2011 United Kingdom - Telecoms, IP Networks, Digital Media and Forecasts

FttH receives boost from Virgin Media

BuddeComm’s quarterly publication, UK - Telecoms, IP Networks and Digital Media, provides a comprehensive overview of the trends and developments in the telecommunications and digital media sectors in this key European market, including regulator data to the first quarter of 2011 and operator data to June 2011.

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. Negative GDP in 2009 has shown some recovery since, yet failing consumer confidence is likely to affect revenue for the next two years at least. Nevertheless, the telecom sector has fared better than many other sectors of the economy: the sector remains resilient if only because consumers are steadfastly attached to communications services, and most would not cut back on mobile, pay-TV or broadband services. As such, operators providing these services are well placed to weather the continuing downturn. Yet consumers have curtailed much discretionary spend, and the combination of fierce competition and regulatory measures to reduce costs for end-users has resulted in a steady decline in overall revenue, including a 25% drop in 2010, year-on-year. Revenue from fixed internet services fell 5.7% in response to the proliferation of cheaper bundled services while retail mobile revenues continued to grow steadily (at 1%) and TV revenue increased 5.7%.

Investment in the telecom sector has also been affected by the economic climate. It has been dominated by operators concentrating on upgrading cable and fibre networks, as also by mobile network operators upgrading their network capabilities with new technologies including HSPA and LTE, and securing spectrum to enable them to cope with demand for mobile data use in coming years.

Fixed-line penetration has been falling steadily since 2000 while mobile penetration has increased to the extent that by mid-2011 about 23% of households relied on mobile-only access, compared with only 6% in 2001. In digital broadcasting, satellite services have shown considerable growth while DTTV coverage continues to be extended ahead of ASO scheduled for the end of 2012.

UK – Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Key Highlights

• Broadband speeds have increased considerably, with Virgin Media offering 100Mb/s services across much of its network and BT providing a 40Mb/s FttC offer for much of its network as part of its £1.5 billion network investment. Nevertheless, average speeds in mid-2011 were only about 6.2Mb/s, placing greater pressure on upgrades to keep pace with future consumer demand for bandwidth.
• Virgin Media has extended its FttH network in select towns, and in mid-2011 announced plans to build an open-access FttH platform to five million homes and businesses. The estimated £2 billion cost may depend on generous government subsidies, yet the scheme is far ahead of BT’s FttC capabilities and poses the only real large-scale FttH deployment in the country.
• Mobile data usage is expected to grow at 80-90% in coming years as consumers respond to greater network capacity combined with lower usage charges (the result of competition) and imposed maximum data tariffs (the result of EC legislation). To this end operators are relying on additional spectrum in the 800MHz and 2.6GHz band to be made available from 2013 following auctions to be held in 2012.
• Bundled services are now taken by more than half of the UK’s households, dominated by telephony/broadband and telephony/broadband/TV offers. Competition has greatly reduced prices for consumers, while deals among operators, such as that between Vodafone and BT Wholesale, has made quad-play offers readily available.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in the UK. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards in 2010;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

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