emails Social networking
Voice call on mobile phone Face to face
Text messages
Any text based
services 68%
Any voice based
services 63%
Source: Ofcom research, Q1 2012
Page 35 Figure 1.15
15
The audio-visual industries
Jane Rumble, Head of Media Research and Market Intelligence
16
TV industry revenues grew by 5% in 2011
3,795 4,064 4,277 4,596 4,839 5,242
3,462 3,576 3,470 3,136 3,486 3,557
2,525 2,622 2,623 2,663
2,690 2,749 837 780 787 713
732 777
£0m
£3,000m
£6,000m
£9,000m
£12,000m
2006 2007 2008 2009 2010 2011
Other revenue
BBC income allocated to TV
Net advertising revenue
Subscription revenue
£10,619 £11,041 £11,109 £11,157 £11,747 £12,326
Page 136 Figure 2.22 Source: Ofcom/Operators
Growth driven by subscriptions – but NAR also up
£11,747m
£12,326m £403m
£59m £45m
£43m £15m £13m
11,500
11,600
11,700
11,800
11,900
12,000
12,100
12,200
12,300
12,400
12,500
2010 revenue
Subscriber revenue
BBC TV spending
Other PSB portfolio
NAR
PSB NAR Other NAR 2011 revenue
+2.2%
+0.7%
Revenue (£m)
+1.5%
+8.3%
+6.1% +8.4% +4.9
%
Page 117 Figure 2.2 Source: Ofcom/Operators
18
NAR continues to recover
£2,427m £2,387m £2,204m £1,896m £2,144m £2,159m
£276m £386m £459m
£453m £518m £561m
£759m £803m £808m £786m
£824m £837m
£3,462m £3,576m £3,471m £3,135m
£3,486m £3,557m
£0m
£500m
£1,000m
£1,500m
£2,000m
£2,500m
£3,000m
£3,500m
£4,000m
2006 2007 2008 2009 2010 2011
Commercial multichannels
Commercial PSB portfolio channels
Main commercial PSB channels
Net advertising revenue
Source: Ofcom/Operators
Page 139 Figure 2.25
19
65% 73% 82% 85% 89% 91% 93% 96%
34% 25%
17% 14% 10% 7% 4% 2% 0%
20%
40%
60%
80%
100%
Digital Television
Analogue terrestrial TV
Proportion of UK adults
Digital Television is almost universal as DSO comes to an end in October 2012
Source: Ofcom research
Page 119 Figure 2.4
20
35.0 34.1 30.9 32.5 30.6 30.2 28.5
11.0 18.2 23.0 20.2 24.1 23.1 23.9
2.1
3.0 4.6 4.5 6.3 8.9 11.5
0
20
40
60
80
2006 2007 2008 2009 2010 2011 2012*
26" to 32" 33" to 42" 43+"
Source: GfK sales data estimates. *2012 data represents Q1 only.
Percentage of TV sets sold larger than 26”: 2006 – Q1 2012
TV screens are getting bigger
Page 126 Figure 2.12
21
TV viewing remains resilient
3.6 3.6 3.7 3.8 4.0 4.0
0
1
2
3
4
5
2006 2007 2008 2009 2010 2011
Average TV hours per viewer, per day
Page 155 Figure 2.42 Source: BARB
22
The public service broadcasters maintain the greatest share of viewing
30.6% 31.2% 31.8% 31.4% 32.3% 32.7%
22.0% 22.3% 22.6% 22.6% 22.7% 23.1%
11.2% 11.2% 11.7% 11.5% 11.5% 11.8% 5.1% 5.6% 5.9% 6.0% 5.9% 5.9% 8.7% 7.6% 6.8% 7.4% 8.4% 8.8% 4.0% 3.9% 3.9% 4.0% 4.1%
4.0% 2.9% 2.7% 2.6% 2.7% 1.9% 2.8% 2.8% 2.6% 2.7% 14.3% 14.0% 12.9% 12.8% 12.3% 11.8%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009 2010 2011
Other
Virgin Media
Viacom
UKTV
BSkyB*
Five
Channel 4
ITV
BBC
Audience share in multichannel homes (%)
Source: BARB
Page 163 Figure 2.52
Timeshifting constitutes 15% of total viewing in DVR homes
23
150 160 163 166 189 184
10 14 14 15
14 16
12 15 16 16
16 18
0
50
100
150
200
250
2006 2007 2008 2009 2010 2011
Viewed 1-7 days after broadcast
Viewed on same day as live
Live
13% 15% 15% 16% 14% 15%
Average minutes viewed per day, DVR homes
Source: BARB
Page 171 Figure 2.61
Total Smart TV sales reach 2.9m
24
115
2,890
+237 +223
+420
+414
+266
+304
+553
0
500
1,000
1,500
2,000
2,500
3,000
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012
Sale
s un
its (0
00s)
352
575
995
1,409 1,675
1,979
2,532 +358
Source: GFK sales estimates
Smart TV sales
Page 129 Figure 2.16
25
60%
40% 39% 32%
27% 24% 20%
0%
20%
40%
60%
80%
Needed new TV, decided to buy one with latest technology
Liked look and design
It was the best TV I
could get for budget
Wanted the best screen
It was nothing to do with the
internet functionality
Wanted to watch
programmes on my TV
rather than a computer
Liked the range of internet services available
5% now own a smart TV Top reasons people buy a smart TV
Page 130 Figure 2.17 Source: Ofcom research, Q1 2012
26
65%
35% Used internet connection on Smart TV
Never used internet connection on Smart TV
Two thirds of Smart TV owners have gone online Use of internet connection
Page 131 Figure 2.18 Source: Ofcom research, Q1 2012
27
Among smart TV owners, catch-up TV is most popular online activity
51%
41% 36%
28% 26% 25%
17% 13%
0%
20%
40%
60%
Watching catch-up TV
using an app
Streaming movies
Watching short clips
Listening to music
Playing games
Social networking
Skype Shopping
Online activities undertaken on Smart TVs
Page 132 Figure 2.19 Source: Ofcom research, Q1 2012
28
Revenues from online delivery models increase by 50% Revenues (£m)
Source: Screen Digest.
12.0 17.2 43.3 56.8
11.7 15.0 17.9
20.4 23.2
19.1 38.3
82.8
143.4
11.0 21.6 49.6
78.0
151.7
229.3
0
50
100
150
200
250
2006 2007 2008 2009 2010 2011
FTV views
Subscriptions
PPV transactions DTO transactions
Total
Annual Growth
51% 73% 14% 13% 31%
Page 151 Figure 2.39
29
10%*
16%
23% 27%
29%
1% 1% 2% 2% 6%
0%
10%
20%
30%
40%
Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012
Catch up TV via Internet
TV streaming via Mobile
Proportion of UK adults (%)
The rate of growth in use of catch up services online shows signs of slowing
Source: Ofcom research. Page 123 Figure 2.8
30
Unique audience to online catch-up TV services
Source: UKOM/Nielsen
0
2
4
6
8
10
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
BBC iPlayer
ITV Player
Channel 4oD
Channel 5 - Demand Five
Sky Player
Unique audiences, PC/laptop(m)
Page 174 Figure 2.65
31
Unique audience to selected online film/TV sites Unique audiences, PC/laptop(m)
Source: UKOM/Nielsen, home and work panel.
0
1
2
3
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
LOVEFiLM.com
blinkBox
Yahoo! Movies
Netflix
Blinkx
Metacafe Page 175 Figure 2.67
32
Internet and web-based content
Andrew Jackson, Convergence Analyst, Market Intelligence
Internet advertising now the largest form of advertising in the UK
33
41
52 58
68 71 74 76
0
30
60
90
0
15
30
45
Hou
seho
ld ta
ke-u
p (%
)
Shar
e of
tota
l adv
ertis
ing
(%) /
Ac
tive
digi
tal m
edia
uni
vers
e (m
illio
ns)
Internet advertising share Internet users Broadband penetration
8 16
24 26
12 20
30
2005 2006 2007 2008 2009 2010 2011
Internet advertising share, active internet users, and broadband penetration: 2005-2011
Source: Internet Advertising Bureau, Nielsen Work and Home Panel, Ofcom
Page 229 Figure 4.10
Internet advertising revenues grew 14% in 2011
34
Internet advertising, by type: 2008 - 2011
Source: IAB/ PwC Adspend 2008-2011
637 709 945 1,128
1,987 2,148 2,346
2,767 715 667
751 785
3,350 3,541 4,097
4,784
0
2000
4000
6000
2008 2009 2010 2011
Other Classified Search Display
£ millions Year on Year Growth 6% 16% 17%**
2011 Growth
89%
5%*
18%*
13%*
Page 230 Figure 4.11
Mobile internet advertising revenues more than doubled in 2011
35
Mobile advertising revenues, and smartphone and mobile internet take-up
Source: Mobile Advertising Revenues: IAB/PWC, Ofcom: take-up of internet on mobile phone and of smartphones
29 38
83
203
26 27
39
0
10
20
30
40
50
0
50
100
150
200
250
2008 2009 2010 2011
UK
adul
t tak
e-up
(%)
Rev
enue
(£ m
illio
ns)
Mobile advertising revenues Smartphone take-up
Page 233 Figure 4.14
Internet video advertising has grown eight fold in four years
36
0
30
60
90
120
00:00:00
00:30:00
01:00:00
01:30:00
02:00:00
Rev
enue
£ m
illio
ns
Tim
e (h
h:m
m:s
s)
Internet video advertising revenue Time per visitor on film/video sites
12 28
54
109
2008 2009 2010 2011
Video display advertising revenue and time spent on film/video sites: 2008 - 2011
Source: Internet Advertising Bureau, Nielsen Work and Home Panel inc. applications.
2012 Page 231 Figure 4.12
37
Four in five have access to the internet
Home internet access, by age, socio-economic group and gender
75 84 86 87
69
51
23
77 85 88 87
73
55
26
80 90 90 88
75 64
27
0
20
40
60
80
100
UK 16-24 25-34 35-54 55-64 65-74 75+
2010 2011 2012 Home internet access (%)
Source: Ofcom technology tracker, Q1 2012. Page 243 Figure 4.25
38
Internet audience growth slowing on PC/laptop
Laptop and desktop computer online audience vs. broadband take-up: 2004 – 2011
Source: Nielsen UKOM, Ofcom technology tracker, Q1 2012.
24.5 24.1 26.3 29.8 32.2 35.6 38.0 39.0 39.7
0
20
40
60
80
100
0
10
20
30
40
50
Jan-
04
May
-04
Sep-
04
Jan-
05
May
-05
Sep-
05
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11
Jan-
12
Prop
ortio
n of
hou
seho
lds
(%)
Activ
e di
gita
l med
ia u
nive
rse
(mill
ions
)
Online Audience Total Broadband Take-up
-1.7% 9.1% NA* 8.4% 10.3% 6.7% 2.8% 1.6% YoY Growth
Page 244 Figure 4.26
39
Time spent online on a PC/laptop is levelling off
Active internet users and time online on a laptop or desktop computer: 2004 – 2011
Source: Nielsen UKOM, Ofcom technology tracker, Q1 2012.
0
6
12
18
24
30
0
10
20
30
40
50
Jan-
04
May
-04
Sep-
04
Jan-
05
May
-05
Sep-
05
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11
Jan-
12
Tim
e on
line
(hou
rs)
Activ
e di
gita
l med
ia u
nive
rse
(mill
ions
)
Online Audience Online Time Per Person
Jan 2012 24.6
Jan 2004 11.9
Nov 2009 28.7
Year 2004 2005 2006 2007 2008 2009 2010 2011 Average (hrs)
11.1 12.5 NA* 17.6 18.7 23.9 23.0 23.5
Page 246 Figure 4.27
40
Source: Ofcom omnibus research, March 2011/2012
Smartphones are becoming most important device for accessing the internet
88%
31%
42%
51%
42%
0% 20% 40% 60% 80% 100%
Regularly text
Regularly instant message
Regularly use for social networking
Regularly use for email
The most important device for accessing the internet
Page 223, Figure 4.3 Page 225, Figure 4.5
41
11% of households now own a tablet
14%
16%
9%
31%
22%
25%
45%
52%
18%
35%
46%
30%
43%
42%
34%
37%
0% 20% 40% 60% 80% 100%
Work
Listen to music
Watch short video clips
Social networking
Play games
Access news on website
Internet browsing
More than once a day
At least weekly
Activities using a tablet
Source: Ofcom research, Q1 2012
Page 65 Figure 1.52
42
Tablets are substituting PC/laptop use
37%
23%
0% 20% 40%
Browse internet
Use social networking sites
37%
33%
0% 20% 40%
Use laptop
Use PC
Since getting a tablet, doing more ... And doing less …
Source: Ofcom research, Q1 2012
Page 66 Figure 1.53
43
Source: UKOM/Nielsen home and work panel, March 2012
31.2
5.1 4.9
25.7
6.2 4.0
20.8
9.6 7.4
18.5 17.1
7.3
15.6 10.1
6.5
0
10
20
30
40
Goo
gle
Sear
ch
Yaho
o! S
earc
h
Bing
Web
Face
book
Twitt
er
Link
edIn
YouT
ube
iTun
es
BBC
iPla
yer
Amaz
on
eBay
Tesc
o
Wik
iped
ia
BBC
New
s
Mai
lOnl
ine
Search Engines Social Networks Entertainment Online Shopping News and I f ti
Unique audience (m)
Clear leaders in search, social networking, and entertainment categories
Leading sites in selected categories, by unique audience
Page 257 Figure 4.37
Twenty times more videos are watched on YouTube than the nearest competitor
44
Top platforms for video content, by number of videos watched
Source: ComScore Video Metrix, January 2012
3,660
177 107 76
45 44 37 34 18 15
1
10
100
1000
10000
YouTube VEVO Perform Sports
BBC Sites
Facebook Viacom Digital
Microsoft Sites
Yahoo! Sites
Amazon Sites
Vimeo
Number of videos watched (m)
Page 271 Figure 4.51
Facebook is pervasive among social networkers
45
Overlapping and unduplicated audiences of selected social networking sites on desktop and laptop computers
Source: UKOM/Nielsen home and work panel, March 2012
0.4m 0.6m 0.2m 0.1m
25.7m 5.8m 3.4m 2.3m 0.5m
0%
20%
40%
60%
80%
100%
Facebook Twitter LinkedIn Google+ Friends Reunited
On Facebook Off Facebook
Proportion of unique audience (%)
Page 267 Figure 4.47
Social networks aid web navigation
46
Selected sites ranked by proportion of referred traffic generated through referrals from Facebook
Source: UKOM/Nielsen home and work panel, March 2012
23.7%
11.2%
6.7% 3.8% 3.6% 3.3%
0%
5%
10%
15%
20%
25%
YouTube BBC eBay Twitter Wikipedia Amazon
Proportion of referrals from Facebook (%)
Page 268 Figure 4.48
47
The telecoms industries
Ian Macrae, Principal, Strategy
Service revenues fell by 2% in 2011…
48
Source: Ofcom/operators (retail and wholesale data); IDC (corporate data services data)
UK telecoms revenue by wholesale and retail, fixed and mobile, and corporate data services
6.1 5.7 5.5 5.4 5.4 5.2 4.0 4.6 5.0 4.7 4.2 3.6
13.8 13.6 13.4 12.9 12.6 12.3
13.9 15.0 15.5 14.9 14.9 15.1
3.0 3.2 3.2 3.3 3.4 3.6
40.7 42.0 42.5 41.2 40.5 39.7
0
10
20
30
40
50
2006 2007 2008 2009 2010 2011
Corporate data services Retail mobile
Retail fixed
Wholesale mobile
Wholesale fixed
Revenue (£bn)
Page 305 Figure 5.22
… as increases in data revenues failed to offset falling voice revenues
49
Source: Ofcom / operators
Total retail revenue, by voice and data
10.5 10.4 10.2 9.7 9.4 8.9
3.2 3.2 3.2 3.3 3.2 3.4
10.9 11.5 11.5 10.9 10.6 10.5
3.0 3.5 4.0 4.1 4.3 4.6
0
10
20
30
2006 2007 2008 2009 2010 2011
Mobile msgg and data
Mobile voice
Broadband and narrowband
Fixed voice
Revenue (£bn)
Page 306 Figure 5.23
50
ARPU for fixed voice and mobile fell; broadband ARPU increased slightly in 2011
25.23 24.87 24.56 23.83 23.31 22.26 16.39 16.07 15.38 14.78 13.51 13.70 16.27 16.47 15.85 14.43 13.67 13.34
11.96
0.71 0.92 1.30 1.59 1.80 2.09
0
10
20
30
2006
2007
2008
2009
2010
2011
Fixed voice
Fixed broadband
Mobile phone access, voice and messaging
Mobile broadband (estimate)
Mobile phone non-messaging data
Source: Ofcom/operators except for mobile broadband figure which is based on YouGov data
Average revenue per user (ARPU) per month, by service
£ per month
Page 307 Figure 5.24
Consumer spending on telecoms is falling in real terms and as a % of total household spend
51
28.61 27.13 25.84 24.73 24.04 22.06
37.94 37.81 36.51 35.05 33.49 32.21
11.92 11.06 10.68 11.02 10.53 10.78
£78.46 £76.00 £73.04 £70.81 £68.06 £65.04
3.4% 3.4% 3.3% 3.3% 3.2% 3.0%
0%
1%
2%
3%
4%
0
50
100
2006 2007 2008 2009 2010 2011
Fixed internet
Mobile voice & data
Fixed voice
As a proportion of total household spend
Source: Ofcom / operators / ONS Notes: Adjusted to RPI; includes VAT
Average household spend on telecoms services
£ per month (2011 prices) As a % of total expenditure
Page 331 Figure 5.52
Voice telephony
Four in five households have both fixed and mobile voice lines
53
Household penetration of fixed and mobile telephony
Source: Ofcom research, Q1 2012 data
Proportion of respondents (per cent)
7 8 7 7 6 5
84 81 80 78 79 79
9 11 12 14 15 15 1 1 1 1 1 1
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012
None
Mobile only
Fixed and mobile
Fixed only
Page 350 Figure 5.76
Two firsts for mobile call volumes in 2011 – volumes fell, but accounted for over 50% of all voice minutes
154 149 141 132 129 116
69 80 87 91 98 102
19 25 28 29 27 21 242 254 256 252 254 239
0
100
200
300
2006 2007 2008 2009 2010 2011
Total
Pre-pay mobile
Contract mobile
Fixed voice
54
Source: Ofcom / operators
Total fixed and mobile voice call volumes
Billions of minutes Annual change
5 year CAGR
-5.6% -0.3%
-20.1% 2.2%
4.0% 8.1%
-10.0% -5.6%
Page 296 Figure 5.15
7.0 7.6 7.9 7.8 7.7 8.3
12.3 10.9
10.0 9.0 8.5 8.5
0
5
10
15
2006 2007 2008 2009 2010 2011
Fixed
Mobile
Comparison of average fixed and mobile voice call charges
The cost per minute of fixed and mobile minutes has converged
Pence per minute
Source: Ofcom / operators Page 332 Figure 5.53
Fixed minutes per residential line fell steeply
297 275 272 272 268
236
67 74 76 78 74 69
0
100
200
300
2006 2007 2008 2009 2010 2011
Fixed
Mobile
56
Source: Ofcom / operators
Average monthly call minutes per residential fixed and mobile voice connection
Minutes per month Annual change
5 year CAGR
-11.6% -4.5%
-7.1% 0.7%
Page 297 Figure 5.17
The young in particular are using VoIP
57
Source: Ofcom research, Q1 2012
Use of fixed voice communication services in the home
82%
61% 72%
87% 91% 95%
26% 30% 32% 31% 21%
12% 21% 22% 25% 24%
17% 9%
0%
20%
40%
60%
80%
100%
All respondents
16-24 25-34 35-54 55-64 All aged 65 or older
Personally use a landline
Have ever used VoIP
Currently use VoIP
Proportion of respondents (per cent)
Page 337 Figure 5.59
Text-based communication is also growing
58
75 64
40
10
80 68
47
12
80 71
52
17
0
20
40
60
80
100
Mobile messaging Email Social networking sites
Mobile instant messaging
2010 2011 2012
Source: Ofcom research, data as at Q1 of each year
Proportion of respondents (per cent)
Use of methods of communication other than traditional voice telephony
Page 298 Figure 5.18
59
While mobile voice has declined, SMS continues to grow
26 34
43 52
61 68
25 33 42
53 68
83
0
20
40
60
80
100
2006
2007
2008
2009
2010
2011
Prepaid
Postpaid
Source: Ofcom / operators
Billions of SMS messages
Page 318 Figure 5.39
Twice as many people communicate daily with friends and family by SMS as by landline
60
Source: Ofcom research, Q1 2012
Methods of communicating with friends and family used at least once a day
58 47
32 30
29 26
12 9
8
0 10 20 30 40 50 60
Text messaging Voice call on mobile
Social networking (e.g. Facebook) Email
Voice call on landline Instant messaging (e.g. MSN)
Comment on website VoIP (e.g. Skype)
Micro blogging (e.g. Twitter)
Proportion of respondents (per cent)
Page 299 Figure 5.19
Mobile telecoms
Pay-monthly connections continue to grow
62
45.1 46.4 46.3 47.1 44.0 41.4
24.9 27.4 30.2 33.2 37.1 40.2 70.0 73.8 76.5 80.3 81.2 81.6
35.6% 37.1% 39.5% 41.4% 45.7% 49.2%
0%
10%
20%
30%
40%
50%
0
50
100
150
2006 2007 2008 2009 2010 2011
Post-pay
Pre-pay
Source: Ofcom / operators
Subscriptions (millions) Proportion contract (%)
Page 319 Figure 5.41
63
… with most customers on 24-month contracts
2 13 10 15 19 24 24 21 20 21 21 18 17 17 19 18 18 14 14 19 16 15 11 13 12 8 5 3 3 3 3 4 7 8 8 10 9 11 13 16
80 84 82 75 72 68 67 63 60 50
35 28 24 12 6 4 3 3 2 3 2
1 1 1 1 2 3 5 7 13 26
41 47 50 63 69 70 68 70 69 70 67
1 4 1 1 1 1 1 2
0
20
40
60
80
100
Q1
2007
Q2
Q3
Q4
Q1
2008
Q2
Q3
Q4
Q1
2009
Q2
Q3
Q4
Q1
2010
Q2
Q3
Q4
Q1
2011
Q2
Q3
Q4
Q1
2012
Other
24 months
18 months
12 months
1 month
Source: GfK Retail and Technology UK Ltd
Contract lengths for new post-pay mobile connections
Proportion of sales (%)
Page 348 Figure 5.74
64
0 0 0 6 7 6 7 7 12 12 12 13 15 18 17 18 20 24 26 26 29 5 5 8
12 15 17 17 19 20 21 23 23 22 20 19 18 17 18 19 20 20
4 4 9
6 6 6 8 10 10 13 13 13 13 13 15 16 14 13 13 11 11
14 16 11
13 13 14 11 8 7 10 10 11 11 14 15 17 21 14 12 10 10
14 9 9 6 8 10 14 11 14 13 12 13 12 13 11 10 7 8 8 9 9
46 43 41 38 34 31 30 28 26 19 15 15 14 11 13 13 12 14 14 15 14 17 23 21 19 17 15 15 16 12 13 15 12 13 10 10 10 9 9 8 9 7
0%
20%
40%
60%
80%
100%
Q1
2007
Q2
Q3
Q4
Q1
2008
Q2
Q3
Q4
Q1
2009
Q2
Q3
Q4
Q1
2010
Q2
Q3
Q4
Q1
2011
Q2
Q3
Q4
Q1
2012
£40+ £35-39.99 £30-34.99 £25-29.99 £20-24,99 £15-19.99 £0-14.99
Source: GfK Retail and Technology UK Ltd
Monthly line rental prices for new post-pay mobile connections
Proportion of sales (%)
60% of new mobile contracts are for less than £25 per month
Page 349 Figure 5.75
65
Post-pay ARPU has fallen by nearly 30% in five years
34.89 34.58 32.78
28.74 26.24 25.14
16.99 17.40 17.15
16.03 15.47 15.43
7.24 7.43 7.23 7.12 6.86 6.56 0
10
20
30
40
2006
2007
2008
2009
2010
2011
Postpay
Blended
Prepay
Source: Ofcom / operators. Blended refers to all subscribers – prepay and postpay.
Mobile average revenue per user £ per month
Page 316 Figure 5.36
66
8.9 8.4
14.5
22.7
32.6
2.6 4.1 4.8 5.1
0.2 1.2 0
10
20
30
40
2007 2008 2009 2010 2011
Smartphone data users
Mobile broadband
3G-enabled tablets
million
The number of cellular data connections doubled between 2009 and 2011 Number of mobile broadband connections, 3G-enabled tablets and users accessing the internet on their mobile device
Source: Ofcom data based on submissions by operators and Ofcom market research Page 288
Figure 5.7
67
40% of mobile users claim to access the internet on their phone
18
10 11 8
28
17 13 12
40
29
19 19
0
10
20
30
40
50
Internet access Emailing Instant messaging Downloading apps
2010
2011
2012
Use of data services on mobile handsets
Proportion of mobile users (per cent)
Source: Ofcom research, data as at Q1 of each year Page 354
Figure 5.82
0
200
400
600
Jul-2
010
Aug-
2010
Sep-
2010
Oct
-201
0
Nov
-201
0
Dec
-201
0
Jan-
2011
Feb-
2011
Mar
-201
1
Apr-
2011
May
-201
1
Jun-
2011
Jul-2
011
Aug-
2011
Sep-
2011
Oct
-201
1
Nov
-201
1
Dec
-201
1
Jan-
2012
Feb-
2012
10% use more than
25% use more than
50% use more than
75% use more than
Most smartphone users use less than 200MB per month – although data use is growing
68
Source: BillMonitor
Smartphone data use Monthly data use (MB)
Page 292 Figure 5.10
69
Just 17% of mobile data users say their tariff offers less than 500MB per month
Smartphone data caps
Source: YouGov SMIX
17%
24%
6% 9%
2% 1%
19%
21%
Less than 500MB
500-750MB
750MB-1GB
1-2GB
2-5GB
5GB or more
Unlimited
Don't know
Percentage of respondents using each range of allowance
Page 292 Figure 5.11
70
WiFi networks are an essential aspect of smartphone use Use of smartphone WiFi connection relative to cellular connection
Source: YouGov SMIX
4%
39%
28%
23%
2% 5% Only WiFi
Mostly WiFi
WiFi and mobile equally
Mostly mobile
Only mobile
Don't know
% of respondents in Dec 2011
Page 293 Figure 5.12
Two thirds of smartphone users claim to use public WiFi networks
71
Source: YouGov SMIX
Location of Wi-Fi use on a smartphone
% of consumers mentioning each location
90%
43%
67%
46%
63%
0%
20%
40%
60%
80%
100%
At hom
e
At w
ork
Public
places
On the
move
Out and about
Page 294 Figure 5.13
Broadband
Fixed drives continuing growth in broadband take-up
73
52 58 56 56 58 64
9 9 9 8 3 6 7 5 48 42 32 29 26 24
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012
None
Mobile only
Fixed and mobile
Fixed only
Any broadband
Household penetration of fixed and mobile broadband
Source: Ofcom research, data as at Q1 of each year
Proportion of respondents (per cent) 68% 71% Total broadband
take-up 76% 74%
Page 332 Figure 5.54
There were nearly one million new ADSL broadband connections in 2011…
9.93 11.87 13.22 13.97 14.97 15.91
3.06 3.41
3.68 3.84 4.03 4.12
0.03 0.04
0.04 0.05 0.13
0.41
13.01 15.32
16.94 17.86
19.13 20.44
0
5
10
15
20
2006 2007 2008 2009 2010 2011
Other broadband
Cable
ADSL
74
Fixed broadband connections
Connections (millions)
Source: Ofcom / operators Page 312 Figure 5.30
… with BT Retail seeing the fastest growth
75
3.1 4.1 4.5 4.9 5.4 6.0 1.3 3.7
5.5 6.4 7.5 7.9
5.5
4.0 3.2 2.7
2.1 2.0
9.9 11.9
13.2 14.0 15.0 15.9
0
5
10
15
20
2006 2007 2008 2009 2010 2011
Other non-LLU ADSL
LLU ADSL
BT Retail ADSL
ADSL broadband connections Connections (millions)
Page 312 Figure 5.31
76
After years of decline, there are signs that average broadband prices are stabilising Estimated average monthly cost of a residential fixed broadband connection
£23.60 £20.51 £18.09 £17.59 £15.96 £15.73
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011
£ per month
Source: Ofcom / operators Note: Data is based on operator allocations of revenues for bundled services and should be treated with some caution
Avg headline speed
-15.4% -11.8% -2.8% -13.1% -9.2% -1.4% Annual change
2.5Mbit/s 6.4Mbit/s 8.3Mbit/s 4.8Mbit/s 12.8Mbit/s 16.8Mbit/s
Avg actual speed
4.1Mbit/s 6.2Mbit/s 7.6Mbit/s
Page 340 Figure 5.64
More than two thirds of broadband connections offer headline ‘up to’ speeds of more than 10Mbit/s
77
Residential fixed broadband connections by ‘up to’ headline speed
% of broadband connections
Source: Ofcom/operators
34% 30% 8% 4% 2% 1% 1%
59% 62%
68% 54% 51%
41% 31%
8% 8% 24%
41% 45% 53%
60%
0% 1% 2% 5% 8%
0%
20%
40%
60%
80%
100%
Nov 2008 Apr 2009 May 2010 Nov 2010 May 2011 Nov 2011 May 2012
30Mbit/s and higher
Over 10Mbit/s and less than 30Mbit/s Over 10Mbit/s
8Mbit/s to 10Mbit/s
Less than 8Mbit/s
4.1Mbit/s 5.2Mbit/s 6.2Mbit/s 6.8Mbit/s 7.6Mbit/s Average actual speed (measured by SamKnows in partnership with Ofcom)
Page 314 Figure 5.33
We estimate at least 60% of UK households had access to superfast services by end March 2012
78
Superfast availability to UK households – March 2012 •Cable = 45% •FTTC-enabled exchange areas = 37%
•Availability of FTTC = 31% of UK households*
•Availability of cable and/or FTTC = c.60% of UK households* *Based on estimate of 85% of households in FTTC-enabled exchange areas being served by an enabled cabinet NOTE: excludes BT FTTP, Cable availability in Virgin Media’s non triple-play areas and smaller local fibre deployments
Cable availability FTTC availability
See N&R CMR reports and CMR UK Page 284, Figure 5.4 Source: Ofcom / operators
Superfast broadband is available to 60% of households…
39 38 37 37 36 35 35 34 33 32 32 31 30 29 29 29
7 7 7 8 9 9 10 10 12 13 13 14 15 15 15 16
6 6 7 8 8 9 9 9 10 11 11 12 13 14 15 15 51 51 52 53 53 54 54 54 55 56 56 57 58 58 59 60
0
20
40
60
Dec
-10
Jan-
11
Feb-
11
Mar
-11
Apr-
11
May
-11
Jun-
11
Jul-1
1
Aug-
11
Sep-
11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb-
12
Mar
-12
FTTC-only
FTTC and cable
Cable-only
79
Source: Ofcom / operators
Estimated household availability of superfast services, by technology
Proportion of homes (per cent)
Page 284 Figure 5.4
… and take-up of superfast broadband tripled in the year to March 2012
0.2 0.4 0.6 0.9
1.1 1.4
1.2 2.1
2.9
4.3
5.5
6.6
0
2
4
6
8
0.0
0.5
1.0
1.5
2.0
Q4 2010 Q1 2011 Q2 Q3 Q4 Q1 2012
Superfast connections (left axis)
Superfast as % of all connections (right axis)
80
Source: Ofcom / operators
Take-up of superfast broadband services
Connections at ‘up to’ 30Mbit/s or more (millions)
Superfast as a % of all connections
Page 287 Figure 5.6
81
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