2009 United Kingdom - Telecoms, IP Networks, Digital Media and Forecasts

BuddeComm’s annual publication, United Kingdom - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in the UK.

The UK’s telecom market has not been unscathed by the global economic downturn, which has pushed the economy into one of the deepest recessions experienced by any European country. Overall revenues in the telecom sector increased by only 0.5% year-on-year in 2008, to about £43 billion, considerably lower than the 4% growth seen in 2007. Competition has continued to drive down the price of overall telecom services by about 6% annually, yet the real economic hardship of many consumers will significantly reduce discretionary spend until at least 2011. The consequent decline in revenue for telcos, together with the still problematic liquidity market, will dampen their ability to fund network investment during the next two years. BT has been an early casualty, having been obliged to scale back its 21CN All-IP implementation.

Nevertheless, the telecom sector remains resilient by comparison with other market sectors, if only because consumers are steadfastly attached to communications services. This has been recognised by the government’s proposal to make the provision of broadband a universal service obligation by 2012, though it is unlikely that the timetable will be kept to.

Fixed-line penetration has fallen steadily since 2000 while mobile penetration has increased to the extent that by mid-2009 about 20% of households relied on mobile-only access, compared with only 6% in 2001. Average residential broadband speeds more than doubled in the year to June 2009 yet there remain poorly served areas, accounting for some 15% of all households. BT dominates the fixed market, accounting for about 47% of all connections, though O2 is the largest overall provider in terms of subscribers.

The digital TV market is among the most competitive in Europe, with both free and pay satellite services competing against a range of platforms providing IPTV and VoD services. Analogue switch-off, due by 2012, is much anticipated as broadcasters and the providers of mobile and broadband services look to acquire released spectrum and so expand their service offerings in coming years.

UK key telecom parameters – 2008 - 2009

(Source: BuddeComm)

Key highlights:

·         Local loop unbundling has grown substantially since 2006, and by August 2009 there were more than six million unbundled lines. With more than 20 telcos providing unbundled services from over 1,850 local exchanges, competition in urban areas is intense, leading to some of the lowest broadband prices in Europe. Consolidation among providers in recent years has meant that the broadband market is essentially served by a triopoly of BT, Carphone Warehouse and Virgin Media, which together hold some 75% of all fixed-line subscribers. The economics of scale will enable them to reduce access prices further in coming years as they face increasing competition from the mobile network operators.

·         The 2009 Digital Britain report which proposed a universal broadband service of 2Mb/s by 2012 will require public funds, sympathetic regulation and the re-use of sub-1GHz spectrum freed from digital switchover. The much delayed spectrum auctions will hamper this development in 2010, requiring tighter regulatory control.

·         Long-term evolution trials have kept pace with developments elsewhere in Europe, led by O2 which envisages providing data at 140Mb/s, or ten times the speed currently available. The success of LTE will be much needed during 2010 and 2011 to develop rural broadband access as well as provide a platform for MNOs to develop their mobile data services.

·         Virgin Mobile launched one of Europe’s fastest cable networks during 2009, and may upgrade to a 200Mb/s service by 2012. This will vastly improve the accessibility of high-end data services while the rollout of FttH is unlikely to expand substantially during the next two years.

Data in this report is the latest available at the time of preparation and may not be for the current year.