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July 19, 2012

Ofcom's 'Communications Market Report 2012' -Texting Passes Calling in UK and Other Trends

By Peter Bernstein, Senior Editor

The good news for all of us who love to digest industry data is that the UK’s communications regulator Ofcom is out with “Communications Market Report 2012,” its ninth annual report on the various markets for which it has oversight. These include: broadcast television and radio, fixed and mobile telephony, Internet take-up and consumption and postal services.

Covering a whopping 411 pages, it is almost impossible to know where to begin.  I leave it to readers to download the full report and find your favorite market. The sections for each sector covered have exhaustive charts and tables and analyses to ponder so you’d best set aside a lot of time. In fact, Ofcom has even made the data searchable so it can be used for working your own Excel magic.

That said, it only seems fair to titillate you with a few factoids from the report.

  • The average UK consumer now sends 50 texts per week which has more doubled in four years with over 150 billion text messages sent in 2011.
  • Almost another ninety minutes per week is spent accessing social networking sites and e-mail, or using a mobile to access the Internet, while for the first time ever time spent on calls on both fixed and mobile phones has declined.
  • Traditional forms of communications are declining in popularity, with the overall time spent talking on the phone falling by five percent in 2011. This reflects a 10 percent fall in the volume of calls from landlines, and for the first time, a fall in the volume of mobile calls (by just over one percent) in 2011.
  • Teenagers and young adults are leading these changes in communication habits, saying they prefer to talk face to face — a reflection of the rapid increase in ownership of Internet connected devices, such as tablets and smartphones.
  • Tablet ownership jumped from two percent to 11 percent in 12 months
  • One in ten UK adults now has an e-reader.
  • Two fifths of UK adults now own a smartphone, with the same proportion saying their phone is the most important device for accessing the internet.
  • Internet connected 'smart TVs' now are in five percent of UK households, giving consumers the ability to 'Turf' - both watch TV and surf the Web .
  • UK households own on average three different types of Internet-enabled devices such as a laptop, smartphone or Internet-enabled games console.
  • 15 percent of households own six or more devices.

On the telecoms side specifically there was some interesting insights, as can be seen in the table below. 

As can be seen, total UK telecoms revenues declined for the third year in a row in 2011. While retail and corporate data revenues rose slightly they were offset by declines in fixed call, access revenues and wholesale revenues.   Also of interest were the facts that for the first time mobile voice call volumes were down (not as much as fixed which have been steadily declining), and the number of calls originating from mobile devices now exceeds those on landlines, but as noted above texting has passed them both as the most popular way to interact.

Explanations of what all of this means in terms of things like fiber-to-the-cabinet rollouts (now over 30 percent of homes reached), using mobile investments to expand broadband to under-served areas, and the impact of the growing use of Wi-Fi by smartphone users are all explored in detail.

Trend spotting

The reason for non-UK observers to spend some time with the report is from a trends perspective what is going on in the UK is similar to what is transpiring in the rest of the developed world. While not a perfect apples-to-apples comparison given specific countries’ progress on fixed, wireless and converged broadband and the rates of smartphone and tablet adoption, crunching the numbers here because of the level of detail is illuminating. At the end of the day what it shows is that: personal devices are increasingly becoming the communications/session endpoints of choice; generational preferences will continue to put stress on voice revenues originated on any device or network (especially with the hastening of VoIP via Wi-Fi and not 4G); and how to invest in broadband to meet customer expectations is going to be a challenge given the context for usage and the growing unpredictability of when it will take place and for what reasons. Indeed, finding the right broadband technology mix to go with billing models that can generate the revenues needed to both invest in the future but also fend off the entreaties of OTT’s to customers for the value-added part of their experiences paints a picture of the challenges facing not just service providers and their ecosystems, but regulators as well.

Last week the European Commission VP Neelie Kroes set out a policy statement on broadband investment ahead of its formal adoption at the end of the year. The statement is aimed at finding a way to encourage operators to speed up their investments in superfast broadband. While Ms. Kroes and her staff were looking at things like lighter regulation, stimulating competition and figuring out how to treat the existing copper, TeliaSOnera revealed that for the first time its IP revenues had passed those for fixed lines. 

In short, data is king (including in that category VoIP) and IP is how we consume it, the death of public TDM networks is approaching at increasing speed at the same time operators are facing a tsunami of data which is forcing them to place their bets, but knowing where to place them has become increasingly complicated for economic, competitive and regulatory reasons. It is clear that in many parts of the world the industry is at a tipping point. Watching the fortunes of not just service providers but what used to be household names in the networking and devices sectors validates the level of total ICT volatility. The Ofcom report is a valuable indicator of all of this. It will be interesting to see how fast and far the bars move this time next year.

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Edited by Rachel Ramsey
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