Ofcom - The Communications Market Report 2012

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


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%


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


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%


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


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


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


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


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


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


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


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


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%


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)


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


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%*


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


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


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


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

Email

Internet browsing

More than once a day

At least weekly

Activities using a tablet


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 …


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


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)


Facebook is pervasive among social networkers

45

Overlapping and unduplicated audiences of selected social networking sites on desktop and laptop computers


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 (%)


Social networks aid web navigation

46

Selected sites ranked by proportion of referred traffic generated through referrals from Facebook


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 (%)


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)


… as increases in data revenues failed to offset falling voice revenues

49


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)


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


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


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


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


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%


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


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%


The young in particular are using VoIP

57


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



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


Use of methods of communication other than traditional voice telephony


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


Billions of SMS messages


Twice as many people communicate daily with friends and family by SMS as by landline

60


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)



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


Subscriptions (millions) Proportion contract (%)


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 (%)


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


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


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)


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


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


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


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%


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)


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


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)


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


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


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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Ofcom - The Communications Market Report 2012