2007 OFCOM Communications Review

The British regulator OFCOM released its 2007 review. The report is worth reading ... here are a few of the report's key points:

• The availability of broadband to more than half of UK households has driven the development of converged services and devices.
• Convergence has opened up major revenue opportunities for the producers of many content types. Over the first half of 2007 90% of UK singles sales by volume came from digital downloads to the computer or a mobile handset. The market for computer game playing has also been transformed, with millions of consumers worldwide now engaging in shared online gaming experiences.
• Audiovisual content, by contrast, continues to be largely broadcaster-funded, although independent producer revenue from new media rights more than doubled to £42m in 2006.
• The traditional advertiser-funded model of broadcast audiovisual output faces pressures both from the growing popularity of online advertising (it rose by nearly half in 2006 to £2bn) and from the multichannels (which attracted advertising revenue of over £1bn in 2006).
• Increasingly sophisticated devices are beginning to influence consumer behaviour. Fifteen percent of individuals now have a digital video recorder (DVR) and up to 78% of adults who own them say they always, or almost always, fast-forward through the adverts when watching recorded programmes.
• Bundled communications services are increasingly popular with consumers, with 40% of households now taking more than one communications service from the same provider (up a third on last year). A majority of broadband customers take it as part of a bundle.
• Each person now consumes more than seven hours of media and communications services cumulatively per day. However, the tendency to consume some media simultaneously means that the actual time spent on media is likely to be less than this.
• Digital television penetration broke through the 80% barrier in Q1 2007, taking the total number of homes with multichannel television to 20.4 million (80.5% of the total).
• Radio reach has been stable over the last five years at around 90%. However, total listening hours fell by 1.4% in the year to Q1 2007, and are down 4.0% on five years ago. Listening hours have fallen furthest among 25-34 year olds, down by 17.3% over five years, and among children, down 8.7%. However, the over-55’s are now listening to more radio, with hours up by 5.5%.
• Some 58% of listeners say they have accessed radio through one of the digital platforms (up seven percentage points on last year); 41% have listened via DTV, 24% over the internet, and 8% via mobile phone. Twenty seven per cent of UK adults now own an MP3 player, with 5% using them to listen to radio podcasts.
• Average household spend on telecoms services fell by nearly a pound in 2006 to £64.73 per month. For the first time, average mobile spend fell (by 70p to £31.72) as falling prices more than compensated for an increase in the total number of connections and in the average number of voice calls and text messages per subscriber. Like-for-like prices (based on a basket of services with average usage at 2006 levels) fell by nearly 9%.
• Total industry revenue in 2006 was £47.0bn, of which £38.5bn was retail revenue (i.e. revenue from end-users). This was an increase of 1.4% on 2005 but represents significantly slower growth than the previous five years as fixed-line revenues declined and growth in mobile and broadband revenues slowed.
• More than half of UK households had broadband by March 2007. The average (blended) headline speed in June 2007 was 4.6Mbit/s, although actual speeds experienced are often considerably lower, varying according to the quality and length of line from premises to exchange and the number of simultaneous users.
• Households with a mobile connection (93%) exceeded households with a fixed connection (90%) for the first time in 2006. Average calls per mobile connection rose above 100 minutes a month for the first time, while average calls per fixed-line connection fell below 300 minutes.
• Local loop unbundling accelerated through 2006 so that by the end of March 2007, 72% of UK premises were connected to an unbundled exchange (an increase from 45% in March 2006). The proportion of premises in unbundled areas taking LLU services rose from 3% in March 2006 to 9% in March 2007.
  
• Analysis of time spent online reveals that Britain is a nation of shoppers and social networkers. More time was spent on eBay than on any other web site, and social networking sites Bebo, MySpace, Facebook and YouTube are all in the top ten sites by time spent.
• Women aged 25-34 spend over 20% more time online than their male counterparts. ‘Silver surfers’ also account for an increasing amount of internet use with nearly 30% of total time spent on the internet accounted for by over-50s (although, as over-50s account for 41% of the UK population, their internet usage remains significantly lower than average).

How many of these facts and trends are unique to the UK? What are the implications of these trends for regulatory policy and the strategies of the firms in the marketplace? Are consumers better or worse off, on balance? Are social goals (eg. universal service) being met?