[news release] Ofcom published its annual Communications Market Report 2007 which reveals new trends in the UK’s £50bn electronic communications sector.UK consumers now spend 50 hours per week on the phone, surfing the internet, watching television or listening to the radio. Average daily internet use in 2006 (36 minutes) was up 158% on 2002 and time spent on the mobile phone (almost 4 minutes per day) was up 58%. Time spent watching TV was down 4% at 3 hours and 36 minutes, listening to radio was down 2% at 2 hours and 50 minutes and time spent on a fixed line phone was down 8% at 7 minutes.While consumers are getting more out of their communications services, the amount they are spending on them continues to fall. In 2006, average household spend on communications services was £92.65 per month, down from £94.03 in 2005.Ofcom’s 330 page report shows how consumers are using new digital communications services to take control of how, when and where they access and use communications services. In particular:
- The range of services and devices now available to children (8-15 year olds) in the UK is rapidly changing what they do with their time. Over 75% of 11 year olds now have their own television, games console and mobile phone. Some 15% of 13 to15 year olds and 7% of 10 year olds also have their own webcam.
- Fewer children are playing console and computer games (61% regularly did so in 2005 down to 53% in 2007), watching videos and DVDs (59% did so regularly in 2005 and 38% in 2007) and listening to radio (40% listened regularly in 2005 and 20% in 2007). Instead, they are using their mobile phones more often (50% regularly did so in 2005 compared with 53% in 2007), surfing the internet (47% regularly in 2005 to 52% in 2007) and using MP3 players (20% regularly in 2005 to 28% in 2007).
- Older people are also consuming more media. The over 55s was the only age group to increase its average radio listening between 2002 and 2007 (up 5.5%). And older people are not just increasing their use of traditional media. Some 16% of over-65s use the web. These silver surfers spend an average of 42 hours online every month, more than any other age group. Indeed, far from being just a young person’s technology, one quarter of all UK internet users are over 50 and the over-50s account for 30% of total time spent online.
- Among 25-34 year olds women spend more time using the internet than men. In this age group, 2.18m young women users account for 55% of total time spent online. By comparison, just 1.83m 25-34 year old men in the UK use the internet.
The networked nation
The process of convergence – bringing technologies, platforms and devices closer together – is connecting the nation as never before. Consumers can now get live TV over their mobile, radio over their TV and make voice calls on the internet.
- There is now an even greater range of ‘bundled’ communications services providing landline, broadband, digital television and mobile in a single package. As a result, the number of consumers taking services in bundles rose to 40% of the population by April 2007, up by a third over 12 months.
- Consumers are increasingly using telephone services over the internet offered by so-called VoIP providers. At the end of 2006 20% of respondents to Ofcom’s survey said they were phoning online, up from 14% at the end of 2005.
- And in the UK we are increasingly relying on our mobile phones. The report shows that by the end of 2006 there were more than double the number of mobile connections (69.7m) than landline connections (33.6m). More UK households now rely just on a mobile phone (9%) than rely just on a landline (7%) and for the first time, total mobile call minutes (82bn) accounted for over one third of all call minutes (234bn).
- Today’s consumers are using their mobiles for much more than just making phone calls. Some 41% of mobile phone users regularly use their phone as a digital camera, 13% use it for internet access, 10% listen to FM radio broadcasts, and 21% use it as a mini games console. And in 2006 mobile users in the UK sent 20% more texts than the previous year with an average of 12 text messages per mobile per week.
- Wireless networks are allowing more people to access the internet on-the-move. Some 11.2% (7.8m) of mobile phones now connect to a 3G network (70% up on 2005 at 4.6m). The report also shows the number of Wi-Fi hotspots in the UK, which enable broadband speed wireless internet access, is also increasing. By April 2007 there were 11,447 hotspots compared to 10,339 a year previously.
- Digital television – in 80.5% per cent of UK homes by April 2007 – is changing what, when and how we watch. One of the new services being used by viewers in the 11.5 million subscription television households is high-definition (HD) television. The report finds that, in the 450,000 homes that have it, 33% of viewing time is spent watching in HD and 43% of those surveyed said that they watch more television – especially premium content such as films and sport – as a result of having HD.
- And by April 2007, 15% of respondents said they had a digital video recorder (DVR), almost double the number at the end of 2006. DVRs allow users to record whole television series and to pause and rewind live programmes.
- Radio listeners have a much wider choice of stations and ways of listening due to the growth of digital radio. In 2006 the total number of DAB digital radio sets sold broke through the 5 million mark and 17.2% of UK homes now have a DAB digital radio. DAB sets accounted for 18.6% of all radio sales in 2006 (1.8m sets) compared to 12.9% in 2005 (1.5m sets).
- DAB is not the only way that consumers listen to digital radio. The report finds that 33% of consumers have listened to the radio via digital television (15% do so at least weekly), 21-22% listen online (12% at least weekly) and 10-12% listen via their mobile phone (6% at least weekly).
A changing industry
Increased convergence of services and technologies is also changing the shape of the communications sector and in particular industry revenues.
Television
- UK television advertising revenue in 2006 fell by 2.2% on the previous year to £3.5bn, the first fall since 2002. The decline in advertising revenues coincides with greater availability and use of television-style content online and the growth of digital video recorders (DVRs) that allow users to skip adverts, putting even greater pressure on advertising revenues. The report found that up to 78% of DVR owners regularly used them to skip through adverts.
- Declining advertising revenue is, however, increasingly being supplemented by alternative sources of income. In 2006 subscription revenues increased to £4bn (approximately £350 per subscription), up from £3.3bn in 2005. Similarly, revenues from interactive services, such as quiz television channels and participative voting in programmes, increased by 18.3% during 2006 to £123m, although this new source of income may be affected in the future as broadcasters review their approach to interactive TV.
- While television advertising overall is declining, revenues for digital-only free-to-air channels, such as ITV2, More4 and Five Life, is rising and for the first time broke though the £1bn mark in 2006, a 21% increase over 2005. Revenue for the three commercial terrestrial channels – ITV1, Channel 4 and Channel 5 – stood at £2.4bn in 2006, 9.6% lower than in 2005.
- As television advertising revenue declines, online advertising spending continues to surge, up 47% during 2006 and just breaking the £2bn mark. Internet advertising spend is now equivalent to almost half (44%) that spent on all TV advertising, to 83% of advertising spend on ITV1, Channel 4 and Five and to one quarter (24.2%) of all press advertising.
Telecoms and broadband
- By April 2007 53% of UK households had a broadband connection. Headline broadband speeds – the maximum advertised speed of a service – have doubled over the last 12 months. The average blended headline broadband speed stood at 3.6Mbit/s at the end of 2006 compared to 1.6Mbit/s in the previous year. By June 2007 this had risen to 4.6Mbit/s.
- The increase in headline speeds is due in part to continued investment and growth in local loop unbundling which enables operators to install their own equipment in BT’s exchanges and offer broadband services direct to consumers. There has been a threefold increase in the proportion of properties connected to an unbundled telephone exchange which are actually taking an unbundled service, from 3% in March 2006 to 9% in March 2007. Average headline speeds are also being boosted by ongoing investment in infrastructure on both the BT and cable networks.
- Competition in the provision of phone services is also increasing. Whilst BT is diversifying its revenue streams in other areas, its share of fixed voice call volumes fell below 50% for the first time in 2006 (48%) and the company’s share of all telecoms connections (including mobile) fell below one in four (23%, down from 26% a year ago).
- Increased competition is driving down prices for consumers. Ofcom’s analysis of the cost of a typical basket of residential telecoms services (including a fixed line, two mobiles and a broadband connection per household, all at 2006 usage levels) shows that consumers would have paid £6.51 (9%) more for the same bundle of services in 2005 than in 2006. In the five years to 2006 the cost saving on the same bundle was £34.97 in real terms.
Radio
- While the total number of radio stations in the UK has increased through the expansion of DAB (in June 2007 there were 389 radio stations in the UK, 169 of which were available on DAB), the report shows that the total number of radio listening hours declined to an average of 19.8 hours per week per listener in 2006. This fell further to 19.4 hours in Q1 2007. This decline has been felt most in the commercial local radio sector. Between April 2005 and April 2006, average listening to local commercial radio fell by 4.1%.
- As listening has declined, so has commercial radio advertising revenue. Between 2001 and 2006, radio’s share of total advertising revenue in the UK fell by 14.3% and in 2006 stood at £480m. Total revenue for local commercial stations fell by 9.5% from £169m in 2005 to £153m in 2006.
- By contrast, the report finds that people are increasingly tuning-in to BBC radio. In the first three months of 2007, four out of the five most listened to stations were all BBC. The top five were: BBC Radio 2, Radio 1, Radio 4, Classic FM and Five Live.
- The report also estimates that the BBC’s expenditure on radio, at £637m in 2006, is at its highest level in five years. This compares to £512m for the commercial radio sector, at its lowest level since 2002.
Ofcom Partner of Strategy and Market Developments, Peter Phillips said: “This comprehensive survey shows how our communications sector continues to develop at a fast-pace, with consumers of all ages using a range of devices to find the services they want at lower prices.” He added: “Industry innovation and competition continue to deliver significant benefits to the UK economy and consumers.”The full report is available online at: www.ofcom.org.uk/research/cm/cmr07