Communications Market Report Research Document Publication date: 19 August 2010 Introduction This is Ofcom’s seventh annual Communications Market report. Its objective is to act as a reference source covering the UK communications sectors, aimed at industry, policy makers, analysts and consumers. The report also provides context for the work that Ofcom conducts in furthering the interests of consumers and citizens in the markets we regulate. The report contains data and analysis on broadcast television and radio, broadband and fixed/mobile telephony. It also offers insights into how people are using the internet and converged devices to access audio-visual and audio content. Take-up of several digital devices and services passed new thresholds in 2009/10. Over seven in ten people (71%) now have access to a broadband connection at home; over nine in ten (92%) have digital television installed on their main set in the home. And more than a quarter (26%) of mobile users now have a smartphone, offering consumers access to much more than just voice telephony. Growing levels of device take-up are reflected in the new ways in which people relate to communications services and media content. Broadcast television viewing and radio listening have remained comparatively stable year on year. But people are also using the internet to access audio and audio-visual content. Nearly four in ten people claim to watch television services online, while 14% listen to radio over the web. Moreover, a fifth (23%) of mobile handset owners now use it to access data-related services such as the internet. This is just a snapshot of the findings emerging from this year’s report. The first section (page 15) provides a fuller summary. This is followed by an examination of how people consume media content and communications services across a variety of digital devices – with a particular focus on concurrent use (Section 1.3). The report goes on to examine the bundling of communication services (page 55), followed by an assessment of the impact of the economic cycle on communications markets in the UK (page 69). It concludes by comparing communications markets across the four nations of the UK (page 83). The remainder of the report sets out a range of data from the television/audio-visual content industries (page 96) and the radio/audio sector (page 188). It continues with an analysis of internet take-up and the use of web-based content (page 234) and concludes with an assessment of telecoms and networks (page 278). Each section now also includes analysis of converged media, devices and consumption. Finally, to make this report and its resources more useable to stakeholders we are, for the first time, publishing all the data and charts in a searchable resource. This can be found at www.ofcom.org.uk/cmruk. Companion reports for each of the UK’s nations are once again being launched alongside this report; these can be found at www.ofcom.org.uk/cmr10. We publish this report to support Ofcom’s regulatory goal to research markets constantly and to remain at the forefront of technological understanding; it also fulfils the requirements on Ofcom under Section 358 of the Communications Act 2003 (the Act) to publish an annual factual and statistical report. And it addresses the requirement to undertake and make public our consumer research (as set out in Sections 14 and 15 of the Act) The information set out in this report does not represent any proposal or conclusion by Ofcom in respect of the current or future definition of markets. Nor does it represent any proposal or conclusion about the assessment of significant market power for the purpose of the Communications Act 2003, the Competition Act 1998 or any other relevant legislation. 1 Contents Key Points 3 1 The market in context 11 2 TV and audio-visual 95 3 Radio and audio 187 4 Internet and web-based content 233 5 Telecoms and networks 277 Glossary 360 Table of Figures 370 2 Key Points Key points: the market in context Key market trends (page 15) The availability of most broadcast and telephony services remained largely unchanged during 2009. Digital terrestrial television availability rose (to 81%) during the year, while the coverage of local loop unbundling (LLU) rose by one percentage point, to 85% of households. Communications industry revenue (based on elements monitored by Ofcom) declined by 2.3% during 2009 to £52.8bn. It fell across all industry sectors; telecoms revenues contracted by 2.7%, television revenue fell by 0.4% and radio revenue was down by 4%. Consumer satisfaction levels for most communications services remained unchanged during the year. Mobile telephony and broadband satisfaction remained stable year-on- year at 94% and 90% respectively; multichannel TV satisfaction rose by six percentage points to 91%. Household spending on communication services fell again in 2009, down by £2.41 to £91.24, driven largely by falling spend on mobile and fixed voice services. Spend on communications services accounted for 4.4% of total household expenditure in 2009, down from 4.6% in 2008. Consumer’s digital day (page 24) On average, nearly half of people’s waking hours are spent using media content and communications services – on average 45% of the total. People spend on average seven hours a day consuming different media, but they squeeze in 8 hours and 40 minutes’ worth using more than one medium at a time. Older consumers spend most of their media and communications time using TV and radio sets, while younger people spend half of their time with computers, mobile phones and handheld devices. Compared to people over 55, 16-24s are more likely to use the TV set or mobile phone for a wider range of activities. Phone calls represent 57% of all mobile phone use by over-55s, compared with less than 25% for those in the 16-24 age group. Text messaging and social networking together make up 63% of all mobile phone use among 16-24s. Two-fifths of the time consumers spend on a computer is on communicating with other people. But computer use varies by age. People aged over 55 spend just under 40% of their time using a computer to communicate with others, and they are more likely to use email, not social networking. For 16-24s, over half their time on computers is spent communicating with other people, and they are more likely to use social networking. UK adults are most likely to watch scheduled TV on its own (83% of all viewing time), whereas mobile and computer activities attract the most simultaneous media use. Using a mobile phone or a computer is most likely to be undertaken at the same time as other media (57% of mobile phone use takes place concurrently with other media activity and 62% for computer use). Media multi-tasking is popular across the day but scheduled television emerges as a ‘solus’ activity for many people in the evening. 3 The market for bundled communication services (page 55) Around half of all UK households now buy two or more of their communications services from one supplier in a bundle, up from less than a third five years ago. Triple-play voice, broadband and TV bundles account for a third of the total. Seventeen per cent of households took triple-play services in Q1 2010, compared to just 3% five years ago. But many people buy still services on a stand-alone basis. Only half of all households (53%) that have a landline, fixed broadband service and pay-TV currently purchase these services as a triple-play bundle. Seventy per cent of people with a communications service bundle said that the main reason for taking a bundle was because it was cheaper. Almost half (49%) of those with a bundle also said that it was more convenient to deal with one supplier. Bundling often provides a route for users to take up a new service. Forty-five per cent of households with pay-TV in a bundle did not previously purchase pay-TV services, and 40% of households with broadband in a bundle did not previously have broadband. Those who buy bundles are, on average, more satisfied than those who buy single services. In particular, bundlers have higher satisfaction with value for money and customer service. There are some indications that consumers with bundles are less likely to switch provider than those with single services. Just 3% of those with a bundle switched their whole package in the year to Q1 2010, compared to 11% of those with stand-alone fixed broadband, 6% with stand-alone fixed voice and 3% with stand-alone pay-TV. Communication markets and the economy (page 69) Consumers remain concerned about the economic downturn with 29% of respondents worried about its personal impact. Overall spending on communications services still appears robust in the face of competing claims on disposable income such as holidays and nights out. When forced to choose between communications services, mobile phone users were less inclined in 2010 to choose their mobile as the item on which they would cut back spending. Eighty-seven per cent of consumers believed that at least one communications provider was offering better deals now compared to a year ago. Only a minority (13%) thought that no communications providers were now offering improved deals, in comparison with a quarter of people in 2009. Consumers are more likely to use online shopping as an opportunity to save money. Just over half of respondents (52%) with broadband access agreed they were more likely to use the internet to shop than 12 months ago, while 61% agreed that they use price comparison websites more frequently than this time last year.