The Communications Market 2006

Size: px
Start display at page:

Download "The Communications Market 2006"

Transcription

1 The Communications Market 2006 Publication date: 10 August 2006

2 Key points: The communications market Total retail revenue in the UK communications sector reached 50bn in 2005, a 5% increase compared to The biggest annual rise ( 2bn) came from the telecoms sector, while television revenue grew by 500m. Total radio funding (BBC spend plus commercial revenue) remained broadly flat year-onyear. Average household spend on communications rose slightly in 2005 by 54 pence (less than 1%) to per month. The largest single component was mobile communications at per month (35% of total spend). However, for the first time in five years, as a proportion of total household expenditure, average UK household spend on communications services fell slightly from 4.63% in 2004 to 4.60% in This decrease was predominantly down to falling prices, particularly in fixed line telecoms, which more than offset increases in take-up and usage. Consumption of many communications services is rising. On average in 2005, mobile subscribers made more calls and sent more texts than they did in 2001, internet users spent almost 20 minutes more time online per week and TV viewers watched for 11 minutes longer; however, over the same period, radio listening fell by 24 minutes while fixed line calling remained flat. There is also evidence of a significant difference in communications usage patterns between young adults and the general population: for example, year olds spend on average 21 minutes more time online per week, send 42 more SMS text messages, but spend over seven hours less time watching television. Availability of several new digital services increased during 2005; 3G mobile services are now available to over 90% of the population and the proportion of unbundled exchanges is up ten percentage points on Take-up of digital services continued to increase over the year: by March million UK homes took digital TV services, 11 million homes and small businesses had broadband connections, and there were around five million 3G subscribers. In 2005 and early 2006 a number of converged services came to market including various IPTV (internet TV) offerings, television to mobile devices, and new voice over IP (internet telephony) products. In addition, operators are increasingly bundling their services, with fixed line/broadband bundles becoming particularly widespread. 1

3 Key points: Radio Total funding for the UK s radio industry stood at 1.15bn in 2005, down 2.2% on We estimate that BBC radio expenditure reached 626m or 55% of the total. National commercial radio earned 270m from net advertising revenue (24%), while local commercial radio added a further 164m (14%). Commercial sponsorship made up the final 86m (7.5%). Listening has risen by 3% over the last five years. National commercial and BBC radio picked up listener hours across most age groups; by contrast, local commercial radio suffered losses, particularly among year olds (down 30%). The BBC s share of radio listening rose to 55.4% in Q1 2006, up 3.4 percentage points since In Q3 2005, for the first time, the BBC s UKwide station share exceeded that of all commercial radio; by Q the gap between the two had widened to 1.7 percentage points. Three main groups account for 71.4% of all commercial radio listening, a rise of 7.8 percentage points on GCap Media had a 34% share (36% in 2004), Emap 25% (17%) and Chrysalis 12% (11%). GCap also has the largest share of commercial station licences with 22% of the total, up two percentage points on Emap held 16% of licences (a six percentage point increase) and The Local Radio Company 9% (no change). DAB sales exceeded 3m during Q and an estimated 11% of UK homes now own a DAB digital radio set, up six percentage points on Some 51% of listeners say they have accessed radio through one of the digital platforms accounting for around 10.5% of all radio listening. There are now 133 services which are available only through digital radio platforms and these services have a collective listening share of 2.3%. Sixteen new FM licences were awarded by Ofcom during 2005, with a further six awarded by May Ofcom has also awarded a total of 102 community radio licences since August Restricted service licences (RSLs) awards reached 498 during 2005, the highest number yet in a single year. 2

4 Key points: Telecommunications Total 2005 telecoms revenue reached 46.6 billion, of which 38.3 billion was retail revenue (i.e. revenue from end-users). Retail revenue rose by 5.5% compared to In residential telecoms, average household spend fell slightly during 2005, to just under 61 per month this was in part due to falling prices: the real price of a typical basket of residential telecoms services fell from 80/month to 76/month during the year. Mobile telecoms comprised 13.1 billion (34%) of total retail telecoms revenue up from 12.0 billion in 2004 and fixed line revenue fell from 10.9 billion in 2004 to 10.1 billion in 2005; internet (including broadband) showed the highest revenue growth of the major telecoms platforms up by 17% to 3.4bn. Some 31% of UK call volumes in 2005 were from mobiles a rise of three percentage points from 2004, and 11 percentage points higher than in Average mobile terminations rates (the wholesale charge paid by operators to terminate a call on a mobile network) fell by 24% during 2005, to stand at 5.9 pence per minute by the end of the year; this compares to an average rate of over 14 pence per minute in By the end of March 2006, 6.1 million of BT s fixed exchange lines took some or all of their voice services from another operator using carrier pre-selection (CPS) 1.2 million more lines than a year previously. By the end of March 2006, 11.1 million of the UK s homes and small businesses had broadband internet connections; over eight million of these connections were via DSL, compared with five million a year previously. Average broadband speeds rose during 2005, prices continued to fall, and choice increased. However our research suggests that consumers may not be fully aware of all the factors affecting the actual speed and cost of the service they receive such as: their distance from the exchange; the quality of their phone; the fact that they might be subject to usage caps and may be sharing elements of their broadband connection with other users 2005 saw rapid growth in the reach and usage of social networking websites (such as MySpace, Friends Reunited and Bebo), which allow users to create online profiles and connect with friends or others with similar interests. Our research shows that over 40% of adults with internet access have used these sites; that figure rises to 70% among year-olds, with over half in this age group using them at least weekly. 3

5 Key points: Television Total television revenue exceeded 10.5bn in 2005, up 4% in 12 months. Subscription revenue rose by 9% while net advertising revenue increased by 2%. Subscriptions now exceed advertising revenue by a 10% margin. Homes with multichannel television broke through the 70% barrier in 2006 and by the end of the first quarter of 2006 the figure had risen to 18.6m, or 72.8% of homes. The main driver of multichannel television growth was Freeview, which added 2.0m homes in the 12 months to the end of March There are now 7.1m homes in which the main set receives television via digital terrestrial. Total hours of output from entertainment, factual, news, leisure, children s and sport channels increased by 13% in 2005 to 713,227 19% of that output was originated material. Public service broadcasters launched a range of new free-to-air channels in 2005/06, including ITV4, CITV and More4. Channel 4 took E4 free-to-view and ITV and Channel 4 launched quiz-based channels ITVPlay and Quiz Call. The viewing share of digital-only channels reached 30% during Spinoffs from the five main channels featured prominently amongst those that performed most strongly, helping to hold up the overall portfolio share of the biggest broadcasters in multi-channel homes. Reflecting a strengthening multichannel line-up on Freeview, the collective share of the digital-only channels exceeded that of any one of the five main channels for the first time in The Secretary of State for Culture, Media and Sport announced a firm date for digital switchover, which will commence in 2008 with the Border region and come to its conclusion four years later. Digital UK launched the first advertising campaign to raise awareness of switchover in June Telewest and Sky launched high-definition TV services in time for the World Cup, offering a combination of broadcast channel content and pay-per-view films. The BBC launched a pilot of its internet media player (now re-named BBC iplayer) offerings triallists on-demand access to a range of downloadable television programmes and radio content. Meanwhile a range of channel operators participated in trials of television to mobile handsets in 2005 to test consumers appetite for content on the move. 4

6 Contents 1 Overview Introduction Key communications themes Communications consumers get more for their money Young people are moving away from old media Competition in bundling heats up The year in communications Introduction Availability: 3G and LLU extend reach of communications services New services over existing platforms New services over new platforms New ways of watching and listening Competition and technology help to deliver lower prices Take-up: digital TV penetration grows, broadband now mass-market The communications industry Introduction: the emergence of bundled products New technologies may require new pricing structures Overall broadcasting and telecoms revenues reach 50.6bn Subscriptions drive TV revenue growth, with advertising slowing The financial markets The communications consumer Introduction Spend declines despite increased usage Consumption more broadband, more TV, less radio Consumption patterns are changing for young adults Spectrum Introduction: an important component of the communications market New uses of spectrum Spectrum auctions 45 5

7 1.6.4 Spectrum trading Digital Dividend Review Ultra Wideband (UWB) Cave audit 47 2 Radio Key themes Local commercial radio loses out to national commercial radio and the BBC The year in radio Digital listening continues to rise Number of stations available in the UK rises to Digital distribution offers new ways to reach listeners TV operators continue to expand into radio Future radio policy framework takes shape The radio industry Radio revenue shrinks by 1.7% driven by falling commercial income Radio group characteristics Overview of the major radio operators in The commercial radio groups Service availability and station choice Purpose and use of long-term RSLs (L-RSLs) The radio listener Access to digital radio continues to rise Weekly radio reach in the UK BBC network listening exceeds all commercial listening for the first 93 time Broadly stable total hours of listening mask significant shifts by age 93 3 Telecommunications Key themes Telecoms prices fall, driven by increased competition 108 6

8 3.1.2 Broadband gets faster, but some consumers are unaware of 108 limitations TV comes to mobile and broadband Over half of online year olds regularly use social networking websites The year in telecoms Fixed-line revenue falls again, but mobile and broadband continue to 112 grow Mobile TV and internet TV take big steps forward LLU takes off, spurred by new regulatory environment Broadband pricing gets aggressive Major mergers and acquisitions drive bundling strategies Residential VoIP gains traction G grows further WiFi gets joined up The telecoms industry Introduction Total telecoms turnover rises to 46.6bn BT remains the largest UK telco Mobile continues as the dominant contributor to UK revenue Market share of telecoms connections continues to fragment Mobile connections grow while fixed lines fall Fewer fixed lines, despite increased competition Fixed-line call volumes decline Fixed-line charges fall again Total fixed-line voice revenue continues to drop CPS continues strong growth Competition further dents BT s fixed-line volume share Broadband continues as the fastest-growing telecoms platform BT increases its share of the wholesale broadband market BT remains the market leader in broadband retail subscriptions Mobile remains the most important telecoms revenue generator Mobile termination rates fall again Off-net mobile prices fall steeply 150 7

9 Mobile subscriptions continue strong growth For business users, mobile spend eats further into fixed-line BT halts its decline in business fixed call volume share IP-based solutions for corporate customers offer further growth for 153 fixed network providers 3.4 The telecoms user Introduction Slight decline in household spend on telecoms services Mobile penetration now at near-saturation, internet still rising Mobile gaining ground as main method of making calls SMS usage continues to grow BT volumes fall further as switching levels increase Residential prices continue to fall across the board Residential consumers are broadly satisfied with fixed and mobile 163 services Non-SMS mobile data use starts to grow Internet take-up grows, fuelled by broadband Availability and take-up of higher-speed broadband both grow Consumers are still confused about broadband limitations Most non-internet homes are voluntarily excluded A higher proportion now use the internet every day Broadband subscribers download more video/audio than dial-up 170 subscribers Google tops the online destination charts Social networking and blogging sites take off Residential satisfaction with internet services grows SME mobile penetration falls Business fixed-line spend falls again as business fixed-line call volumes continue to decline Larger SMEs switch fixed calls and mobile suppliers more often Broadband now dominates SME internet connectivity Television Key themes - Television Strong performance by mainstream networks spin-off channels Competition for audiences intensifies on Freeview 184 8

10 4.1.3 Operators bring content on demand and on the move to market Roadmap for digital switchover takes shape The year in TV The five mainstream channels spin offs gain share Multichannel TV gains in popularity on Freeview The five main channels diversify revenue sources On-demand content shifts up a gear The industry embraces content on the move Emerging policy framework defines future shape of TV market Another year of record TV licence awards High definition television comes to market for the World Cup Digital television - the roadmap to switchover is revealed Platform operators launch service enhancements Channel operators launch new channels The television industry TV revenue exceeded 10.5bn in The multichannels continue to build advertising share Industry flow of funds subscription revenue shows significant 207 growth Total industry output stood at 1.4 million hours in Originated hours fall due to ITV1 s reduced regional output Factual has been the growth peak-time PSB genre for seven years ITV, BBC and Five increase the proportion of peak time General 213 Factual in Entertainment and Children s were the largest multichannel genres Compliance with regulatory obligations Original productions Regional productions Independent productions News and current affairs Programmes made for a regional audience Repeats European programming Operators market shares 232 9

11 The five main channels retained more share in peak than in other 233 slots Share loss from the five mainstream networks offset by spin-off 234 channels Competition for Freeview audiences intensified in Five mainstream networks portfolio share holds up in multichannel 236 homes The production sector The television viewer Multichannel broadcast platforms available to consumers Freeview drove the growth of multichannel homes in Future growth in multichannel homes looks set to continue Freeview attracts an older, more affluent demographic Consumption of television services TV reach amongst younger people is falling The picture of channel share since 1955 multichannels making 258 inroads into the share of the five mainstream networks Total share of Entertainment channels grows, driven by Freeview The five main networks spin-off channels gained share in Multichannel operators cater for most audience demographics Violence, swearing and intrusion remain key concerns for the public Television remains the public s primary source for news TV news viewing is declining Regulating television for the protection of children and youth Public attitudes toward advertising 277 Glossary of terms and definitions 279 List of figures

12 The Communications Market Overview 11

13 Contents 1.1 Introduction Key communications themes Communications consumers get more for their money Young people are moving away from old media Competition in bundling heats up The year in communications Introduction Availability: 3G and LLU extend reach of communications services New services over existing platforms New services over new platforms New ways of watching and listening Competition and technology help to deliver lower prices Take-up: digital TV penetration grows, broadband now mass-market The communications industry Introduction: the emergence of bundled products New technologies may require new pricing structures Overall broadcasting and telecoms revenues reach 50.6bn Subscriptions drive TV revenue growth, with advertising slowing The financial markets The communications consumer Introduction Spend declines despite increased usage Consumption more broadband, more TV, less radio Consumption patterns are changing for young adults Spectrum Introduction: an important component of the communications market New uses of spectrum Spectrum auctions Spectrum trading Digital Dividend Review Ultra Wideband (UWB) Cave audit 47 12

14 1.1 Introduction This report is the third in a series of annual Communications Market reports, the latest of which was published in August This edition covers developments across the electronic communications and media sectors in the UK for the calendar year of 2005 with additional analysis for the period to June 2006 where available. The Communications Market supports Ofcom s aim to provide best-in-class research to which stakeholders have regular access. It aims to give a comprehensive picture of the radio, telecommunications and television sectors, with a round-up of recent developments and the latest available data on: industry size, structure and financing; availability, penetration and use of products and services; and consumer attitudes and behaviour. This edition follows a year in which consumers have started to feel the impact of converged communications services. At the device level, phone calls can now be made over the internet while the internet can be accessed using mobile handsets; equally television and radio programmes can now be enjoyed over both broadband and mobile phones. Also, at the operator level, the distinction between broadcaster, mobile operator, and fixed-line or broadband provider is blurring in each case there are examples of industry players bundling services together in innovative ways, in an effort both to attract and retain customers. While this report contains separate sections for the radio, telecoms and television sectors, descriptions of converged services can often be found in more than one section for example the recent trials of radio and television to mobile phones feature in all three. In each case we try to look at such services from a different perspective. In future reports, as services converge further, we will aim to present our analysis in a way which reflects the way they are offered and used more closely. Ofcom welcomes comment on the content and style of the Communications Market report to help inform future publications. Suggestions and queries should be sent to: market.intelligence@ofcom.org.uk. 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 and/or the assessment of licence applications or significant market power or dominant position for the purposes of the Communications Act 2003, the Competition Act 1998 or other relevant legislation. We endeavour to ensure that the data in this report are the most accurate currently available. 13

15 1.2 Key communications themes Communications consumers get more for their money In 2005, for the first time in five years, average UK household spend on communications fell slightly, from 4.63% to 4.60%, as a proportion of total household expenditure. Despite growth in take-up of many key services 3.8m more broadband connections, 5.8m more mobile connections and 2.7m net additional digital TV households (of which 441,000 subscribed to pay TV) total 2005 communications spend per household rose in real terms by just 0.6% (54 pence) to This was almost entirely because of falling prices, particularly in the fixed-line sector, where average household spend decreased from to 23.60/month, largely offsetting increased mobile, broadband and broadcasting spend. We can see this more clearly if we apply 2005 telecoms usage levels to 2001 prices; average spend on telecoms services would have been 15% higher in real terms at per household in 2001, against in These data show that, in simple terms, consumers are using more and paying less. This is largely due to a combination of increasing competition, new delivery platforms, innovative pricing and marketing, and regulatory intervention where necessary. However, this trend looks set to continue: further increases in competition, combined with innovative service bundling, could increase the downward pressure on prices over the next year; wide-scale local loop unbundling (LLU) should give operators new ways of packaging and pricing broadband and fixed-line services; and new ways of delivering TV and radio programming (primarily via broadband and mobile platforms) could result in increasing competition and a broader range of service offerings Young people are moving away from old media In 2005, we noticed a further shift in communications consumption patterns among the young (16-24 year old) age group. While it is true that usage of media, telecoms and technology has always varied by age, this difference has become more marked over the past year. Younger people have embraced the multitude of new technologies and means of communication, to the detriment of traditional platforms and services. For example, in a multi-channel TV world, younger viewers now watch less public-service broadcasting output than ever before (share of viewing to terrestrial channels among year olds is down from 74.3% of their viewing time in 2001 to 58% in 2005) opting instead for newer digital channels that might better reflect their values and interests. In radio, too, this age group is listening to proportionately less analogue and local commercial output than average and is instead replacing it with digital listening and output from the newer national commercial services. A similar theme emerges in telecoms, where young adults are forsaking fixed-line telephony in favour of mobile calls and texts year old subscribers make on average seven more calls and send 42 more texts per week than the population as a whole. They also spend more time online; young adults who use the internet do so for 21 more minutes per week than the UK average and at least 70% of them have used websites for keeping up contacts (against 41% of all adults). These are the children of the internet age, many of whom have never known a life without home computers, games consoles, mobile phones and online connectivity. 14

16 They are accustomed to more on-demand delivery of services: they want to contact their friends whenever and however is most convenient; they expect to watch TV programmes and listen to radio stations which interest them; they want to create their own online presence, and connect directly to others with similar tastes and interests Competition in bundling heats up Throughout 2005 and early 2006, many operators started combining a number of different communications services known as bundling. The first players to bundle services were the cable operators, which were able to offer TV and fixed-line telephony from their inception in the mid 1990s. The bundling aspect of these early offers was usually merely a single billing relationship for customers, and sometimes a single point of customer service. When the cable companies also began to offer broadband internet, in the early 2000s, they started giving discounts to customers who took two or three services. Until around 2003, the cable companies were the only operators that could offer any kind of cross-platform bundles: every player in the communications sector only owned or operated one type of service (mobile, fixed-line, broadband, TV), with the exception of BT which has operated fixed-line and broadband services since 2000, but marketed them separately. However, the introduction of commercially-viable wholesale line rental (WLR), which gave any company the chance to sell voice and broadband products over fixed lines rented from BT, opened the door to the first fixed/broadband bundles. At the same time, WLR gave operators with existing strengths in other platforms (TV and mobile for example) the opportunity to bundle their core product with broadband, or fixed-line voice, or both. This received fresh impetus with the introduction of changes to the regime for local loop unbundling (LLU) in LLU gives operators the chance to effectively take over operation of local exchange lines from BT, thereby establishing a unique fixed-line relationship with the consumer. In August 2005, BT voluntarily reduced the fully-unbundled line rental charge from 109 to 80 per annum, and Ofcom subsequently set price ceiling rules to guard against future LLU price increases. While BSkyB had tried a basic TV/fixed-line bundling strategy in the 1990s by establishing a marketing deal with BT, by 2005 it could use LLU to bypass BT altogether. BSkyB signalled its intention to do just that with its acquisition of Easynet, one of the UK s largest LLU operators, in October Other operators that introduced new bundled offers during 2005 and early 2006 include: Carphone Warehouse used LLU to offer new subscribers free broadband for life provided they took the fixed-line rental plus calls bundle. This offer surpassed the company s expectations, with over 340,000 new subscribers pre-ordering the service in the first eight weeks after the announcement; Orange rebranded its Wanadoo broadband ISP and began to offer free broadband to customers who spent more than 30 each month on an Orange mobile contract; O2 appeared to follow suit by acquiring LLU operator Be in June 2006; BSkyB announced the introduction of free broadband for all of its pay TV subscribers in July 2006; 15

17 BT trialled a fixed/mobile offering in 2005; and Ntl acquired Virgin Mobile in early 2006, giving it the potential capability to offer quad-play services: TV, fixed voice, mobile and broadband. We may see bundling becoming more intelligent meaning that there is some level of true service convergence, rather than a series of stand-alone services being offered under the same marketing and billing umbrella. For example, mobile/broadband bundles could make it possible for subscribers to remotely access their central and diary functions more seamlessly, regardless of whether they were at their PC or away from home using their mobile device. The evolution of TV over broadband also brings a potentially new element to the bundling product set. 16

18 1.3 The year in communications Introduction During 2005, the UK communications market played an increasingly important part in consumers daily lives. Take-up of new digital services proceeded at pace driven by increased availability, greater choice, innovative consumer offerings and falling prices. We examine each of these factors in turn in this section Availability: 3G and LLU extend reach of communications services 2005 was a year where sections of the telecommunications industry continued to push aggressively to maximise their potential customer base. Although many platforms (2G mobile, fixed-line, satellite TV) had already reached near-universal availability, during 2005 and early 2006 there were increases in the availability of 3G, broadband and unbundled local exchanges (LLU) (Figure 1.1). Figure 1.1: Availability of digital communications services Platform UK wide 2006 UK wide 2005 Increase on 2005 (percentage points) England Wales Scotland N Ireland Fixed line 100.0% 100.0% 0.0% 100% 100% 100% 100% Mobile (2G) % 99.0% 0.9% 100% 100% 99% 100% 3G % 82.0% 8.5% 97% 76% 68% 89% DSL % 96.0% 3.9% 100% 100% 100% 100% LLU % 34.0% 10.0% 49% 15% 29% 0% TV over DSL % 5.0% 5.0% 12% 0% 0% 0% Digital cable % 45.0% 0.0% 48% 23% 37% 30% Satellite TV 98.0% 98.0% 0.0% n/a n/a n/a n/a DTT % 73.0% 0.0% 73% 57% 82% 58% DAB digital radio 89.0% 89.0% 0.0% 92% 8 73% 8 92% 8 92% 8 1 From Q Percentage of postal districts where at least one operator reports at least 75% area coverage 2 From Q Percentage of postal districts where at least one operator reports at least 25% area coverage 3 Percentage of premises connected to a DSL-enabled exchange based on data reported by BT in January 2006; however, some premises may not be suitable for delivery of broadband services due to local technicalities, such as distance from exchange or poor quality of networks 4 Percentage of premises connected to an LLU-enabled exchange at January Represents availability of Homechoice, the only UK television delivered via DSL 6 Total cable availability (including analogue) reached 50.4% of the population in March 2006 (source: operators) 7 Figures relate to availability of signals from all six multiplexes 8 Figures relate to local multiplex licensed population coverage rather than transmitter coverage Source: Ofcom / operators / licensees Note: For a more detailed explanation of availability figures please refer to Ofcom s Communications Market: Nations and Regions report, published in April At the end of 2005, second generation mobile services were available from at least one operator to a 75% geographic coverage level in 96.9% of postal districts, and 82.4% of postal districts were similarly covered by all four operators (Figure 1.2). When mapped onto population density in those areas, our analysis shows that 99.9% of the UK population live in postal districts with 75% geographic coverage by at least one 2G mobile operator. 90.5% of postal districts had a minimum 25% geographic 3G coverage offered by at least one mobile operator, while 46.2% received services from four or five operators 17

19 (our criteria for coverage require operators to be able to provide downlink bandwidth levels of at least 128kbit/s one of a number of possible thresholds for advanced data and video services. The postcode coverage threshold is lower than for 2G services owing to both technological considerations and to reflect the newness of 3G services). Figure 1.2: Geographic coverage of mobile services by postal district 2G coverage (75%) Four operators Three operators Two operators One operator Zero operators 3G coverage (25%) Five operators Four operators Three operators Two operators One operator Zero operators Source: Ofcom / operators, Q3 Q According to BT, by Q % of UK premises were connected to a DSLenabled exchange. However, some premises within these exchange areas are not suitable for delivery of broadband services, or only broadband at lower speeds, owing to local technicalities such as distance from the exchange or poor quality of networks. Local loop unbundling (LLU) entails physically disconnecting BT s local lines from its network and connecting them to other operators networks, enabling them to provide their own services to customers. The number of unbundled lines started to rise steeply in late-2005 and early-2006, following wholesale price reductions from BT and the introduction of a price-capping regime by Ofcom. In December 2005 there were 210,000 unbundled lines, but by June 2006 a further 370,000 lines had been added, taking the total to 580,000. Following the closure of Kingston Interactive Television (KIT) in February 2006, which had been available to 105,000 homes in the Hull area of East Yorkshire, TV over DSL (delivered over an unbundled exchange) was available to approximately 2.4m homes in the London area by May These services were provided by Homechoice, which has stated that it plans to work with alternative providers of unbundled services to extend its coverage area throughout 2006 and The UK s newly merged main cable operator ntl:telewest also provides broadband connectivity. Its broadband service is delivered via fibre-optic and coaxial cable (rather than BT s copper wire local network), and delivers speeds of up to 10 Mbit/s. Digital cable s availability to 45% of UK homes has remained unchanged over the 18

20 last year (Figure 1.3) and ntl:telewest has stated its intention to extend its reach via local loop unbundling of BT lines, rather than by building new cable. Figure 1.3: Availability of digital cable and digital terrestrial television, DTT Cable coverage DTT coverage Source: Ofcom Note: Coverage areas are indicative only Satellite remained the digital television platform offering the widest coverage in Although the footprint covers the whole of the UK, actual availability to households can be limited due to factors such as obstruction to the line of sight to the satellite, local topography and planning restrictions. According to BSkyB, 98% of households in the UK and Ireland can get the Sky digital satellite service. Digital Terrestrial Television (DTT) coverage also remained constant during the year, with 73% of UK households able to receive services from all six multiplexes (Figure 1.3). The Highlands and Islands of Scotland and upland areas of England and Wales still had significant reception problems by the end of Also, in Northern Ireland there were only three transmitters as of December 2005, limiting coverage to the region. Availability of DAB (Digital Audio Broadcasting) digital radio remained static in 2005, with 89% of the UK population covered by at least one and in most cases all three of the multiplexes operated by Digital One, the BBC and local commercial broadcasters (Figure 1.4) (In addition digital radio services are available to digital TV and internet homes). 19

21 Figure 1.4: DAB digital radio coverage 2006 Source: Ofcom Note: Coverage areas are indicative only New services over existing platforms During 2005 and early 2006, a number of factors including technology developments, accessibility to multiple delivery platforms at low cost, and innovative business models all helped consumers to listen to, view, interact with, use and store information in new ways, and to get more from their communications services. The number of broadcast digital TV channels and radio stations increased again; operators launched TV services to mobile devices; the amount and variety of audio and video content available via the internet continued to rise and the number of households with personal video recorders (PVRs, capable of recording television on a hard disc drive) grew rapidly during the year. New television and radio services Reduced costs and ample capacity through the use of digital technology have made it easier for broadcasters to target a more narrowly defined audience with niche channels. In 2001, three years after digital television launched on satellite, BSkyB offered 198 non-terrestrial channels on its Sky service and these channels commanded approximately 39% of multichannel viewing. The remaining 61% share was to the main terrestrial channels, BBC1 through to five, and their associated digital spin-offs. The following four years witnessed rapid growth in the number of channels, with the launch of a further six terrestrial spin-offs (excluding the relaunches of BBC Choice and BBC Knowledge) and a net addition of 138 non-terrestrial channels (Figures 1.5 and 1.6). This increase in channel choice was a key driver of consumer take-up of multichannel television, which doubled between 2001 and 2005 to over 18 million households. 20

22 Figure 1.5: Spin-off channel launches from the five main channels Operator Channel Launch Closed/replaced BBC BBC News 24 BBC Parliament BBC Choice BBC Knowledge CBBC CBeebies BBC Four BBC Three November 1997 September 1998 September 1998 June 1999 February 2002 February 2002 March 2002 February 2003 February 2003 March 2002 ITV ITV News ITV2 ITV3 ITV4 CITV ITV Play August 2000 December 2002 November 2004 November 2005 March 2006 March 2006 December 2005 Channel 4 Film Four* E4* Quiz Call More4 * Launched originally as subscription services Source: Ofcom November 1998 January 2001 August 2005 October 2005 Figure 1.6: Channel availability Terrestrial spin-offs Main five terrestrial Non terrestrial 0 Source: Ofcom / BARB However, in some ways, the five mainstream channels taken together with their spinoffs have benefited more than new operators from the growth in multichannel television; viewing share of their spin-off channels rose from 3% to 9% in multichannel homes between 2001 and 2005, more than offsetting the 1.2 percentage point drop in share of the parent channels. The share of non-terrestrial new channels meanwhile fell from 39% to 34% in multichannel homes, as audiences grew but fragmented (Figure 1.7). 21

23 Figure 1.7: Multichannel share of viewing in multichannel homes, m Total multichannel homes 18.1m 2001 viewing share 2005 viewing share Main five terrestrial 58% Non terrestrial 39% Main five terrestrial 57% Non terrestrial 34% Terrestrial spin-offs 3% Terrestrial spin-offs 9% Source: Ofcom / BARB The radio sector, too, has also been able to offer greater availability and choice through digital distribution. Many stations have embraced television, the internet and DAB, as a means of increasing their coverage (Figure 1.8) Figure 1.8: Radio stations launching on the national DAB multiplex Group Station Launch Closed BBC 5Live Sports Extra 6Music 1Xtra BBC7 Feb 2002 Mar 2002 Aug 2002 Dec 2002 GCap Core Planet Rock Life Nov 1999 Nov 1999 Jan 2000 Other PrimeTime ITN News Radio Bloomberg Radio Nov 1999 Aug 2000 May 2001 May 2006 Jul 2002 Dec 2002 Source: Ofcom However, as with television, the existing national groups have often been the key beneficiaries of wider availability. Share of listening to national stations increased from 49% in 2001 to 55% in Although the number of local radio stations increased by 37 to 366 during this period, their share of listening declined by 5.7 percentage points. Clearly listening share is affected by factors other than just increased availability. However, a look at the strategies of the BBC, Virgin and Emap illustrates how some of the larger radio groups have taken advantage of the digital opportunity: The BBC has launched new stations 6Music, BBC7, Five Live Sports Extra, the Asian Network and the World Service on DAB, digital television and the 22

24 internet. These stations contributed to an increase in the BBC s total share of listening of 2.4 percentage points over the four years to Since 2005, Virgin has launched a series of stations on DAB, digital TV and the internet, including Virgin Radio Classic Rock and Virgin Radio Groove. The new stations have helped to off-set some of the share loss on Virgin AM. In 2003, Emap Radio launched the four magazine-branded digital stations Heat, Kerrang!, Q and Smash Hits. With distribution over the internet, Freeview and some DAB local multiplexes, these stations have benefited from crosspromotional opportunities and wide digital distribution. New telecoms services In the telecoms sector a number of services either came to market or evolved significantly during 2005 and early Among these was residential voice over IP (VoIP), which moved from being a niche product towards becoming a much broader consumer offering. This evolution was driven by a number of factors, including greater overall consumer awareness of VoIP, and new devices which simplify the user experience. In May 2006, for example, Vonage introduced a VoIP handset which plugs straight into an ADSL-enabled wall socket, rather than requiring the user to switch on their PC; and in June 2006 BT launched its new Home Hub, which allows users to plug any handset straight into a phone socket on the hub itself. Other developments in telecoms services included a continued rise in the volume and breadth of mobile content from new ring tones to user-generated video channels. Similarly, in broadband, new content is continually being added with notable growth in intelligent websites such as last.fm, a music download site that interrogates users PC music libraries and suggests further music they might like New services over new platforms TV over broadband The continued rapid uptake of broadband to the home has provided a significant addressable base to which rights holders can distribute their content. This has benefited not just the major broadcasters, for whom the internet offers a new way to reach new (and existing) customers, but also small rights holders and even individuals, who can now distribute their programming. During 2005 and early 2006 significant barriers were overcome and internet distribution now seems to be a key strand in the growth strategies of many broadcasters. New service launches and trials at the beginning of the year were designed to optimise this internet viewing experience; BSkyB s Sky by Broadband service and the BBC s integrated Media Player (imp) trial both exploited peer to peer (P2P) file sharing technology to overcome the limitation of a 500kbit/s internet connection and deliver reliable, high quality video by exploiting free storage in the form of the consumer s computer hard disk drives (HDD) to store the content before viewing. During the course of the year broadband technologies and speeds continued to improve, with up to 2Mbit/s broadband connections becoming increasingly common and up to 8Mbit/s available in some areas. These developments, along with improvements in video compression technologies, have resulted in a growing number of operators offering video services which are streamed in real time, without the need for local storage on the viewer s computer. Details of some of the key services currently available include: 23

25 The BBC commenced the trial of its integrated Media Player (imp) in September It allows users to download TV and radio programmes from the bbc.co.uk website to their PC for consumption up to seven days after transmission; BSkyB launched Sky by Broadband, its video download service in January 2006, offering movies and sports clips via the internet. The service is available to eligible Sky digital customers at no extra charge; AOL launched its IPTV service, In2TV, in November 2005, with full-length episodes of popular TV shows and interactive programmes, including quizzes and games; Channel 4 launched FourDocs in June 2005, which gives viewers an opportunity to showcase their own four-minute documentaries, and offers an online archive of Channel 4 documentaries; and MTV launched Overdrive in April 2006, featuring music, news and video trailers. Although these organisations use software to manage and protect their digital rights, the continued threat of piracy and illegal downloads remains an issue for many content owners. In an Ofcom survey, 83% of internet users were aware that there are illegal ways to access films, music and computer software on the internet but 33% of these believed illegal downloads should be legal (Figure 1.9). Interestingly, this figure jumps to 50% when looking at the younger age demographic. Figure 1.9: Attitudes to downloads that are currently classified illegal Percentage of internet users aware that there are illegal ways to access content Should be illegal Should not be illegal Don't know if it should be illegal All users 54% 33% 13% Broadband users 53% 37% 10% Dial-up users 57% 24% 18% Aged % 50% 10% Aged % 20% 13% Source: Ofcom research, summer 2005 TV to mobile devices In addition to broadband distribution, most of the UK s mobile network operators have introduced TV services to mobile devices over the last year. Development has occurred on two fronts; higher speed mobile data connections provided by 3G networks have allowed streamed television and downloaded video clips to be 24

26 delivered to mobile handsets, while trials seeking to bring the efficiency of broadcast networks to deliver television services to mobile phones have also taken place. The first generation of television services on mobile phones are delivered using 3G technology on traditional one-to-one mobile data connections (known as narrowcasting as opposed to broadcasting or one-to-many ). Consequently, if two customers watch the same broadcast content at the same time, they each use capacity on the 3G network. Although most network operators now offer such services, adoption is relatively low and so this inefficiency of transmission is not a major concern. However, as take-up increases, alternative technologies may need to be deployed to address this scalability issue. BT Movio and Virgin Mobile have recently completed trials in London of a broadcast technology that allows television services to be broadcast via the DAB digital radio network. Using this DAB-IP technology, users with compatible mobile handsets are able to receive both digital radio and digital television services and, as it is a broadcast technology, there is no limit on how many users can receive the service at any particular time. The trial offered radio alongside a limited range of television channels and resulted in consumption of around one hour of television per week alongside 95 minutes of radio. While DAB-IP is an evolution of the standards developed for digital radio, an alternative technology called DVB-H (Digital Video Broadcasting - Handheld) is a derivation of the technology behind digital TV. In conjunction with Nokia and broadcast network operator Arqiva, O2 conducted a trial in Oxford in 2005 using a DVB-H network, which revealed that viewers watched on average just over three hours of mobile TV per week New ways of watching and listening PVRs By March 2006, there were over 1.4 million subscribers to BSkyB s Sky+ personal video recorder (PVR) service, with 0.8 million net additions since December 2005 alone. At the heart of these devices is a hard disk drive (HDD) which allows digital TV programmes to be stored, randomly accessed and replayed with no reduction in picture quality. The capacity of the standard Sky+ set top box has increased from 40 to 160 gigabytes, while retail prices have fallen. The reducing price of HDD storage is leading to the inclusion of PVR functionality in an increasing number of consumer devices. Key PVR offerings which have come or are coming to market include: Telewest launched its TV Drive PVR in March It is HD (High Definition) capable, and can simultaneously record two programmes while the viewer watches a third; BT has announced that its BT Vision hybrid DTT/IPTV set top boxes will include a local HDD; A number of new Freeview PVRs have been launched. The Freeview consortium has announced a marketing campaign later this year under the Freeview Playback brand; and 25

27 Top Up TV (the subscription service available over the Freeview platform) has announced its intention to launch its Anytime PVR product in autumn Having an accessible base of HDD-enabled set top boxes may provide platform operators with an opportunity to introduce new services in which broadcast programmes, advertising and other content can be pushed onto the disk and then made available to the consumer on demand, or potentially, in the case of advertising, based on user behaviour and preferences. Video and audio on the go The advent of the MP3 system for compressing digital audio, along with the ipod device and itunes download service from Apple, were both important in reinventing the idea of music on the go. However, there is evidence of a similar trend emerging in video, TV and radio content. Portable TV sets have been available for many years; indeed Seiko produced one integrated into a wristwatch in 1982 and cheap mass market hand portable units were available by the end of the 1980s, but take-up has been limited. However, with the growth of digital technology there are now many devices which allow the viewing of stored digital video on the move, in addition to broadcast mobile television. Examples include: Portable DVD players The most common device for watching stored video on the move is a portable DVD player with integrated screen. These have fallen rapidly in price and are now available for under 100. Due to the constraints of accommodating the DVD disc they remain fairly large and power hungry items. Hard disk based portable media players The latest version of the ipod is equipped with a colour screen and can display videos and photos stored on its hard disk. The UK itunes download service now also supplies video as well as music, with music videos and animated short films available. In the US, itunes also offers TV shows and some full length DVDs for download. Other portable media players are available, some of which have larger screens optimised for video display, such as those made by Archos, Creative and iriver. Sony s Playstation Portable (PSP) While primarily a games console, this device can also play videos stored either on its own optical disk format (called UMD) or the device s memory card. Over 100 movies are available on UMD. Sony also offers a free video download service with clips ranging from film trailers to music videos and interviews. The company has announced plans to launch a movie download site, hoping to do for films what itunes did for music. Pace s planned PVR2GO device operates much like a standard PVR, but includes a removable unit containing a hard disk and small screen for viewing while away from the TV set. This suggests the line between in-home personal video recorders (PVRs) and portable media players may be starting to blur. Radio too is addressing customers desires to control their listening and viewing habits. The BBC Radio Player which offers on-demand listen again services had a record month in March 2006, with more than 20 million hours of online listening and 26

28 12 million on-demand requests. In April 2006, The Archers was the most demanded programme with over 650,000 requests. While listen again programmes are only available for seven days after broadcast, and are streamed through an internet connection, MP3 downloads can be kept indefinitely; podcasting is simply an automated form of MP3 downloading. Although there is no definitive list of the most downloaded podcasts, itunes reported that the most downloaded shows via their application were: Baddiel and Skinner (Times Online); Ricky Gervais free video podcast; Best of Moyles (Radio 1); The World Cup on Guardian Unlimited; and The Now Show (Radio 4). High-definition TV As the cost of digital storage reduces, and the speed and capacity of digital networks continue to improve, the data requirements for digital TV are set to increase further with the introduction of more channels and the advent of high definition TV (HDTV). HDTV services typically require 4-6 times the amount of data to carry video information as standard definition services. Using current compression technologies, such as MPEG2, this would significantly increase the amount of storage and network capacity required. The commercial deployment of the latest compression technologies, such as MPEG4, over the last year, promises to reduce these requirements significantly, reducing the costs associated with delivering these services to consumers. BSkyB and Telewest both currently offer commercial HDTV services in the UK, and a trial of HDTV over the digital terrestrial platform is underway in the London area. The Sky service costs 299 for an HD set top box (which also has the PVR functionality of the Sky+ service), and an additional 10 monthly subscription for a selection of content from Sky One, Sky s sport and movie channels, together with HD versions of National Geographic, Artsworld, Discovery and a BBC HD channel. Telewest s service has no upfront cost, but for an additional 10 or 15 a month (depending on the TV package to which they subscribe) customers get an HD-enabled PVR. The Telewest service currently has two channels BBC HD and ITV HD Competition and technology help to deliver lower prices During 2005 and the first half of 2006, increased competition in the communications sector, coupled with advances in technology, have benefited the customer in terms of greater availability of services, more choice from a broader product offering, and, in many cases, lower real prices. Prices in the pay-tv sector remained broadly flat over the year, although the cost of new products and services such as high-definition TV and PVRs was passed on to subscribing customers. However, the price of telecoms services fell again; our analysis suggests that spend on a selection of these services, based on 2005 average household consumption levels, fell by 6.2% in real terms between 2004 and 2005, and was over 15% lower than in 2001 (Figure 1.10). For example, in 2001 it 27

29 would have cost the average household to use mobile voice and text services at 2005 levels, compared to for the same usage levels in This reflects the fact that the fall in prices over this period has more than offset the increase in the number of mobile subscribers per household. Figure 1.10: Real cost of average household telecoms consumption per month, 2005 prices Broadband Dial-up Mobile voice and text Fixed voice calls Fixed access Source: Ofcom / operators Note: Assumes consumption is at 2005 levels across all years. Includes VAT; excludes NTS voice calls. Although there have been real falls in the price of fixed voice services and mobile calls and text, the biggest drop since 2001 has come in broadband, where improved technology has allowed operators to offer ever-higher speeds without concurrent price increases. Retail offers are continually changing, but a subscription to an entrylevel service typically cost less than 10 per month by May This compares with a 1-1.5Mbit/s connection costing between 30 and 35 per month in December 2004 (Figure 1.11). Figure 1.11: Average UK residential broadband subscription prices per month kbit/s 1Mbit/s >1Mbit/s Source: Ofcom Note: Prices are an average of the top four UK ISPs, and are for stand-alone broadband subscriptions. Most operators no longer market a 512kbit/s product. In addition, bundling of services to the customer has become a key part of operators strategies to reduce broadband prices. The biggest surprise in the competitive pricing model was probably Carphone Warehouse s (CPW) free broadband offer, introduced in March 2006 and designed both to grow its broadband base and also to entice its TalkTalk fixed-line subscribers to a bundled broadband product. Orange 28

30 responded to CPW s price drop in May 2006, offering free broadband to customers who also took out an 18-month mobile contract at 30 per month or more Take-up: digital TV penetration grows, broadband now mass-market The mobile and broadband sectors were the key drivers of growth in the UK telecoms industry in 2005, while digital terrestrial television and DAB take-up also grew strongly. Figure 1.12 shows penetration of key communications services and devices as at Q1 2006, plotted on the technology adoption S curve. Figure 1.12: Adoption curve for communications services and devices, Q % Fixed line 2G mobile 75% Digital TV Take-up 50% Broadband Portable music player 20% PVR VoIP Games console 0% Innovators Early Adopters 3G mobile DAB Radio Early Majority Late Majority Late Adopters Source: Ofcom Note: penetration of DAB radio, 3G mobile and VoIP are based on individuals; other technologies are based on households Total mobile subscriptions grew by 5.8m in 2005 to 65.5m. This figure represents over 100% of the UK population, reflecting the increasing number of users with multiple subscriptions and increased business use. Household penetration of mobile phones (i.e. homes with at least one mobile subscription) was approximately 90% as of Q a near-saturation figure compared with 71% in By comparison, fixed line penetration was 90%, having declined from 94% since G mobile adoption also increased markedly during 2005, growing 66% to 4.8 million subscriptions (8% of the population), reflecting a significant marketing push from the main mobile operators. 3UK retained the greatest market share at 77% of subscriptions, with Vodafone at 15%, and the remainder split between Orange, O2 and T-Mobile. By May 2006, there were more than 11 million broadband connections to homes and smaller businesses in the UK. We estimate that DSL broadband (at a minimum of 512kbit/s) is now available to over 95% of homes and businesses in the UK, in addition to the 45% of UK homes passed by cable broadband (which can currently deliver broadband internet at up to 10Mbit/s). 29

31 Penetration of digital TV reached 73% in the first quarter of this year, or 18.3 million households. Digital terrestrial was the main driver, with over 7 million homes now using Freeview on their primary TV set outnumbering the number of analogue-only households for the first time. Digital switchover is due to commence in 2008 beginning with the Border region, at which point take-up can be expected to accelerate. It is interesting to see how much more quickly consumers are adopting digital technology than analogue. Figure 1.13 shows that it took over 40 years for analogue television sets to penetrate 73% of households. However, for digital television the same position has been reached in just eight years (although many digital homes still have unconverted sets) (Figure 1.13). Figure 1.13: TV penetration - all TV households and digital TV households Percentage of households 100% Digital switchover 80% 60% 40% 20% 0% Colour TV introduced Multichannel TV introduced Digital TV introduced HDTV introduced Freeview introduced All TV households Digital TV households Source: Ofcom, BARB Ownership of audiovisual devices has also grown strongly over the past year. Ofcom research suggests that household penetration of portable music players increased from 18% in December 2005 to 35% by March 2006, driven by growth in MP3 players; ownership is skewed towards males and year olds (Figure 1.14). And in addition to the 2.5 television sets per household, there has been strong growth in the number of computers that allow owners to watch TV or video. This has been accompanied by increased take-up of devices which affect the way programmes are watched; DVD player ownership is stabilising at around 70% of households, but now that penetration of PVRs has reached around 8% (and 29% of households own recordable DVD devices) we may start to see some substitution of the VCR, or at least see it being moved to second and third TV sets. 30

32 Figure 1.14: Take-up of other household audiovisual devices Percentage of households 100% 80% 60% 40% 82% 87% 87% 85% 85% 82% 80% 68% 70% 69% 73% 70% 50% 59% 41% 38% 28% 45% 29% 28% 35% Video recorder Digital television DVD player MP3 player 17% 18% 29% 20% 10% 27% 8% 11% 13% 11% 20% 2% 6% 5% 8% 5% 3% 1% 2% 3% 0% Q Source: Ofcom research / estimates PC with TV/video capability PVR A comparison of availability and penetration of the major digital communications services reinforces the fact that, while take-up always lags availability, the mobile, broadband and DTT service providers have been particularly successful at reaching their addressable market in a comparatively short space of time (Figure 1.15). Figure 1.15: Availability and penetration of digital services Percentage of UK households Availability Penetration Penetration of addressable market % Mobile (2 / 2.5G) Satellite TV % % 37.8% % % 8.9% % Broadband DAB digital radio 3G Mobile Digital terrestrial TV Cable TV TV over DSL Percentage of addressable market Source: Ofcom / operators / licensees, end Note: Figures for radio and 3G are for individuals not households 31

33 1.4 The communications industry Introduction: the emergence of bundled products Before examining revenues and sources of funding for the communications industry, it is instructive to look at some of the new business models and pricing structures being adopted by service providers. During 2005, many major communications service providers re-evaluated their revenue, cost and investment models to reflect changes in the market. Consumers increasingly perceive communications services as commodity products, with purchase criteria driven largely by price. In such an environment, some operators can add value by branding, grouping and marketing their services in innovative ways. A significant manifestation of this is the increase in service bundling, which is evolving to become a critical tool in offering better value to the consumer. Through bundling, operators hope to increase revenue and margins, reduce churn, and achieve efficiencies through increased cross-service use of infrastructure. (In this report, we define bundling in its broadest context: that of an operator offering multiple services under a single brand with a bundled retail price and a single bill covering the bundle. Bundling may also include a truly converged package where services are available across multiple networks and devices). One illustration of this focus on bundling has been the recent offers of broadband services by some mobile network operators. A key enabler of this has been the improved ability to offer retail services directly to customers rather than taking wholesale products from BT. By accessing the local loop, operators typically incur higher fixed costs to install equipment at the exchange but lower wholesale charges, which can result in higher operating margins. Consumers have demonstrated considerable interest in some of these products; Carphone Warehouse s new bundle, which incorporates free broadband and will be available to customers in July 2006, was demanded to such a great extent after its announcement in March that the company has warned there will be delays in connecting new customers. Figure 1.16 below illustrates the evolution of bundled services since the cable operators first started offering TV and telephony in

34 Figure 1.16: The evolution of communications service bundling 4 Broadband offered via LLU Number of services in bundle 3 2 Cable Operators Cable Operators BT BT Fusion NTL/ (Virgin) Carphone Warehouse Orange (Wanadoo) O2 (Be) BSkyB March 2006 April 2006 May 2006 June 2006 Time Source: Ofcom Note: Chart refers to time when bundles were first announced New technologies may require new pricing structures Voice over Internet Protocol (VoIP) could potentially prove disruptive to the business models of some mobile operators. If substantial voice traffic were to be delivered by VoIP, operators could experience revenue erosion. This threat might be mitigated through adoption of flat rate charging structures for broadband access; for example, as part of Carphone Warehouse s free broadband offer, customers must also subscribe to a fixed line call subscription of 9.99 per month (in addition to a line rental of per month). Another area where pricing models are still evolving is on-demand, broadband delivery of television and radio programmes, where consumers propensity to pay has not yet been heavily tested. Much IPTV content (such as that in the BBC trial) is currently free, and those operators that have a pay offering have not marketed it particularly aggressively. Channel 4 and MTV have only offered a limited number of signature programmes as part of their pay offerings, although the AOL Film Download service suggests online content pricing could reduce rental or purchase prices for consumers as a result of lower distribution costs. Most of these new operator strategies and revenue models are still in their infancy, and their impact has yet to be fully felt in reported results Overall broadcasting and telecoms revenues reach 50.6bn Overall broadcasting and telecoms retail revenue increased by 5% to 50.0bn in 2005, equating to 4.1% of GDP (Figure 1.17). The bulk of this ( 38.3bn) and the biggest annual rise ( 2.0bn) came from the telecoms sector. Growth in 2005 television revenue was 4%, compared to 9% growth between 2003 and Combined net radio advertising and BBC radio spend declined marginally to 1.1bn. 33

35 Figure 1.17: UK communications retail sector revenue bn % GDP 80 4% % 4.0% 4.1% 4.1% 4.1% 3% % % 0 0% Source: Ofcom / licensees / operators / BBC TV Radio Telecoms % GDP In 2005, the mobile sector contributed 13.1bn of retail revenue a 9% increase on The fixed-line market continued to decline, with a reduction of 800m, or 8%, year-on-year. Internet and broadband revenues grew from 2.9bn to 3.4bn. Other retail telecoms revenue (which includes elements from the wider telecoms value chain, such as mobile handset subsidies and a range of other value-added services) increased by 11% to 9.1bn (Figure 1.18). Figure 1.18: Analysis of UK telecoms retail sector revenue bn Source: Ofcom / licensees / operators Other retail Corporate data services Internet and broadband Mobile voice and data Fixed calls and access Subscriptions drive TV revenue growth, with advertising slowing TV industry revenue rose by 401m (4%) in 2005 to reach 10.5bn (Figure 1.19). Subscriptions (including pay television, PVR, high definition and multi-room services) totalled 3.9bn; net advertising revenue rose to 3.6bn; while public funding contributed 2.4bn. The growth in total revenue was driven largely by an increase in subscriptions earned by BSkyB, NTL and Telewest. These rose by 8.5% in 2005 to reach 3.9bn and now exceed net advertising revenue by a 10% margin. This is a result of a slow down in net advertising revenue growth to just 1.9% in 2005 (following two years of average 5% per annum growth) which contrasts with five-year average growth of 14.5% for the pay-tv sector. This is turn has been driven by: 34

36 an increasing subscriber base; a change in the mix of subscribers; price increases; and take-up of new services. Public funding continued to play an important role in UK broadcasting. In 2005, Ofcom estimated that the funding allocated by the BBC to television stood at 2.4bn, up 5% on Other revenue (which includes non-broadcast revenue such as payper-view, retail sales from shopping channels and premium rate telephony) has remained steady, at 0.7bn (Figure 1.19). Figure 1.19: TV revenue 2001 to 2005 bn 5,000 4,000 3,000 2,000 1,000 3, , , , , , ,481 3,548 3, ,216 2,302 2,319 2, Subscriptions Net advertising revenue Licence fee allocated to TV Other Source: Ofcom / licensees / BBC In radio, total industry revenue declined by 1.7% in 2005 to 1.15bn the first fall since This decrease was principally due to a fall in commercial revenue of 43m to 519m, with national commercial down 32m to 269m (despite an increase in listening share of 0.5 percentage points) and local commercial down 11m to 164m (Figure 1.20). The BBC s expenditure on radio in 2005 was estimated by Ofcom to account for 55% ( 626m) of radio industry funding. Figure 1.20: Radio industry revenues bn Source: Ofcom Total BBC expenditure Total commercial National commercial Local commercial Commercial sponsorship 35

37 The combined net advertising revenue of commercial TV and radio grew by less than 1% in 2005 to 3.98bn, comprising a 1.9% increase in television to 3.6bn, offset by a 7% decline in radio to 0.43bn (Figure 1.21). Figure 1.21: Growth of UK broadcasting net advertising revenue bn Radio - local commercial Source: Ofcom / licensees Radio - national commercial TV An analysis of the wider advertising market shows that total spend on display advertising grew by 2.1% in 2005 to 16.0bn (Figure 1.22). While newspapers, television, and direct mail accounted for 71.1% of this, internet advertising grew by 73% year-on-year to 1.1bn, increasing its share of total display spend from 4.2% to 7.1%. Internet advertising has now overtaken business magazines to become the fourth largest display advertising medium in the UK; it is nearly three times larger than radio advertising and more than a third the size of television. Figure 1.22: UK advertising spend by medium bn (2000 prices) Source: The Advertising Association Revenues at constant 2000 prices Cinema Radio Consumer magazines Outdoor and transport Business magazines Internet Direct mail TV Newspapers The financial markets Shares in the UK telecoms and media sectors have underperformed the FTSE100 since the start of The telecoms index (fixed and mobile) rose by 2% in the 36

38 period to late June, while the media sector (including broadcasters, publishers and advertising agencies) was unchanged; by contrast, the FTSE 100 index gained 17% (Figure 1.23). Figure 1.23: Telecoms and media sector share index FTSE Media Telco 80 Jan- 05 Feb- 05 Mar- 05 Apr- 05 May- 05 Jun- 05 Jul-05 Aug- 05 Sep- 05 Oct- 05 Nov- 05 Dec- 05 Jan- 06 Feb- 06 Mar- 06 Apr- 06 May- 06 Jun- 06 Source: uk.finance.yahoo.com The Price to Earnings (P/E) ratio, a commonly-used valuation measure which relates share price to earnings per share, has reflected downward revisions to growth prospects for the telecoms sector, particularly in mobile. For Vodafone, by far the largest component of the UK telecoms index, the P/E ratio was a relatively low 11 in late June 2006 compared to an average for FTSE100 companies of 12.6 and for the telecoms sector as a whole of 11.6 (Figure 1.24). Figure 1.24: PE ratio and dividend yield in media and telecoms sectors Measure Jun Dec Jun Telecoms sector PE ratio Dividend yield 3.1% 3.3% 5.1% Media sector PE ratio Dividend yield 2.3% 2.3% 2.5% FTSE100 PE ratio Dividend yield 3.2% 3.1% 3.3% Source: FT.com; data points for the last working day of the month A similar pattern is reflected by changes in dividend yield (annual dividend payments per share expressed as a percentage of the share price). The average dividend yield on telecoms stocks was high in late June, at 5.1%, compared to the UK base rate of 4.5% and an average yield among FTSE100 stocks of 3.3%. By contrast, the media sector is seen by investors to be a higher growth area, with an average P/E ratio of around 24, and a dividend yield of 2.5%, This sector contains a broad range of stocks, which may explain its resilience in spite of share price falls for broadcasters such as ITV and GCap, which were affected by lower advertising revenue growth than was expected by analysts. 37

39 1.5 The communications consumer Introduction Use of communications services in 2005 continued its recent upward trend. However, despite increased consumption, average spend on media and telecoms services declined as a percentage of household income for the first time in five years an indication that the communications sector is delivering better value for the consumer. In this section we explore how consumption has changed in 2005 generally, and then focus on emerging trends in consumption among the young Spend declines despite increased usage From 2001 to 2004, increased availability and choice, coupled in some cases with cheaper services, have contributed to a significant increase in consumption, reflected in a rise in communications spending as a proportion of total household spend from 4.07% in 2001 to 4.63% in The biggest increase was attributable to mobile voice and text, followed by television services. However, in 2005, average monthly household spend on communications services levelled out at 87.67, up 54 pence on 2004 in real terms. This was echoed by a fall, albeit a slight one, in communications spend as a proportion of total household expenditure, from 4.63% to 4.60% (Figure 1.25). Figure 1.25: Average monthly household communications spend per month, 2005 prices Share of total household spend % % 4.60% 4.37% 4.55% Source: Ofcom / operators / licensees / BBC 5% Radio 4% 3% 2% 1% 0% TV Internet and broadband Mobile voice and messaging Fixed voice Communications as share of total spend A closer comparison of 2005 spend with 2004 shows that the reduction was driven by a fall in average spend per month on fixed-line services of 2.82, although this was largely offset by increased mobile, internet and television spend, leaving a net monthly increase of 54 pence per household (Figure 1.26). 38

40 Figure 1.26: Change in real household communications spend (2004 to 2005) Change in average monthly communications spend ( ) Fixed voice Fixed voice Mobile voice and messaging Internet TV Radio Total Source: Ofcom / operators / licensees / BBC Note: Based on constant 2005 prices. Apportionment of BBC licence fee to radio and TV based on Ofcom estimates Consumption more broadband, more TV, less radio Total time spent consuming and using communications services showed a modest increase over the four years to 2005 (Figure 1.27). Average television viewing went up by 11 minutes to 25 hours and 34 minutes per week, while radio listening experienced a decline of 24 minutes per week over the same period. Time spent by mobile subscribers making calls and sending SMS text messages both grew strongly but in absolute terms time spent online by internet users went up most, reflecting growing penetration and the increasing number of always on broadband connections. Figure 1.27: Weekly communications consumption Usage per week Change TV viewing hours 25:23 25: mins Radio listening hours 20:30 20:06-24 mins Telephone call minutes fixed 1:11 1:10-1 min mobile 0:20 0: mins Number of SMS texts Internet hours 2:10 2: mins Source: Ofcom / operators / RAJAR / BARB / TGI-BMRB Note: TV and radio hours are per individual; call minutes and SMS text messages are per connection; weekly internet hours are for Q4 of each year for adults 15+ who have used the internet in the last 12 months. Perhaps another driver of internet use is the growing popularity of social networking and blogging websites. Sites such as MySpace, Friendsreunited and Bebo, used to establish and re-establish social contacts and communicate with communities, are among the top 50 most visited in the UK. Blogs (a type of website where users post entries in a chronological order, which can be publicly viewable or limited to particular users or user communities) are also generating great interest: there were over 35 million blogs worldwide in April 2006 and a new one is created every second, according to tracking service Technorati. In addition, the internet is increasingly used 39

41 for downloading content to personal devices, including MP3 file sharing, movie downloads and audio and video clips Consumption patterns are changing for young adults Our research and analysis suggests that young adults (16-24) have embraced new technologies to a far greater degree than the general population, while they use the more traditional media of television and radio considerably less (Figure 1.28). Mobile phone (calls and texts) and internet use are well above average for this age group and our research suggests that year olds regard the mobile phone as their primary telecoms platform (for example, 85% say they would use a mobile text or call as the preferred method of arranging to meet a friend, compared to 46% for all age groups). Figure 1.28: Weekly communications consumption by age group Usage per week All age groups Difference TV viewing hours 25:34 18:21-7h 13mins Radio listening hours 20:06 18:18-1h 48 mins Mobile phone use Number of mobile calls calls Number of SMS SMS Internet hours 2:29 2: m Source: Ofcom / operators/ RAJAR / BARB/ TGI-BMRB Note: TV and radio hours are per viewer/listener; SMS is the self-reported number of messages sent per mobile user; weekly internet hours are for Q4 of each year for adults 15+ who have used the internet in the last 12 months. At the same time, this age group has embraced online communication activities our research shows that 70% of internet users aged have used social networking websites (compared to 41% of the general population), with over half doing so on a weekly basis. They are also much more likely to contribute content: 37% of year olds have posted material online (compared to 14% across all age groups), while close to one in five have their own website or blog (section discusses this in greater detail). The drop in listening and viewing hours of young adults is probably also partly explained by their higher ownership of most new technologies than the population as a whole. For example, over half own a games console and / or an MP3 player and they also appear to have a higher propensity to consume in an innovative manner; 38% of young adults view TV over their PCs, compared to only 24% of all individuals (Figure 1.29). 40

42 Figure 1.29: Use of entertainment devices in the home Percentage of adults Teletext TV Video Recorder DVD Internet MP3 Games console PC for TV viewing PDA 72% 73% 51% 66% 71% 62% 59% 57% 55% 29% 56% 24% 38% 24% 7% 5% year olds All adults Source: Ofcom research, April % 20% 40% 60% 80% year olds watch substantially less television than older people and their viewing is declining at a faster rate, down by over one and a half hours, to 18 hours and 18 minutes per week, over the past four years (against a 1% rise for the adult population). In addition, their exposure to television is declining; just 84% watched at least an average of 15 consecutive minutes per week in June 2006, whereas the all individuals figure was 92% (Figure 1.30). Figure 1.30: Average weekly reach of television ( ) 100% 95% 93% 92% 94% 93% 92% All inviduals 90% 85% 87% 84% 86% 85% 84% year olds 80% Source: BARB Note: 15 minute consecutive reach This fall may be due to a desire among young adults for a different type of content offering. This hypothesis is reflected in the growing share of their viewing to multichannel television up from 30% in Dec 01 to 41% in Dec 05 (Figure 1.31). 41

43 Figure 1.31: Channel share by month for age group (all homes, all day) 100% 80% 60% 30% 28% 31% 32% 31% 35% 40% 42% 41% Non-terrestrial channels 40% 20% 70% 72% 69% 68% 69% 65% 60% 58% 59% Terrestrial channels 0% Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Source: Ofcom / BARB Of course, lower viewing of the main terrestrial channels is mirrored among the general population as multichannel penetration increases. However, Figure 1.32 shows the disproportionately higher fall among year olds for each of the last four years. Figure 1.32: Change in percentage share of viewing to terrestrial channels Terrestrial viewing share 80.4% 74.3% % reduction in share year on year 78% 70.5% 76.4% 68.6% 73.8% 64.4% 70.4% 58% All individuals year olds Source: BARB In radio, too, there appears to be a shift towards newer services and different consumption patterns among young adults. Although total listening among this age group has risen by 5% over the past five years, this has been driven by a 118% increase in listening to the newer national commercial services (and a 12% rise in BBC radio listening), offsetting a 12% fall in local commercial services which have on average been around longer (Figure 1.33). In addition, a greater proportion of their listening time is spent listening to digital when compared to other age groups. It is also interesting to note the 17% fall in listening among year olds again largely driven by less local listening to commercial radio (down 30%). 42

44 Figure 1.33: Change in radio listening between March 2001 and March 2006 Percentage change in annual hours listened Radio universe National commercial Local commercial BBC all 35% 25% 237% 118% 30% 26% 20% 15% 5% 8% 5% 3% 1% 11% 5% 6% 12% 0% 14% 10% 2% -5% -15% -25% -35% Source: RAJAR -17% -6% -10% -12% -11% -30% Children % Ofcom research suggests that among internet users the activity which has suffered most as a result of being online (either because less time is available or because the internet provides the required information) is TV viewing with 18% saying they watch less (Figure 1.34). However, again there is a markedly different pattern for young adults (15-24 year olds). For all categories of media, except television, more young adults reported a greater reduction in consumption than the population as a whole, suggesting the internet has a far greater substitution effect on other media for young adults. But the more established media of newspapers, magazines and radio were particularly affected, although interestingly games console use also fell significantly. Figure 1.34: Reduced consumption resulting from increased internet use Percentage of respondents 0% -10% -20% Use games consoles -5% -12% -2% Listen to radio -7% -15% Read magazines Read local newspaper -2% -5% -5% -8% -8% -8% -21% -22% Watch video/dvd -12% -4% Read national newspaper -14% -8% Watch TV -18% -13% -18% -30% -27% All individuals year old year old Source: Ofcom research, April 2006 Question: since using the internet for the first time, which if any of the following activities do you believe you undertake less? 43

45 1.6 Spectrum Introduction: an important component of the communications market The availability and efficient use of spectrum is important in a well-functioning communications market. Figure 1.35 below shows that the defence sector still commands the greatest single proportion of available spectrum (despite the release of parts of its allocation to the commercial sector over the past ten years). The next largest user of spectrum is the fixed/satellite sector this includes point-to-point microwave communications links which form part of the telecoms network, and satellite uplink/downlink. Interestingly, cellular spectrum (i.e. the spectrum used for mobile communications) comprises only 5% of the total. Figure 1.35: UK spectrum use weighted by frequency (weighted) Emergency services 2% Defence 30% Other 7% Business radio 5% Cellular 4% Aeronautical and maritime 14% Science 1% Fixed / satellite 24% Broadcasting 13% Source: Ofcom Note: This has been weighted such that a 1MHz allocation at 100MHz is given equal weighting to a 10MHz allocation at 1GHz New uses of spectrum Over the past two decades, a number of new technologies which make more efficient use of spectrum have emerged. These technologies have evolved from research laboratories through to full commercial availability, and many now play an important part in consumers everyday lives. They include: Digital Audio Broadcasting (DAB), a technology developed by a group of manufacturers and broadcasters to provide radio services in a digital format. In 1995, the BBC carried out the first DAB broadcast in the UK and services now operate in VHF Band III ( MHz). DAB uses spectrum more efficiently and is based on a standard which utilises techniques to make the radio signal robust against sources of interference and weather conditions unlike FM transmissions, where these adverse effects are translated into a hissing or crackling sound. Wireless Fidelity (WiFi), a wireless technology, operating in the licenceexempt bands at 2.4 GHz and 5 GHz, that allows users to connect to an access point to from a wireless local area network (WLAN). Users can also 44

46 access the internet if the access point has appropriate connectivity. WiFi access points (also known as hotspots) typically have a range of about 100 metres. As WiFi operates in licence-exempt bands, it is subject to power restrictions to minimise the effects of interference. WiFi is based on variants of the IEEE standards and latest versions support a data rate of around 100Mbit/s using MIMO (multiple input multiple output) technology. BT Openzone was one of the earliest service providers to offer WiFi hotspots in the UK in 2003, and as of mid 2006 there were approximately 14,600 public hotspots in the UK, in locations such as airports, hotels, railway stations and town centres. Bluetooth, a short-range wireless communication technology aimed at replacing the use of cables for connecting mobile and/or fixed devices such as mobile phones, headsets, MP3 players, printers and PDAs. Like WiFi, Bluetooth operates in the 2.4GHz licence-exempt band. However, to minimise interference with other wireless technologies operating in the same band, Bluetooth uses an adaptive frequency-hopping technique to detect and avoid the frequencies used by neighbouring devices. Bluetooth is a low-power technology: most Bluetooth-enabled devices have a range of about 10 metres and support data rates of 1-3Mbits/s. 3G, or the Universal Mobile Telecommunications System (UMTS), the third generation mobile communication system and the successor to the 2G Global System for Mobile communication (GSM) standard. Both UMTS and GSM have been widely adopted in Europe and beyond, which has led to economies of scale and made roaming easier for users who travel internationally. 3G services are licensed in the UK in the frequency bands MHz and MHz. The former band is used to transmit signals from the mobile to the base station (uplink) and the latter to send signals from the base station to the mobile (downlink). In March 2000, the Radiocommunications Agency (RA) held an auction for five 3G licences in the UK, raising just under 22.5 billion, while similar auctions were subsequently held in other European countries. Three years later, 3UK started the first commercial 3G network in the UK. 3G services support higher data rates than GSM (up to about 384 kbit/s), which has enabled use of new services such as mobile video telephony and mobile music track downloading. As UMTS establishes itself further, operators are already looking to boost its speed using HSDPA (High Speed Downlink Packet Access) and HSUPA (High Speed Uplink Packet Access) technologies Spectrum auctions The first spectrum auction since Ofcom was established took place on 20 April This was in line with the recommendations made by the Spectrum Framework Review to allow market forces to have a greater say in determining how spectrum is used. Following publication of a consultation document and a statement in July and November 2005 respectively, Ofcom made available for auction twelve licences at the frequencies MHz paired with MHz. The licences are technology neutral but are on a low-power basis. Possible uses include private GSM 45

47 mobile phone networks in office buildings or campuses. Fourteen companies participated in the single-round sealed bid auction, and the total licence fees paid were 3.8 million. Further UK-wide auctions are in the pipeline for a number of bands including: MHz paired with MHz MHz paired with MHz MHz 10, 28 and 32 GHz A further spectrum auction in conjunction with the Republic of Ireland s telecoms regulator, ComReg (Commission for Communication Regulation), is planned for the MHz band, with one licence being made available in Northern Ireland and one in the Republic of Ireland Spectrum trading Towards the end of 2004, Ofcom authorised spectrum trading allowing the holders of certain categories of wireless telegraphy licences to transfer all or part of their rights and obligations under a licence to another party. The first spectrum trading in the UK occurred in Fourteen applications for licence trading were received by Ofcom during the year. Eight of these trades had been completed by May 2006, and consent had been granted by Ofcom for the remaining six. This represented a little under 2% of the licences for which spectrum trading was available during the year. In April 2006, Ofcom published a consultation document on spectrum usage rights (SURs) proposing a new way of specifying the emissions that a licence holder might transmit in neighbouring bands and locations Digital Dividend Review In September 2005, the UK Government announced that analogue television would be gradually phased out between 2008 and 2012, and replaced by its digital counterpart which is about six times more efficient. The switchover to digital services will result in the release of up to 112 MHz non-contiguous spectrum in the UHF band. This freed-up spectrum known as the digital dividend could enable the launch of a wide range of services encompassing advanced business and broadcasting services, wireless broadband services and additional television channels using standard or high definition. In November 2005, Ofcom announced the launch of its Digital Dividend Review, which will examine issues such as possible uses for the digital dividend, technical limits on spectrum use to prevent interference, and mechanisms for making this spectrum available to the public. Ofcom aims to publish a consultation document before the end of 2006, before taking its final decision by mid Ultra Wideband (UWB) At the beginning of 2005, Ofcom consulted on the position it should adopt in Europe on ultra-wideband devices in the GHz band. Following feedback from manufacturers, operators, other national stakeholders and results from research projects, we outlined the UK position with respect to UWB. This was then used as an input to broader discussions on UWB at European level. 46

48 1.6.7 Cave audit In 2002, Professor Martin Cave published a study, The Review of Radio Spectrum Management, dealing with the application of market forces to commercial spectrum management. More recently, in December 2005, an audit of public spectrum holdings was carried out by Professor Cave and a team of experts based at Ofcom. The audit was intended to encourage the public sector to make more efficient use of its spectrum holdings, by identifying spectrum where immediate or medium-term reallocation is feasible. It also investigated the possibility of extending market mechanisms to the public sector, and the provision of incentives for more effective spectrum management. In an atmosphere of ever-increasing demand for limited spectrum, the Cave audit recognised that public spectrum holdings represent the majority of spectrum which will have to be made available for additional commercial use in the future. In this respect, the audit recommended that Recognised Spectrum Access should be used to define the spectrum rights of Crown bodies. Furthermore, it recommended an increase in bandsharing through appropriate incentives to bodies managing the bands, and the investigation of new technologies to allow bandsharing in bands that were previously excluded for such purposes. In case public bodies lack the commercial expertise to engage with commercial organisations, the report suggested the appointment of a third party to liaise between the public and commercial sectors. 47

49 48 This page is intentionally left blank

50 The Communications Market Radio 49

51 Contents 2.1 Key themes Local commercial radio loses out to national commercial radio and the BBC The year in radio Digital listening continues to rise Number of stations available in the UK rises to Digital distribution offers new ways to reach listeners TV operators continue to expand into radio Future radio policy framework takes shape The radio industry Radio revenue shrinks by 1.7% driven by falling commercial income Radio group characteristics Overview of the major radio operators in The commercial radio groups Service availability and station choice Purpose and use of long-term RSLs (L-RSLs) The radio listener Access to digital radio continues to rise Weekly radio reach in the UK BBC network listening exceeds all commercial listening for the first 93 time Broadly stable total hours of listening mask significant shifts by age 93 50

52 2.1 Key themes Local commercial radio loses out to national commercial radio and the BBC Radio is competing for audience attention (particularly for younger listeners) against an increasing range of digital services. On the face of it, this ought to result in a decline in the size of the radio listening universe, especially among those with access to digital devices and services. However, this potential effect is offset by two factors. First, radio listening can be ambient in nature, allowing the listener to do something else at the same time. Second, station owners have ensured that radio is available on the widest possible range of digital platforms such as DAB, digital TV and the internet. FM receivers are increasingly integrated into mobile handsets, and digital radio played a part in the recent trials of broadcasting to mobiles. An analysis of listener hours by age suggests that the strategy of multi-platform availability is working, as younger people spend more time listening to the radio than they did five years ago. Overall, the universe of listener hours has held up well over the last five years, growing by about 3%. Listening by children, year olds and those over 55 all rose over the period by 8%, 5% and 11% respectively, but listener hours for year olds fell by 17%. However, the changes in listener mix by age have not been equally distributed across national commercial, local commercial and BBC stations. National commercial radio gained hours across all ages between 2001 and 2006, reflecting the fact that strong local radio brands have been able to extend their reach nationally due to the internet, increasing take-up of digital television and the availability of DAB. The BBC, meanwhile, has also managed to outperform the universe across all age groups and among year olds it has done so significantly (an increase of 14% against a national rise of only 3%). The sector that has suffered most has been local commercial radio. In the five years to the end of Q1 2006, local commercial stations have been affected by increasing competition from the national stations as well as other media, with listening hours falling by 14%. 51

53 2.2 The year in radio Digital listening continues to rise DAB digital radio take-up continued to grow over the last year, with over 1.5 million sets sold in the 12 months to Q1 2006, more than 50% up on the previous year. This took total UK DAB set sales to 3 million, and at least one set can be found in 11% of households. DAB sets are also taking an increasing share of overall radio sales; 10.1 million analogue sets were sold in the year to Q (down from 10.7 million the previous year), giving DAB a 13% share. The increase in DAB take-up has been fuelled by: falling prices (the average set cost 78 in Q1 2006, down from 109 in 2004); widening set availability; enhanced functionality; and a broadening product range with over 230 models available from an increasing number of retail outlets. With 19% of people in homes without DAB intending to migrate to the platform in the next six months, take-up looks set to continue growing. In addition, Ofcom research reveals that 11% of those who now have access to DAB in the home have two or more sets, suggesting that consumers no longer perceive digital radio sets as a oneoff purchase. A substantial rise in the hours of radio listening though digital platforms was driven mainly by increasing use of DAB. Share of total listening through DAB sets more than doubled in 2005, to 5.8%. This was accompanied by further growth in listening via digital TV (3.0%) and via the internet (1.9%) taking total digital listening to 11% (Figure 2.1). Figure 2.1: Digital share by platform Share of total listening % 11.0% Uncertain Internet Digital TV DAB Source: RAJAR Platform Study

54 The strong growth in listening via digital platforms has had a knock-on effect on analogue. AM listening share fell by nearly 7 percentage points to 14.4% between 2000 and 2005, and FM listening fell by 3.7 percentage points over the same period to 75% (Figure 2.2). Figure 2.2: Analogue versus digital listening share Share of total listening 100% 4% 6% 11% 80% 60% 80% 82% 81% 80% 75% 40% 20% 20% 18% 16% 14% 14% 0% Source: RAJAR Digital FM AM Analysis of those digital-only stations whose audiences are tracked by RAJAR Figure 2.3 illustrates that the BBC s stations and those from Emap occupied six of the top eight slots. The most popular stations tend to benefit from distribution on Freeview (The Hits, Heat, BBC7, Smash Hits), cross-promotional opportunities on established national radio stations (BBC7, BBC 6Music and 1Xtra) or an association with a powerful brand (Heat and Smash Hits). Figure 2.3: The most listened to digital-only stations Listening hours per week Q (thousands) Radio group Other GCap BBC Emap 0 The Hits BBC 7 Planet Rock Smash Hits Radio BBC 6 Music 1Xtra PrimeTime Radio 585 Heat Source: RAJAR Number of stations available in the UK rises to 384 The number of radio stations broadcasting in the UK on AM, FM or digital audio broadcasting (DAB) platforms (excluding community radio) increased to 384 by June They include a mixture of local, regional and national services, supported by public funding or commercial revenues. This increase reflects Ofcom s ongoing licensing activity on analogue platforms and new digital station launches during 2005/

55 FM licensing resumes in earnest 16 new licences awarded in 2005 With FM spectrum almost fully utilised in many areas, future opportunities for the licensing of new analogue stations are limited. New stations may increasingly look to new platforms, such as DAB or the internet, to launch services. Despite this Ofcom resumed licensing at the end of 2004 and awarded a further 16 new commercial radio licences during 2005 (Figure 2.4), taking the total number of commercial and BBC radio stations to 342 by the year end (a further nine licences for commercial radio stations had been awarded by July 2006). Figure 2.4: Number of analogue radio station licences awarded Number of licensees Note: This does not include the community radio station licences that have been awarded Source: Ofcom 342 BBC local (inc. nations) BBC national National commercial Local and regional commercial In addition to services on AM, FM and DAB, around 90 stations were broadcasting on digital satellite as at June 2006 (many of which were simulcasts of AM/FM/DAB services) (Figure 2.5). Figure 2.5: UK radio stations broadcasting on analogue and DAB digital radio June 2006 (excluding community radio) DAB Analogue or Type of station AM FM Total analogue 1 DAB stations 2 Local commercial UK-wide commercial * 7 BBC UK-wide networks BBC Local and Nations TOTAL There are 97 services available on AM, 276 services on FM and 337 individual analogue services because 36 are simulcast on over both wavebands 2 There are 337 analogue stations and 213 DAB stations, but only 384 unique stations in total because there are 166 stations that simulcast on analogue radio and DAB *The existing Digital One national DAB radio multiplex does not offer coverage of Northern Ireland. In 2005, the number of commercial radio stations broadcasting in the UK increased, with 16 new local analogue FM licences awarded by Ofcom, and a further nine awarded between January and July Winning bidders included a mixture of larger and smaller established radio groups, combined with a number of new consortia (Figure 2.6) 54

56 Figure 2.6: FM radio licence awards, January 2005 July 2006 Date of award Area Station name Ownership January 2005 Ashford KM-FM Ashford Kent Messenger Ltd (67%), Barretts Ltd (10%), Hobbs Parker Partnership (7.5%) February 2005 Kidderminster The Wyre MNA Broadcasting Limited (wholly owned by Midlands News Association Ltd) March 2005 Cornwall Atlantic FM Atlantic Broadcasting Ltd (Tindle Radio Holdings 47%, Camel Media 47%) March 2005 Belfast U105 UTV Radio April 2005 Durham Durham FM The Local Radio Company May 2005 Banbury Touch FM CN Group June 2005 Manchester Xfm GCap Media plc June 2005 Norwich Radio Norwich Tindle Radio Holdings and Town and Country Broadcasting June 2005 Ballymena Seven FM Alpha Newspaper Group and Irish News Ltd September 2005 Torbay Palm FM London Media Company Ltd and Palm Radio Ltd September Swindon Brunel FM The Local Radio Company 2005 September Solent Original 106 FM CanWest Global 2005 October 2005 Barrow-in- Furness Abbey FM November 2005 Swansea Swansea Bay Radio Communications Corp The Radio Business Ltd, The Local Radio Company, CN Group Ltd Town and Country Broadcasting Ltd, Haven FM (Pembrokeshire) Ltd November 2005 Northallerton BTN FM The Local Radio Company December 2005 Ipswich Town FM Tindle Radio January 2006 Warwick 2DayFM CN Group February 2006 Shrewsbury Shrewsbury FM MNA Broadcasting Ltd (90%), a wholly owned subsidiary of Midlands News Association Limited. Shrewsbury Local Radio (10%), backed by Laser Broadcasting March 2006 Plymouth Diamond FM Radio UK Holdings Ltd April 2006 Southend Southend Radio Stockvale Ltd (80%), Provincial Radio Ltd (20%) April 2006 North East Saga FM Saga Radio (North East) Ltd England May 2006 Rotherham Rother FM Lincs FM Group June 2006 Newry Five FM Newry and Mourne FM Ltd July 2006 Andover Andover Radio Andover Limited FM July 2006 Hull KCFM 99.9 Planet Broadcasting Co Ltd 55

57 Community radio becomes established In last year s Communications Market report we highlighted the birth of community radio with five licences awarded. Since then, Ofcom has awarded a further 102 licences. The first phase of community radio licensing closed in May 2006 with the award of a final eight licences in that month (Figure 2.7). Figure 2.7: Community radio licence awards, May 2006 Station Area Comment 7 Waves Radio Wirral, Merseyside Serving the population of Leasowe and surrounding areas on the Wirral, with a particular focus on the elderly and disadvantaged members of this wider community. Talkin Toxteth TTFM Liverpool Focusing on a multicultural, inner-city community. Halton FM Runcorn, Merseyside Seeking to serve the community living, working or undergoing training/ education in the borough of Halton. Cheshire FM Mid Cheshire Aiming to cater for the tastes and interests of members of a relatively rural community in Cheshire. Diversity FM Lancaster For those who live, work or study in Lancaster, the two main parties involved being Lancaster YMCA and St. Martin's College. Chelmsford Calling Saint FM BRFM Chelmsford, Essex Burnham-On- Crouch, Essex Isle of Sheppey, Kent Providing a community-based station seeking to serve the retired population of Chelmsford. Broadcasting to a relatively rural area on the Essex Coast, south of Chelmsford. Based in Sheerness and serving the population of the Isle of Sheppey. The total number of community radio stations now stands at 107, with 87 in England, nine in Scotland, six in Northern Ireland and five in Wales. Figure 2.8 illustrates that licensees are geographically widely distributed, but there are a higher number of stations in the more populated areas. An analysis of community radio stations by target audience shows that 61% (65 stations) are targeted at the whole community. Of those that remain, 16% (21) target an ethnic minority community and 7% (7) focus on young people or people in education. The remaining stations target Christians (7), the British Forces (5) or people over 60 (3). 56

58 Figure 2.8: Location of the UK s community radio stations The Superstation shmufm AM FM VIP On Air Awaz FM Sunny Govan R Edinburgh Garrison Leith FM Revival R Black Diamond Lionheart R CBIT R Teesdale Cross Rhythms Feile FM Radio Failte BFBS Lisburn Down FM Shine FM Iur Aerwaves Diversity The Voice Pendle CR BCB Wetherby CR Seaside R Crescent Asian Fever West Hull CR Phoenix FM Chorley FM Branch FM Salford CR Oldham CR Talkin Toxteth All FM Tameside CR Burngreave CR 7 Waves R Sheffield Live Pure R Siren FM Halton FM Wythenshawe NBC Live Cheshire FM Trust FM R Dawn Calon FM R Faza Cross Rhythms R Ikhlas Wolverhampton CRT The Public The Bridge Aston FM Switch R Unity FM New Style R The Eye Takeover R Harborough FM Future R Afan FM Youth Community R Forest of Dean CR Gloucester FM Toradio GTFM Bristol C FM Beats FM Salisbury Plain Army R 209 Radio Ipswich CR Diverse FM KOOL AM Colchester Garrison R Verulam Saint FM Chelmsford Calling Phoenix FM Asian Star BRFM Greater London Castledown R Aldershot Army R Kent Union Unity 24 Skyline CR Express FM Radio Scilly Spirit of Plymouth Forest FM Angel R Havant Hope FM Angel R IOW R Reverb Greater London Desi R Southall Hayes CR - Hayes Irish FM Hammersmith Life Stonebridge & Harlesden Link FM Havering NuSound R Newham Resonance FM C London Sound R - Hackney TGR Sound Bexley R Umma Newham Voice of Africa - Newham Westside CR Southall Source: Ofcom 57

59 2.2.3 Digital distribution offers new ways to reach listeners Creative exploitation of new technologies in 2005 gave rise to a range of new ways in which traditional broadcast-based radio content could be accessed by the end-user. The ongoing popularity of live listening on the web and to listen again services was once again demonstrated by a selection of performance statistics published by the BBC in March 2006: Live listening on the web: the BBC s Radio Player s live streaming of its radio networks had a record month in March with more than 20m hours of listening. Overall traffic to the BBC s radio websites exceeded 290 million page impressions for the first time with a record 9.3 million unique users logging on over the course of the month (Figure 2.9). Figure 2.9: BBC online listening during March 2006 BBC station Live online listening BBC Radio 1 4m hours BBC Radio 2 3m hours BBC Radio Five Live 500,000 hours Source: BBC press release Listen again on the web: The BBC Radio Player also served 12m ondemand requests in that month, giving listeners instant access to a range of radio shows that had previously been broadcast. Moreover, the rising popularity of portable digital music devices continued, with 24% of adults owning an MP3 player at the end of Q1 2006, and 2.6 million people claiming they used one every day. This was probably a factor in podcasting taking off in 2005, with broadcasters such as Virgin Radio making highlights from their shows available for download. The popularity of podcasting There is no definitive list of the most popular UK podcasts, but itunes reported that the most downloaded shows via their application were: Baddiel and Skinner (Times Online) Ricky Gervais free video podcast Best of Moyles (Radio 1) The World Cup on Guardian Unlimited The Now Show (Radio 4) Separately, the BBC reported that the Today Programme s 8.10 interview attracted 474,357 downloads in March 2006 while the Chris Moyles show was downloaded 441,832 times. We are seeing the first signs of broadcasters finding ways to monetise podcasting, with the production of exclusive paid-for content sold directly to end-users, often using well-known presenters such as Ricky Gervais. The rising popularity of podcasting moved RAJAR to announce that it planned to start monitoring podcast consumption in its next platforms survey in Q

60 In addition to online distribution, digital radio featured in the BT / Virgin Mobile Movio trial of content to mobile handsets. Early results revealed that more hours of radio were consumed than TV and that users might be willing to pay for access to a bundle of services that included radio stations. Digital Radio Mondiale (DRM) offers another way to reach listeners, with high quality and long distance digital audio transmissions using AM. Following trials during 2005, further DRM trial services went live in the UK during February 2006, with a 24 hour service covering London and a second service aimed at covering the UK and Ireland and eventually the rest of Europe. These pilots allow broadcasters to assess the benefits of the technology, which include real-time text and data-based information services, in addition to demonstrating reception quality. Radio stations involved in the trials include: Virgin Radio, talksport, BBC World Service, Classic Gold Digital, Kiss 100 FM, Asian Sound Radio, Premier Christian Radio and CVC. Other organisations involved as providers included VT Communications, National Grid Wireless, and WRN. The launch of new DRM sets such as RadioScape s RS500, which is capable of receiving both DRM and DAB broadcasts as well as FM and the LW, MW, SW bands, could help increase take-up of the technology. The model offers facilities such as the ability to pause, rewind and record live radio, as well as the ability to access an electronic programme guide TV operators continue to expand into radio In 2004 links between radio and television were strengthened when Ulster Television acquired The Wireless Group and Channel 4 took a controlling interest in OneWord, a national digital-only speech station. Channel 4 has since taken its commitment to radio two steps further: Channel 4 Radio launched online in June 2006, offering podcast and streamed access to a range of specially commissioned shows that included spin-offs from Richard and Judy, Lost and Big Brother. Users must register to gain access to the site, which may provide Channel 4 with useful audience and demographic data on the popularity of different shows. Channel 4 Radio also launched The Morning Report, a 30-minute ITN-produced news programme, the digital station OneWord. The company also confirmed its intention to form a consortium to bid for the second national DAB radio multiplex which Ofcom plans to advertise later in 2006 (see below) Future radio policy framework takes shape Radio s regulatory policy framework evolved in three important respects in First, phase two of Ofcom s Radio Review Preparing for the Future came to a conclusion. It recommended that future regulation should focus on station output rather than production-related input. The implementation of this proposal will pave the way for the possibility of the wider use of automation in radio schedules, and for the creation of regional news hubs. Format regulation will remain the cornerstone of output-based regulation (alongside localness guidelines). Ofcom will consult with the public before taking a decision on whether or not to approve material changes in formats. 59

61 Turning to the DAB digital radio platform, Ofcom announced its plans to advertise (before the end of 2006) a second national DAB radio multiplex licence. In addition, Ofcom has identified 31 new local DAB radio multiplex licences that will be advertised, in order of target population, to fill gaps in the existing local DAB coverage. In 2006, Ofcom initiated a project to investigate options for the re-licensing of existing FM and AM commercial radio services when their current licences expire. Ofcom also put under review the terms on which radio restricted service licences (RSLs) will be granted in the future. The main plank of the proposals allows for a reduction in the restrictions on licensing RSLs in areas where commercial or community radio station licences have been, or are to be, awarded. In addition, Ofcom proposed that commercial establishments should be permitted to hold longterm RSLs, and that audio distribution systems should be licensed as restricted services using spectrum around 60 MHz. The consultation also suggests that other frequency bands may be used to provide restricted broadcast services, subject to users being licensed under the Broadcasting Act Finally, signalling a determination to ensure the lawful use of spectrum, Ofcom initiated a crack down on illegal pirate radio stations. An operation to close down unlicensed stations started in London at the end of October 2005, resulting in 44 broadcasters going temporarily off the air. 60

62 2.3 The radio industry Radio revenue shrinks by 1.7% driven by falling commercial income Ofcom estimates that total radio revenue in 2005 was 1.15bn. This figure comprises all reported commercial radio revenue and an estimate of BBC expenditure on radio. The licence fee continues to form the largest single source of funding for the radio industry at 626m. Of the 519m commercial revenue, national operators accounted for 270m and local commercial operators 164m. The remainder consisted of commercial sponsorship revenues were 26m lower than in The majority of this fall was due to the national commercial radio groups, where revenue declined by a total of 32m. A further 11m was explained by the decline in local commercial radio revenue, down 6.3% year-on-year to 164m. The remainder was accounted for by commercial sponsorship (down 1.3m). Meanwhile the BBC expenditure on radio was estimated to have risen on last year by around 19m. As a result, the gap between commercial revenue and BBC expenditure widened to 107m in 2005 (Figure 2.10). Figure 2.10: UK commercial radio revenue and BBC radio spending* bn Total BBC expenditure (estimated) Total commercial National commercial Local commercial * BBC expenditure are estimated figures. Figures in the chart are rounded. Source: Ofcom / BBC Commercial sponsorship Chart-led mainstream stations share of revenue is falling Chart-led mainstream music stations continued to account for the largest share of revenue in 2005, with 37% of commercial analogue net broadcasting revenue (which comprises local and national advertising and sponsorship revenue) in Q (Figure 2.11). However, this has fallen by 16 percentage points since The main beneficiaries have been Adult Mainstream stations, where revenue increased by eight percentage points to 32% by Q1 2006, and Adult Mainstream/Chat, which was up by five percentage points to 8%. 61

63 Figure 2.11: Commercial analogue net broadcasting revenue share Q Q Specialist Music - Other 7% Specialist Music - Youth 7% 35+/Gold 3% Adult Mainstream and Chat 8% Adult Mainstream 32% Specialist Ethnic News/Speech 1% 5% Chart-led Mainstream 37% Specialist Music - Other 6% Specialist Music - Youth 7% 35+/Gold 3% Adult Mainstream and Chat 3% Adult Mainstream 24% Specialist Ethnic News/Speech 1% 3% Chart-led Mainstream 53% Source: Ofcom Spend on radio, as a proportion of display advertising, reaches a five-year low Reflecting the fall in commercial revenue, advertising spend on radio as a proportion of all advertising spend reached its lowest level since at least 2000, at 3.3% (Figure 2.12). The rise of internet advertising, now the fourth largest display medium in the UK, has probably also had an impact. Figure 2.12: UK radio advertising spend and share of display advertising million % 3.4% 3.6% 3.5% 3.3% 4% 3% Radio advertising revenue % 1% Radio share of all display advertising Source: World Advertising Research Center (WARC)) 0% Radio group characteristics 65% of commercial stations are owned by six groups Following the acquisition of The Wireless Group (TWG) by UTV, the Capital/GWR merger and the acquisition of Scottish Radio Holdings by Emap the nine largest groups have consolidated to six: GCap Media, The Local Radio Company (TLRC), Classic Gold Digital, UTV Radio, Emap and UKRD Group. By Q these six groups controlled ten or more radio stations each amounting to 65% of all stations (Figure 2.13). 62

64 Figure 2.13: Number of commercial stations owned by group, Q UKRD Group Ltd 4% Emap plc 16% 6-10 stations in group 10% 2-5 stations in group 9% UTV Radio 7% Classic Gold Digital Ltd 7% The Local Radio Company Plc 9% GCap Media 22% Independents 16% Source: Ofcom Note: The percentages are derived from a universe of stations rather than licences In addition to these six, there are three other groups with fewer stations but which nonetheless have a significant share of listening. Chrysalis owns eight licences (including the Heart, LBC and Galaxy stations), which in Q accounted for 5.0% of all listening. (Note: This listening share now also includes Heart 106, the East Midlands station which Chrysalis acquired from GCap in May 2005). Guardian Media Group (GMG) took a 2.4% share of listening hours through its five regional licences, which carry the Real Radio and Smooth brands. Scottish Media Group (SMG) owns Virgin Radio; the Virgin network accounted for 1.7% of listening hours in Q Within the commercial radio sector the share of listening hours to the two largest radio groups (GCap and Emap) fell between 2001 and GCap s share was down 5.9 percentage points over the period, to 34.0% of listening, but this still put it almost 11 percentage points above Emap which had 23.3% in Q (1.8 percentage points lower than in 2000) (Figure 2.14). The main beneficiaries of these share losses were GMG, Chrysalis and the other station groups. The other category increased over last five years by 2.7 percentage points to stand at 14.1% in Q1 2006, despite a fall from its peak in Meanwhile, GMG s share almost trebled over the same period to 5.7% and the Chrysalis group of stations gained 2.2 percentage points to 11.6%. 63

65 Figure 2.14: Share of commercial listening hours Percentage of listening hours 40% 30% 39.9% 39.2% 39.7% 25.1% 36.2% 35.3% 24.0% 23.8% 24.0% 23.3% 34.0% 23.3% 20% 12.7% 15.4% 11.4% 11.5% 14.1% 10.6% 9.4% 10.7% 12.0% 11.6% 10.5% 10.4% 10% 7.2% 7.5% 7.4% 7.2% 6.7% 7.2% 4.2% 4.4% 4.7% 5.4% 5.7% 4.9% 2.9% 3.6% 3.2% 3.4% 4.1% 0% 2.1% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Gcap Emap Other Chrysalis UTV GMG SMG Source: RAJAR Revenue per listener and per listener hour fall Using licensee and RAJAR figures, total revenue per listener in Q stood at This was down 5% on last year s 5.06, following on from year-on-year growth dating back to Average revenue per hour (calculated as total net broadcasting revenue (NBR) divided by total adult listening hours) in Q was 0.33; this was slightly down on the 2005 figure of 0.34 (Figure 2.15). Figure 2.15: Average commercial radio revenue per listener and per listening hour per listener per hour per listener per hour Q Q Q Q Q Q Source: Licensee and RAJAR data 64

66 When looking at revenues by station size, the average revenue per listener and revenue per listening hour tends to be highest for stations with the lowest potential audience (as measured by total service area (TSA)). Stations with a TSA of fewer than 150,000 potential listeners had an average revenue per listener which was almost double that of stations with a TSA of over 5 million (Figure 2.16). Figure 2.16: Average revenue per listener / listener hour by local station TSA <150k 150 to to to 999 1m to 2m 2m to 5m 5m+ (London) Source: Licensee and RAJAR data, Q per listener (reach) per hour 65

67 2.3.3 Overview of the major radio operators in 2005 The BBC The BBC has local and national radio stations that span the United Kingdom, although the majority are in England (Figure 2.17). Figure 2.17: Map of the BBC s analogue radio stations Nan Gaidheal Scotland BBC Local and Nations 11B radio 11C National station 11D Local station 12A Proposed local station 12C 12D (subject to public value test) Newcastle Foyle Cumbria Cleveland Ulster York Bradford Lancashire Merseyside Leeds Sheffield Humberside Manchester Lincolnshire Cheshire Derby Stoke Nottingham Shropshire Leicester Norfolk WM Northampton Hereford & C & W Cambridgeshire Worcester Gloucester Oxford 3 Counties Suffolk Guernsey Wales Swindon Jersey Bristol Berkshire Kent Somerset Wiltshire Sound Southern Cymru London Essex Cornwall Solent Counties Devon Dorset National Networks BBC Radio 1 BBC Radio 2 BBC Radio 3 BBC Radio 4 BBC Radio Five Live BBC Asian Network (only available in some areas on analogue) Digital-only stations: 1 Xtra from the BBC BBC Five Live Sports Extra BBC 6 Music BBC 7 BBC World Service (available in analogue in parts of the UK and in digital) All national networks and digital only stations are available on DAB, Sky, Freeview and Cable Source: RAJAR / Ofcom BBC national networks (Radio 1 to Five Live) continued in 2005 to attract a majority of all listening hours, reaching a 55.4% share by Q1 2006, up 3.4 percentage points since For the first time ever, BBC national radio share exceeded that of the commercial radio sector as a whole. BBC Radio 2 remained the leading BBC station with a 16% share of all radio listening, although it was the only BBC station to lose share over the year. Radio 1 had a second year of strong growth, up 0.7 percentage points with a 9.1% share (Figure 2.18). 66

68 Figure 2.18: BBC radio share Percentage of listening hours 20% 15% 10% 5% 0% 14.1% 12.2% 11.3% 9.1% 4.2% 1.1% 15.7% 15.7% 11.3% 11.8% 11.4% 11.5% 8.4% 4.5% 15.3% 11.0% 7.9% 7.6% 16.5% 16.0% 11.4% 11.7% 11.1% 10.8% 11.1% 8.4% 9.1% 4.7% 5.1% 4.6% 4.6% 1.2% 1.1% 1.2% 1.2% 1.3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q BBC Local / Regional BBC Radio 1 BBC Radio 2 BBC Radio 3 BBC Radio 4 BBC Radio 5 Live Source: RAJAR The BBC s newer digital-only radio services and the digital distribution strategy for all its radio services helped attract additional listener hours in 2005/06. Live listening on the web and listen again remained popular with the BBC s radio player serving 20m hours of live listening and 12m on-demand requests in March 2006 Digital-only stations: the BBC s portfolio of digital-only radio stations has helped the BBC to build further audience share. The four digital-only stations (1Xtra, 5Live Sports Extra, 6Music and BBC7) reached almost 1.8m listeners during Q and added over 9m listening hours to the BBC total. Podcasts: There were 2.8 million downloads of BBC Radio podcasts in March 2006, up by more than a million on the previous month. Radio 4 podcasts were among the most popular, including the Today programme s 8.10 Interview with 474,357 downloads, and In Our Time with 255,878 downloads in March. Radio 1 DJ Chris Moyles remained the most popular weekly show with 441,832 downloads of Best of Moyles. 67

69 2.3.4 The commercial radio groups Figure 2.19 associates each of the UK s licensed analogue radio stations to its owner. A large proportion of all licences are held by one of 19 groups and the 2005 results for the larger of those groups are reviewed on the pages that follow. Figure 2.19: Commercial radio station ownership by group Isles Lochbroom Two Lochs Waves Moray Firth NECR Cuillin Northsound 1 Northsound 2 TBA Nevis Heartland RNA Tay FM TBA Wave 102 Tay AM Oban Central Scotland Kingdom Xfm Central Your Your Clyde 1 Forth 1 Real Clyde 2 Forth 2 Q96 Saga River Talk107 L107 Borders SIBC Station owners GCap Media Emap Guardian Media Group Chrysalis The Local Radio Company Lincs FM Classic Gold Digital UTV UKRD Kent Messenger Group CN Group Tindle Radio Saga Murfin Media Kingdom FM Forward Media Sunrise Radio Q Radio Network CanWest Other Q101.2 Q102.9 Six FM Manchester Key 103 Magic Galaxy Capital Gold Xfm TBA Birmingham BRMB Capital Gold Galaxy Radio XL. Argyll Q97.2 Seven FM Pirate Atlantic West FM West Sound South West Sound CFM South Hams CFM North East Century Metro Magic Galaxy Sun Saga Durham TFM Alpha Magic Downtown Manx R* Lakeland Cool BTN Energy* City Beat The Bay Yorkshire Coast 3FM* Fresh U105 Abbey Yorkshire Coast Stray Minster Yorkshire North West Wave 2BR The Pulse,Classic Gold,Sunrise Galaxy TBA Century Bee Rock,Magic Real Smooth Revolution Aire,Magic Tower Viking,Magic,TBA Dune TBA Home Ridings Wish Asian Sd. Trax Compass E Midlands Radio City,Juice,Magic,TBA Rocket Manchester Dearne Rother Hallam,Magic Saga Coast Buzz Wire Imagine High Peak Trax Heart Lincs Dee Peak Champion Silk MFM Mansfield North Norfolk Classic Gold Marcher Signal1,Signal2 Ram Trent Classic Gold GEM KLFM Beacon Oak The Beach Telford Classic Gold WABC Rutland Hereward W Midlands The Wolf Leicester Snd Classic Gold Saga Touch Maldwyn The Severn Sabras Lite Broadland Fosseway Heart Birmingham Connect Fen Classic Gold Amber Ceredigion Northants96 Kerrang Sunshine Touch Q103,Star Norwich Wyre Rugby Classic Gold Wyvern Mercia,Classic Gold Chiltern FM Classic Gold Amber Horizon Classic Gold SGR Classic Hits Touch Chiltern FM Touch Touch Classic Gold Town Severn Sound Ten 17 Carmarthenshire SGR Colchester Mix96 Pembrokeshire Classic Gold Star Fox,Fusion, HertBeat Dream Scarlet TBA LGR Dream East Star Mercury LTR Valleys TBA GWR Wilts Essex The Wave Mix107 Time Vibe Swansea Sound Star Choice Southend South Wales Classic Gold,Brunel Red Dragon Choice Swansea Bay GWR Bristol Star Classic Gold Breeze Reading,2 Ten Time Real Capital Gold Classic Gold Jackie Time Invicta,Capital Gold TBA Bridge Classic Gold KMFM County Sound KMFM Star Kick Eagle Severn Estuary BCR Bath TBA CTR KMFM Quay Kestrel Mercury 3TR Win Vibe 101 Spire Delta KMFM KMFM KMFM Southampton Classic Gold Lantern Orchard Vale Ocean,Power Bright Arrow Splash Ivel The Saint Capital Gold Gemini 2CR Sovereign Southern Classic Gold Classic Gold Quay Spirit Capital Gold TBA Wessex Fire Plymouth Sound Isle of Wight Juice Classic Gold Palm Diamond Island Channel Solent Wave Original Capital FM Capital Gold XFM Kiss 100 Magic Source: Ofcom. Note: Stations may cover different sized areas, even when based in the same town London-wide Stations Smooth Heart LBC 97.3 LBC News 1152 Virgin FM Sunrise KATR Club Asia Spectrum Premier 68

70 GCap Media plc GWR Group and Capital Radio merged to form GCap Media in May 2005, becoming Britain s largest commercial radio broadcaster. In February 2006, GCap reported 16.3m listeners, accounting for 34% of all UK commercial listening. At the time of writing, the company operates 57 analogue and 100 digital stations. Key analogue stations include Classic FM, Capital Radio and Xfm, while the company s main digital-only stations are Capital Life, Planet Rock and Core. GCap reported that its merger would deliver projected annual savings of 27m. The group also stated that its revenue fell by 12.7% to 220.2m in 2006 ( m). Pro-forma profit before tax was 22.2m down from 37.3m in The group also reduced its debt from 79m to 76m in 2005 (slightly ahead of market expectations, mainly due to earlier-than-expected delivery of the post-merger savings). The locations of the main GCap stations are shown in (Figure 2.20). Figure 2.20: Map of GCap Media s analogue radio stations Licence populations Brands FM Network (incl. BRMB, Beat, Invicta, GWR, Chiltern) >2.5m Format: Chart-led mainstream m Century FM (incl. Ocean FM) Format: Adult mainstream and chat m m Xfm Format: Specialist music youth oriented <0.1m Choice FM Format: Specialist music youth oriented Capital Gold Format: 35+ and Gold FM AM Digital-only stations: Capital Disney Format: Children s Core Format: Adult mainstream Life Format: Adult mainstream Planet Rock Format: Specialist music other The Storm Format: Specialist music other Xfm, Choice and Century are also available in additional areas on DAB and on the Sky platform Capital FM and Capital Gold are also available on the Sky platform + Classic FM (National coverage) Source: Ofcom At the time of the merger, GCap sold its East Midlands station, 106 Century FM, to Chrysalis for 29.5m and in November 2005 it sold its wholly-owned Bulgarian radio business, Balkan Broadcasting OOD, for 1.5m. During the year, GCap outlined a strategy to strengthen its future performance, including: Concentrating resources on nine target geographic areas London, South East, South West, Midlands, North West, Anglia, Wales and West, North-East and Scotland; Reorganising Capital Radio s advertising strategy to significantly reduce the hourly advertising minutage. This was designed to draw in a larger pool of 69

71 listeners who are less likely to tune out of commercial messages because there are fewer of them. GCap reported in May 2006 that this strategy had increased advertising effectiveness; listeners were nearly two-fifths more likely to recall a commercial message than before the strategy change; Diversifying revenue streams away from radio advertising. In March 2006 GCap reported that non-traditional revenues, such as CD sales and box office income, accounted for 14% of its total. This followed on from a deal the group struck in 2005 with Microsoft Windows XP, which sponsored the audio players on GCap s websites; and Translating local radio brands into national brands in order to increase audience share and improve advertiser appeal. For example, Xfm continued its move to become a national brand with the launch of the Manchester station in March This followed an increase in the station s national reach through its presence on DAB. The group s Central Scotland regional station, Beat 106, was rebranded as Xfm Scotland in January Chrysalis Radio Ltd Chrysalis operates AM and FM analogue stations (Galaxy, Heart, LBC 97.3 and LBC News) in London, Yorkshire, the Midlands, and North West and North East England (Figure 2.21). Figure 2.21: Map of Chrysalis analogue radio stations Brands Galaxy Format: Specialist music youth oriented Heart Format: Adult mainstream LBC 97.3 Format: Speech LBC News Format: Speech Licence populations >2.5m m m m <0.1m FM AM Digital-only stations: The Arrow Format: Specialist music other Heart and Galaxy are carried in additional areas on DAB Heart, Galaxy and LBC 97.3 are carried on the Sky platform * Acquired from GCap. Chrysalis has announced its intention to re-brand the station as Heart, pending Ofcom approval. Source: Ofcom Chrysalis Radio s first half yearly revenue for the period ending March 2006, was 33.1m, (EBITA 5.1m) with analogue stations generating 32.1m of that total. The Heart Network expanded its presence in the market with the rebrand of Century 106 (East Midlands) as Heart 106 in May RAJAR s Q survey reported that Heart 106 s total hours increased by 12.3% in the quarter following the relaunch. 70

72 LBC s revenues increased by nearly 10% in the first half of the 2005/06 financial year. The Galaxy network s audience share fell by 6%. In an attempt to build advertising revenue, Chrysalis reorganised its commercial operations in 2005, merging its advertising and sponsorship/promotions divisions with the intention of offering advertising packages to clients. Like GCap, Chrysalis is seeking to reduce its reliance on advertising revenue, in particular by increasing its online income. With this aim, in January 2006 LBC 97.3 launched a premium podcast subscription, and later in the year Chrysalis announced its intention to offer a bespoke podcast production service entitled Chrysalis Content. Emap Emap s group of businesses spans television, radio, magazines and business-tobusiness activities. In radio, Emap operates 40 local and eight national stations. Key stations include: Smash Hits!, Kiss, Magic, Radio Clyde, Radio Forth, Kerrang!, Q, Mojo and the Big City network. Emap s total revenue for the financial year ending 31 March 2006 rose by 11% to 854m (excluding activities from its French businesses). Of that total, radio accounted for 141m, up 44% on The rise was explained largely by the company s acquisition, from Scottish Media Group, of the remaining 72.9% stake in Scottish Radio Holdings Plc (SRH) in August 2005, making Emap the sole owner. Following this, Emap reorganised its advertising sales business in order to coordinate the sale of national advertising across the whole of the Emap radio group (Figure 2.22). Figure 2.22: Map of Emap s analogue radio stations Source: Ofcom Brands Licence populations Magic Format: Adult mainstream/35+ & Gold >2.5m Kiss / Vibe Format: Specialist music youth oriented m Kerrang Format: Specialist music youth oriented m m Big city stations (e.g. Key <0.1m 103,Radio City, Aire FM) Format:Chart-led mainstream Other Digital-only stations: FM Heat Format: Specialist music other The Hits Format: Chart-led mainstream Mojo Format: Specialist music other Q Format: Specialist music other Smash Hits Format: Chart-led mainstream AM 3C Format: Specialist music - other Kerrang, Magic, 3C and Kiss are carried in additional areas on DAB, Freeview and on the Sky platform 71

73 Guardian Media Group (GMG) GMG Radio includes the Real Radio and Smooth FM brands. With five regional stations in London, South Wales, Central Scotland, Yorkshire and the North West of England, the group generated 35m of revenue in 2005 (up from 33m in 2004). Its 2005 operating profit stood at 1.5m, recovering from a 2.1m loss in GMG Radio holds a 24.3% shareholding in MXR, a holder of regional digital multiplex licences. It also has a 22% shareholding in Digital News Network, which provides a rolling news service on a number of local DAB multiplexes. In May 2004, GMG disposed of its shareholding in Radio Investments Limited to The Local Radio Company Plc. In 2005 GMG s London-based Jazz FM was rebranded as Smooth FM; at the same time GMG rearranged its presence on local digital multiplexes so that a Smooth or Real Radio station became available in most major metropolitan markets (Figure 2.23). Figure 2.23: Map of GMG s analogue radio stations Brands Real Radio Format: Adult mainstream & speech Smooth Format: Specialist music - other FM Licence populations >2.5m m m m <0.1m Smooth and Real Radio are carried in additional areas on DAB and on the Sky platform Source: Ofcom 72

74 Saga Radio In April 2006, Saga Radio group was awarded the North-East regional FM radio licence, beating-off competition from twelve other bidders. Covering around two million people across Tyne and Wear, Durham and Teeside, the station will target an older audience by playing easy listening and melodic music alongside speech programming. This is the fourth station in the Saga portfolio, building on licences in the East Midlands, West Midlands and Glasgow (Figure 2.24). Figure 2.24: Map of Saga s analogue radio stations Licence populations >2.5m m m m <0.1m Saga Radio Format: 35+ and Gold FM Source: Ofcom 73

75 The Local Radio Company The Local Radio Company s (TRLC) origins go back to May 2004 when it was formed to acquire the entire share capital of Radio Investments Limited. Subsequently floating on AIM, the company now operates 28 local radio stations, mainly in England. TRLC has grown both through acquisition and organic development. The company has acquired several stations since its formation, including Bath FM, 2BR in Burnley, Dune FM in Southport, KCR FM in Knowsley (re-launched as The Rocket ) and the remaining 53% of Spirit FM in South West Sussex. It has also been awarded new licences that include Brunel FM in Swindon, BTN FM in Northallerton, and Durham FM. TLRC also has a 35% stakeholding in Abbey FM, which was awarded a licence for Barrow-in-Furness. In September 2005, TLRC struck an agreement with Ulster Television Plc (UTV) for TLRC s national sales house, FRS, to represent UTV s 17 commercial radio stations. The agreement included TLRC s transfer of 50% of the FRS stake to UTV to form a joint ownership structure. TRLC s reported interim revenues for the six months ended 31 March 2006 were up 1% on the previous year to 9.8m (Figure 2.25). Figure 2.25: Map of The Local Radio Company s analogue radio stations Licence populations >2.5m m m m <0.1m FM Source: Ofcom 74

76 UBC (Classic Gold Digital) UBC Media Group owns and operates the Classic Gold digital and analogue commercial radio stations, produces radio programming and provides audio and data services to the rest of the radio industry. The Group controls 17 Classic Gold local analogue stations (all AM) across the UK and holds a minority stake in one national digital station, Oneword Radio; Channel 4 holds a controlling stake in that station, which it acquired from UBC in Classic Gold Digital s 2005 turnover was 4.4m, down 6% on 2004; Oneword contributed 1.1m (9% up on 2004). A third of Classic Gold s listening hours in 2005 came from digital platforms, a rise of 5% on the previous year, reflecting the increases in listening via those platforms (Figure 2.26). Figure 2.26: Map of UBC s analogue radio stations AM Licence populations >2.5m m m m <0.1m Classic Gold Format: 35+ & Gold Classic Gold Digital is also available in other areas on DAB and on the Sky Digital platform Source: Ofcom 75

77 UTV Radio UTV Radio is a subsidiary of UTV Plc which owns a range of television, radio and new media operations. In May 2005, UTV acquired The Wireless Group, including the national AM station talksport, for 96.9m. Having won the licence for a new independent local radio (ILR) service in Belfast in March 2005, the station U105 went to air in November 2005; it also secured a distribution deal on Freeview in Northern Ireland. UTV s financial year-end results for 2005 showed group turnover for the year at 92.7m up 46% on 2004, following the acquisition of The Wireless Group. Operating profit from stations in England, Scotland and Wales was up 4.8 million, and UTV forecast growth of 9% for these stations in the first quarter of 2006 (Figure 2.27). Figure 2.27: Map of UTV s analogue radio stations Source: Ofcom SMG SMG owns the Virgin Radio portfolio of stations. Virgin Radio s revenue increased by 11% to 22.4m in 2005, with radio operating profits rising by 23% to 4.9m. These results reversed the previous four-year trend of declining revenue against a background of a general slow-down in the radio sector. The group cited the increasing financial contribution made by the newer Virgin digital stations - Virgin Radio Classic Rock, Virgin Radio Groove and Virgin Radio Extreme (which was launched in September 2005). Revenue from those stations helped to offset falls in revenue from Virgin AM. 76

78 2.3.5 Service availability and station choice DAB coverage is improving but still short of digital satellite coverage The majority of households in the UK are now covered by one or more digital radio platforms which carry a range of digital radio services. Digital television services are widely available in the UK, with satellite reaching out to approximately 98% of homes (subject to local conditions such as the ability to install a satellite dish and to establish a line of sight to the satellite position). DTT coverage stands at 75% and will increase as digital switchover approaches. Digital cable is currently available to 45% of homes. DAB digital radio coverage of households has been improving rapidly over recent years, with the majority of the population (89%) now covered by at least one multiplex and most by three or more (Figure 2.28). Figure 2.28: UK DAB coverage Source: Ofcom DAB services increasing By Q1 2006, there were 422 separate DAB services broadcasting around the UK (363 commercial, 59 BBC) and 337 analogue radio services. Of the 422 DAB services, 133 are only available on digital radio and 101 are local analogue services now broadcasting outside their original transmission area. The remaining 188 are simulcasts of services broadcast on analogue radio. There are currently seven DAB stations available on Digital One s national commercial multiplex, with 11 DAB stations available on the BBC national multiplex. In addition, the nations and regions have their own services via the local DAB multiplexes. Figure 2.29 illustrates the availability of the local DAB services. 77

79 Figure 2.29: Availability of local commercial DAB stations ` Northern Ireland Scotland Wales Central Southern England East Anglia East Midlands London Midlands North East North West South East South West Yorkshire Source: CRCA 2006 Note: In addition to the services above, other stations are available in these areas including the national and regional BBC stations and also a majority of commercial DAB stations which broadcast across various regions. Figure 2.30 shows the DAB population coverage of each nation via the BBC and Digital One national multiplexes and also the local DAB multiplex coverage. Ofcom s Communications Market: Nations and Regions report, published in April 2006, contains more information on the availability of digital services across the UK. Figure 2.30: DAB population coverage by nation 100% 80% 89% 92% 86% 89% 92% 85% 86% 80% 76% 73% 75% 100% 60% ` 54% 53% 40% 20% 0% UK England Scotland Wales N Ireland BBC Digital One Local commercial Source: BBC, Digital One, Ofcom, June Figure for Digital One UK shows the percentage coverage of Great Britain (Digital One s licence does not include Northern Ireland). Population coverage for local commercial digital multiplexes shows the percentage of population living within licensed areas. Not everyone living within these areas will be able to receive the services at present as transmitter networks are not complete. Actual coverage varies by multiplex and ranges between about 70% and 95% of the licensed area. BBC DAB coverage The BBC continued to drive up its DAB coverage in 2005, reaching 85% of the UK by the year end (Figure 57). In 2006 an additional six DAB transmitters will be switched on in areas of England and Wales, increasing coverage to about 90%. Those new 78

80 transmitters will be at Blaenplwyf, Llanddona, Penrith, High Hunsley, Great Massingham and Chartham (Figure 2.31). Figure 2.31: BBC UK networks DAB coverage Source: BBC June 2005 Digital One DAB coverage Digital One, with its transmission partner Arqiva, has of around 86% coverage of the population of Great Britain. It has plans to switch on a further four transmitters during 2006 / early 2007 in the Kent and Sussex area (Tunbridge Wells), East Anglia (Sewards End), and in Arfon and Llanddona in Wales (Figure 2.32). Figure 2.32: Commercial DAB coverage Note: BBC Local and nations services are carried on local commercial multiplexes 79

81 DAB multiplex locations current and planned There are currently four commercial digital-only stations available nationwide on the Digital One national DAB radio multiplex, following the closure of Prime Time in May There are also a total of 156 local commercial DAB stations available through local DAB multiplexes across the UK. An indication of the geographic distribution and ownership of DAB multiplexes is illustrated in Figure Figure 2.33: Commercial local and regional DAB multiplexes GCap/Emap Emap UTV/Emap UTV (Switchdigital) GCap (Now Digital) MXR DRG 11B 11C 11D 12C 12D Local Regional Source: Ofcom The BBC offers 11 stations on a nationwide basis with its own national DAB multiplex. It also broadcasts a selection of its local and nations services on the currently available local and regional DAB multiplexes. Figure 2.34 shows where new multiplexes will launch and which BBC local/nations services will become available on DAB as a consequence. 80

82 Figure 2.34: BBC stations on local and regional DAB multiplexes On air Planned multiplex 11C 11D 12A 12C 12D Local Regional Local multiplex licence area BBC station(s) with reserved capacity 1 Carlisle & West Cumbria BBC Radio Cumbria 2 North Wales Coast & Caernarfon BBC Radio Wales & BBC Radio Cymru 3 Dumfries and SW Scotland BBC Radio Scotland & BBC Radio nan Gaidheal 4 Heads of the South Wales Valleys BBC Radio Wales & BBC Radio Cymru 5 Morecambe Bay BBC Radio Lancashire & BBC Radio Cumbria 6 Scottish Borders BBC Radio Scotland & BBC Radio nan Gaidheal 7 Weymouth & Dorchester BBC Solent or a new BBC Radio Dorset 8 Carmarthenshire & Pembrokeshire BBC Radio Wales & BBC Radio Cymru 9 Ceredigion & Mid-Wales BBC Radio Wales & BBC Radio Cymru 10 Chester / Wrexham BBC Radio Wales & BBC Radio Cymru (note: Chester is already covered by the Liverpool multiplex which carries BBC Radio Merseyside but there may be a possible new BBC Radio Cheshire service) 11 Derby BBC Radio Derby 12 Gloucester & Cheltenham BBC Radio Gloucestershire 13 Guildford BBC Southern Counties Radio 14 Harrogate BBC Radio York 15 Hereford & Worcester BBC Hereford and Worcester 16 Ipswich & Bury St Edmunds BBC Radio Suffolk 17 Kent Coast (note: this completes the existing Kent multiplex coverage) BBC Radio Kent 18 Kings Lynn BBC Radio Norfolk 19 Lincoln BBC Radio Lincolnshire 20 Luton / Bedford / Milton Keynes BBC Three Counties Radio 21 North Devon BBC Radio Devon 22 Northampton BBC Radio Northampton 23 Oxfordshire (Oxford & Banbury) / Aylesbury BBC Radio Oxford 24 Reigate & Crawley BBC Southern Counties Radio 25 Salisbury BBC Wiltshire Sound 26 Somerset (Taunton & Yeovil) BBC Radio Bristol (Somerset Sound opt-out) or a new BBC Radio Somerset service 27 Stratford-upon-Avon BBC Coventry & Warwickshire 28 York & Scarborough BBC Radio York 29 Western Scotland BBC Radio Scotland & BBC Radio nan Gaidheal 30 Orkney and Shetland BBC Radio Scotland & BBC Radio nan Gaidheal Source: Ofcom May 2006 AM stations in the UK The local AM market continues to be dominated by a few large groups, with 48 of the 58 local AM licences operated by three main groups: GCap, Emap and Classic Gold Digital, following Emap s acquisition of SRH (Figure 2.35). 81

83 Figure 2.35: Map of AM radio stations Magic Capital Gold Classic Gold Other Emap station Other stations Licence populations >2.5m m m m <0.1m Sunshine Signal 2 Sabras Radio Radio XL Asian Sound County Sound Valleys Radio Swansea Sound Radio Maldwyn Fresh Radio Ludlow Stoke Leicester Birmingham East Lancashire Guildford S. Wales Valleys Swansea Montgomeryshire Skipton London AM stations Capital Gold Club Asia LBC News 1152 London Turkish Radio Kismat Premier Christian Radio Spectrum Radio Sunrise Radio. Source: Ofcom 82

84 Figure 2.36 illustrates the distribution of FM station formats across the UK. Figure 2.36: FM commercial local radio station locations Isles Note: stations may cover different sized areas, even though based in the same town e.g. Downtown in Belfast covers the whole of Northern Ireland, while City Beat covers only Belfast and immediate environs. Cuillin Lochbroom Two Lochs Oban Moray Firth Nevis Your Your Heartland RNA NECR Waves Northsound 1 Northsound 2 TBA Tay FM TBA Wave 102 Tay AM Central Scotland Kingdom Xfm Central Real Clyde 1 Forth 1 Clyde 2 Forth 2 Saga River Talk107 L107 Borders SIBC Station styles Chart-led mainstream Adult Mainstream Adult mainstream and chat 35+ and Gold Specialist Music Youth orientated Specialist Music - other Speech Ethnic Licence not yet awarded (TBA) Regional / London-wide Local Station size Regional coverage area (TSA) Q96 FM stations / AM stations * Isle of Man stations not licensed by Argyll West FM Ofcom West Sound North East Century South West Sound Metro Magic Galaxy CFM Sun Saga Q97.2 Durham TFM Q102.9 Seven FM Alpha Magic CFM Downtown Manx R* Lakeland Q101.2 Cool BTN Energy* City Beat The Bay Yorkshire Coast 3FM* Fresh Six FM U105 Abbey Yorkshire Coast Stray Minster Yorkshire North West Wave 2BR The Pulse,Classic Gold,Sunrise Galaxy TBA Century Bee Rock,Magic Tower Revolution Real Smooth Aire,Magic Viking,Magic,TBA Dune TBA Home Ridings Wish Asian Sd. Trax Compass Manchester Radio City,Juice,Magic,TBA Rocket Manchester Dearne E Midlands Rother Hallam,Magic Saga Key 103 Galaxy Coast Buzz Wire Imagine High Peak Trax Heart Lincs Dee Peak Xfm Champion Silk Magic MFM Mansfield North Norfolk Capital Gold Classic Gold Marcher Signal1,Signal2 Ram Trent Classic Gold GEM KLFM TBA Beacon Oak The Beach Rutland Hereward W Midlands Telford Classic Gold WABC Birmingham Leicester Snd Classic Gold The Wolf Touch BRMB Saga Maldwyn The Severn Sabras Lite Fosseway Heart Birmingham Connect Fen Galaxy Ceredigion Northants96 Radio XL. Kerrang Sunshine Touch Q103,Star Wyre Rugby Classic Gold Capital Gold Wyvern Mercia,Classic Gold Chiltern FM Horizon Classic Gold Classic Hits Touch Touch Chiltern FM Touch Classic Gold Carmarthenshire Severn Sound Ten 17 Mix96 Pembrokeshire Classic Gold Star Fox,Fusion, HertBeat Dream Scarlet TBA LGR Dream East Star Mercury LTR Valleys GWR Wilts Essex The Wave Star Mix107 Time Vibe Swansea Sound Classic Gold, Brunel Southend South Wales Choice Red Dragon GWR Bristol Star Choice Classic Gold Breeze Swansea Bay Reading,2 Ten Time Real Classic Gold Capital Gold Classic Gold Jackie Time Invicta,Capital Gold TBA Bridge KMFM TBA County Sound KMFM Star Kick Eagle Severn Estuary BCR Bath TBA CTR KMFM Quay Kestrel Mercury KMFM 3TR Win Spire Delta KMFM KMFM Vibe 101 Southampton Classic Gold Lantern Orchard Vale Ocean,Power Bright Arrow Splash Ivel The Saint Capital Gold Sovereign Gemini 2CR Southern Classic Gold Classic Gold Quay Spirit Juice Plymouth Sound TBA Wessex Fire Isle of Wight Capital Gold Classic Gold Palm FM Diamond Pirate London-wide Stations South Hams Solent TBA Wave Capital FM Kiss 100 Sunrise Original Capital Gold XFM Spectrum Heart LBC 97.3 Club Asia Island Virgin FM LBC News 1152 Kismat Magic Premier Smooth Source: Ofcom June

85 In addition to the licence awards covered in The Year in Radio section, applications are currently being considered for the following licences: Exeter, Bristol, Oxford and South Oxfordshire, Liverpool and Perth. Applications for a licence covering the city of Preston, together with the towns of Chorley and Leyland, will remain open until Thursday 7 September Licences for the Manchester and Aberdeen areas were advertised in July, to be followed by the licence for Herefordshire and Monmouthshire in September. Full details of each application are available on the Ofcom website. 1 The latest timetable is shown in Figure Figure 2.37: Timetable for the advertisement of new FM licences Advertised / due to be advertised Larger licence area Smaller licence area June 2006 Preston/ Leyland/ Chorley July 2006 Manchester Aberdeen September 2006 Herefordshire & Monmouthshire Source: Ofcom Short term restricted service licences (RSLs) awarded in 2005 Having received 585 applications, Ofcom issued a total of 498 Short-term RSLs during This was the highest number of S-RSLs issued in a single year and followed the 489 S-RSLs issued in 2004 (Figure 2.38). Figure 2.38: Number of short-term RSLs Number of licences Source: Ofcom In 2005, 15 applications were cancelled prior to issue by the applicant group, and 72 were rejected by Ofcom. The most common reasons for rejecting an application were that the dates required were not available and a change of dates was not appropriate, or that a suitable frequency was not available for the required period. The most popular reason for running a short-term RSL was to provide a temporary community radio service. A third of the groups licensed for this purpose specifically

86 stated that they had applied, or intended to apply, to Ofcom for a longer term fiveyear community radio licence, and the S-RSL was to help them prepare for this. The second most popular reason was for coverage of religious events. 106 licences were issued for Christian, Muslim, Jehovah s Witness, Sikh and Hindu religious events. The total number of short term RSLs issued in 2005 was the highest number ever issued in a single year at 498 (Figure 2.39). Figure 2.39: Reasons for running a short-term RSL Share of licences 40% 30% 20% 10% 32% 28% 24% 20% 21% 19% 11% 12% 12% 11% 11% 11% 8% 8% 7% 7% 7% 5% 9% 8% 9% 7% 6% 7% % Youth and Community Source: Ofcom Religious Education Festival Trials Sport Students Other Purpose and use of long-term RSLs (L-RSLs) L-RSLs are a means of providing a radio service for people at a particular establishment, in particular within the boundaries of the site of that establishment. They serve the needs of special interest groups based within the site, such as hospital patients and staff, students on a campus, or army personnel and their families within barracks. They are available on demand (subject to meeting the licensing criteria and the availability of a suitable frequency). They are generally not awarded in competition with other applicants. They use broadcasting spectrum, which is either generally not suitable for other broadcast uses (some of the more interference-prone AM frequencies); or is in areas of low demand from other users (FM in some parts of the UK); or is spectrally efficient (AM on induction loop). L-RSLs are for services at non-commercial establishments and for reception within a defined site only (i.e. not the surrounding community as well). One hundred and twenty eight licences are currently on issue for hospital radio services, student radio stations, army barracks, schools, colleges and prisons. Services can licensed on either FM or AM although due to the general lack of FM spectrum the majority of services are licensed on AM. AM induction loop transmission systems, where the signal cannot be heard outside the buildings within which the system is installed, continue to be licensed, although the majority of services are licensed on AM on a freely-radiating basis. In Greater London, the lack of suitable spectrum means that licences are only available on an induction loop system. Licences are issued for five years and are renewable. Of the 128 long-term RSLs in operation, 42% are used to provide radio services in hospitals. The next most popular category was for use in universities (27%), while 85

87 colleges and schools made up 16% of the licences. Fifteen percent of the licences issued are used to provide radio services for the armed forces. (Figure 2.40). Figure 2.40: Reasons for running a long term RSL Share of licences 50% 40% 42% 30% 27% 20% 10% 15% 10% 6% 0% Hospital University HM Forces College School Source: Ofcom 86

88 2.4 The radio listener Access to digital radio continues to rise By 2006, the overwhelming majority of homes had access to radio services, with approximately 99% having at least one radio set in the house. Around three-quarters (74%) owned two or more sets, and over one in eight (13%) had five or more (Figure 2.41). Figure 2.41: How many radio sets do you have in your household? Percent of respondents 30% 25% 28% 20% 10% 20% 13% 13% 0% 1% None One Two Three Four Five or more Source: Ofcom research, Q Note: Average ownership across all homes was 2.6 sets and 3.3 sets in home with at least one set. Digital radio is now widely available as Figure 2.42 illustrates. By Q1 2006, the 72% of homes that were capable of receiving digital television also had access to a range of digital radio services, and DAB penetration reached 11%. The increasing availability and take-up of broadband has also opened up opportunities for listening to high quality downloadable and streamed radio output from the internet. Figure 2.42: Penetration of equipment capable of receiving digital radio Share of households 61% 72% 11% 80% 60% 40% Broadband 41% Cable 11% Terrestrial 28% 20% Satellite Dial-up 33% 20% 0% 11% Internet Digital TV DAB radio Source: Ofcom, GfK, Q

89 Ofcom s research suggests that 19% of those without DAB are likely to buy a DAB set within six months (up five percentage points on the position six months ago). The age group is the most likely to acquire DAB (23%) which could signal a revival in the popularity of radio listening among this group (Figure 2.43). Figure 2.43: Likelihood of purchasing a DAB digital radio in the next 6 months Percent of respondents 100% 80% 75% 79% 71% 75% 79% 76% 74% 60% Likely Unlikely 40% 20% 19% 10% 23% 21% 14% 19% 19% 0% TOTAL ABC1 C2DE Source: Ofcom research, Q Note: Remaining percent are don t knows DAB take-up continues to grow Total DAB set sales in the UK reached three million by the end of March 2006, up from two million six months earlier. This means that 11% of households now own at least one DAB set (Figure 2.44). According to the Digital Radio Development Bureau (DRDB), DAB digital radio sales accounted for an increasing proportion of total set sales. In the six months to March 2006, they made up 16% of all set sales, up by four percentage points on the previous six months. However, DAB sets accounted for 54% of all portable radios sold, up from 45% a year earlier. For the year to March 2006, the DRDB also reported that the value of sales of DAB receivers reached 145m, or 23% of the total value of radio set sales. 88

90 Figure 2.44: Number of DAB digital radio sets sold 2 Millions Q4 Q Q2 Q3 Q4 Q Source: DRDB / GfK, Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Portable Car audio In home Ofcom research suggests that 87% of DAB digital radio set owners have just one set, but around 11% own two or more, up from 8% in Q (Figure 2.45). Figure 2.45: How many DAB radio sets do you have in your household? DAB households 100% 80% 87% 60% 40% 20% 0% 8% One Two Three or more 3% Source: Ofcom research, Q The average price of DAB digital radio sets was 99 in March 2006 up by 9 on the Q price, and reflecting increasing set specification and greater functionality (Figure 2.46). However, average portable set prices stood at 78, representing a fall of 11 on a year ago; the increase in average prices has been driven by rises in the higher specification in home sets ( 145) and car audio sets ( 198). 89

91 Figure 2.46: Change in average price of DAB digital radio receivers All In home Car audio Portable 0 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Source: GfK Q More than 230 different DAB models now available 50% more than in 2004 According to the DRDB, by the end of March 2006 there were over 230 different DAB models available on the market. This compares to 165 a year ago, and 64 two years ago (Figure 2.47). Figure 2.47: Number of DAB models available in the UK Number of models Q Q3 Q Q3 Q Q3 Q Q3 Q Source: DRDB 90

92 2.4.2 Weekly radio reach in the UK 90% of the UK population listens to radio Overall radio reach remained stable in 2005, but commercial radio reach continued to decline. In the two years between 2003 and 2005, its reach fell by three percentage points to 62% (by Q1 2006); this was driven mainly by the declining reach of local commercial radio (a fall of four percentage points to 50%). National commercial reach held steady in 2004 and 2005, having shown some significant growth prior to that period again this may have been driven by an increase in the availability of stations afforded by digital platform distribution opportunities. Between 2005 and Q1 2006, all BBC reach dropped by one percentage point to 66%, BBC network radio went down by two percentage points to 57%, and BBC national and local stations maintained their reach at 21% (Figure 2.48). Figure 2.48: Reach of radio by sector Percent of population 100% 90% 91% 91% 91% 90% 90% 80% 65% 68% 68% 67% 65% 66% 66% 65% 60% 55% 59% 59% 58% 40% 20% 0% 55% 21% 22% 56% 22% 22% 56% 23% 23% 54% 27% 22% 67% 63% 66% 62% 59% 57% 52% 27% 21% 50% 27% 21% 5% 6% 6% 5% 6% 6% Q1 Q2Q3 Q4Q1 Q2Q3 Q4Q1 Q2 Q3Q4 Q1Q2 Q3Q4 Q1Q2 Q3Q4 Q All radio All BBC All Commercial BBC Network Local Commercial National Commercial BBC Nat/Loc Radio Other Source: RAJAR Two trends stand out from Q to Q1 2006: the growth in the reach of radio among children and the reduction in reach among year olds. Taken together, these trends have narrowed the range, so that for all age groups weekly reach now lies somewhere between 89% and 92% (Figure 2.49). 91

93 Figure 2.49: Reach of radio by age group Percent of population 93.4% 92.1% 93.0% 93.5% 94% 91.9% 92.7% 93.3% 92.6% 92.1% 92% 91.9% 91.3% 91.3% 91.0% 91.6% 91.2% 90.7% 90% 89.3% 90.4% 91.0% 88.8% 90.3% 88.8% 88% 88.2% 89.1% 87.1% 86.0% 87.7% 86% 84.9% 91.9% 92.0% 91.2% 91.6% 90.1% 90.1% 89.9% 89.8% 89.7% 89.5% 88.8% 88.7% 89.0% 88.7% All individuals 4+ Children 4-14 Adults Adults Adults Adults % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2Q3 Q4 Q1 Q2 Q3 Q4 Q Source: RAJAR Adults 55+ Children return to radio, while young adults go elsewhere After dropping as low as 85% in Q3 2004, reach to children increased to 90.1% by Q a 5.1 percentage point gain. This may be explained by an increase in the availability of content and branded stations that appeal to younger people on digital platforms. Meanwhile, reach among young adults aged fell by 2.9 percentage points to 88.7%, while that of year olds fell by 2.4 percentage points to 88.8% (Figure 2.50). Figure 2.50: Reach falls in age groups Percent of population 95% 92.1% 91.9% 91.2% 92.0% 91.3% 89.8% 89.3% 90.1% 91.2% 88.7% 88.8% 88.7% 90% 87.1% 84.9% 85% Q Q % All individuals 4+ Children 4-14 Adults Adults Adults Adults Adults 55+ Source: RAJAR 92

94 2.4.3 BBC network listening exceeds all commercial listening for the first time The total universe of listening hours remained broadly static in 2005 at 4.6 billion, having increased by 3% or 117 million hours between 2000 and In the five years to Q1 2006, the BBC s total share of radio listening increased by 3.4 percentage points to 55.4% (Figure 2.51). The main growth driver was the rising popularity of BBC national network radio (Radios 1, 2, 3, 4 and 5 Live); together those stations saw their collective share increase by 4.3 percentage points to 44.3%. In Q the BBC network share exceeded that of all commercial stations for the first time; by Q the margin between the two stood at 1.7 percentage points. Five years earlier, all commercial listening had exceeded that of BBC network radio by six percentage points. The share of BBC nations and local radio share rose by 0.3 percentage points in 2005 to 11.1%; this modest rise ran counter to a gently declining trend over the previous five-year time period. Among commercial radio operators, overall share fell by 3.4 percentage points over the five year period including a 1.2 percentage point fall over the 12 months since Q However, this loss of share was distributed unequally between the local and national operators. Local commercial radio saw a drop of 5.8 percentage points over the last five years, with a 1.4 percentage point fall in the last year alone. By contrast, the national commercial stations added 2.5 percentage points, ending the period with a share of 10.5%. It is possible that the emergence of national commercial radio as a growth medium has been assisted by new digital distribution opportunities that have enabled both established local radio brands (such as Xfm) and new stations to broadcast nationally (Figure 2.51). Figure 2.51: Share of listening hours by sector Percent of listening hours 60% 40% 20% 52.0% 46.0% 53.0% 54.0% 53.0% 54.2% 55.4% 46.0% 45.0% 46.0% 40.0% 41.0% 41.0% 42.0% 38.0% 38.0% 37.0% 12.0% 35.6% 43.8% 43.4% 33.6% 44.3% 42.6% 32.2% 11.0% 12.0% 11.0% 10.8% 11.1% 8.0% 8.0% 8.0% 10.0% 10.2% 10.5% 0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q All BBC National BBC Nations & local BBC All commercial National commercial Local commercial Other Source: RAJAR Broadly stable total hours of listening mask significant shifts by age In the five years to Q there was a measurable shift in the mix of listening hours by age. A substantial decrease in listening by year olds was offset by modest increases amongst children, and year olds. The largest increase, however, came from the 55+ segment, where listening hours increased by 153 million between 2000 and 2005 (Figure 2.52). 93

95 Figure 2.52: Competition of weekly hours of listening by age 2000/ /06 Composition of hours 100% 80% 60% 40% 20% 0% Source: RAJAR platform study % 34% 34% 16% 16% 16% 17% 17% 17% 16% 13% 13% 12% 12% 12% 7% 8% 8% 2000/ / / Children Dividing the 2005/06 hours into three station types BBC, national commercial and local commercial exposes significant variances in the age profile. While the dominant audience for the BBC s services was 55+ (delivering 46% of its total hours), this age group comprised a much smaller component of the local commercial stations, where hours were distributed more equally across all age groups. Commercial national radio also attracted a substantial proportion of the 55+ audience (around a third of total hours), with remaining hours distributed equally across the other age groups (Figure 2.53). Figure 2.53: Profile of audience by age for different station types Proportion of hours 100% 18% 33% 80% 16% 45% 60% 14% 21% 40% 15% 16% 11% 16% 15% 20% 14% 17% 11% 0% 14% 12% 9% 4% National commercial Local commercial BBC radio all Source: RAJAR Children National commercial radio has also gained listeners across most age ranges, significantly outperforming changes in the overall listener universe since The greatest proportionate increase came from children and 15-24s, highlighting the increasing availability of national stations over digital platforms and the popularity of the content those stations carry with younger audiences. While changes in BBC listening hours were broadly consistent with that of the radio universe in the five years to 2005, local commercial stations lost audience hours across all age groups, with the exception of the 55+ segment. Of particular significance was the reduction in the number of listening hours from the year 94

96 old audience, which accounted for around 54% of the total loss in commercial local radio hours (Figure 2.54). Figure 2.54: Changes in hours 2000/ /06 by age group and station type National Radio universe commercial Local commercial BBC all 40% 20% 0% -20% 11% 8% 5% 3% 1% -17% 237% 118% 30% 26% 20% 5% -10% -12% 6% -6% -11% 12% 14% 10% 0% 2% -3% -40% Source: RAJAR -30% Children Digital listening on the rise, mostly at FM s expense In 2005 the proportion of listening through digital platforms rose substantially (Figure 2.55). RAJAR s platform study estimated that the digital platforms share of listening almost doubled in 2005, up nearly five percentage points in 2005 to 10.7%. In the first quarter of 2006 digital share was estimated to have grown again, this time to 11.4%. The increase came almost wholly at the expense of the FM share of listening, which fell by nearly five percentage points between 2004 and AM held its share in 2005, accounting for 14.4% of all listening, stemming a loss of nearly seven percentage points in the four years to 2004 and ending the period with 32% fewer listener hours than in Developments in digital radio such as DRM may offer opportunities for increased listener choice along with improved reception quality for the AM bands (Figure 2.55). Figure 2.55: Share of listening by platform Share of total listening 100% 4% 6% 11% 80% 60% 80% 82% 81% 80% 75% 40% 20% 20% 18% 16% 0% 14% 14% Source: Ofcom / RAJAR Digital FM AM Analogue radio sets are still by far the most widely used method of radio listening, 95

97 with 92% using analogue radio at least once a month. Fourteen percent use a DAB set on a weekly basis, while over a third have used their digital television set top box (at some point) to access radio services. Internet listening has been tried at least once by 17%, with 9% using this feature every week (Figure 2.56). Figure 2.56: How often do you access the radio via: Percent of respondents 80% 70% 69% 77% Every day 60% 59% 54% Once a week 40% 20% 0% 18% 4% 1% 5% 2% Analogue 8% 6% 0% 2% 25% DAB radio set Source: Ofcom research, Q % 16% 8% 6% 11% Digital radio through TV 2% 7% 4% 4% 14% Digital radio through Internet 1% 3% 2% 2% 14% Radio via mobile phone Once a month Have tried it once Never Do not have access to device Digital-only stations are growing in popularity The rise in listening via digital platforms has naturally been accompanied by the growing popularity of radio stations that are only available on digital platforms. RAJAR currently measures audience figures for 22 digital-only stations; and in Q these stations accounted for over 24 million hours of listening, representing around 2.3% of all radio hours for that quarter (Figure 2.57). Figure 2.57: Digital-only listening Hours (millions) % % 1.2% 1.4% % % % % 1.9% Digital-only as a % of total radio hours % % 2.5% 2.0% 1.5% % % 0.3% 0.5% 0 Q1 Q2 Q3 Q4 Q Source: RAJAR Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q % 96

98 The BBC stations only available nationally on digital radio include: BBC 6 Music, BBC 7, Five Live Sports Extra, BBC Asian Network, 1Xtra and BBC World Service. In March 2006, these six stations had a combined weekly reach of nearly three and a half million people. Total hours for these stations stood at over 16 million in Q1 2006, capturing a 1.6% share (Figure 2.58). Figure 2.58: BBC digital-only stations Station Listening hours (000s) Weekly reach Launch date BBC World Service* 6,409 1,262, (2002 DAB) BBC 7 3, ,000 December 2002 BBC 6 Music 1, ,000 March 2002 BBC Asian Network 1, ,000 October Xtra from the BBC 1, ,000 July 2002 Five Live Sports Extra 1, ,000 February 2002 Source: RAJAR Q * The BBC World Service figures relate to listening in the UK. The World Service is also available on analogue so these figures will includes listening across both analogue and digital platforms. Similarly the BBC Asian network is also available on MW in the Midlands area. As of March 2006, there were five commercial digital-only stations available nationwide: Capital Life, Core, One Word, Prime Time Radio and Planet Rock. Prime Time Radio, a Saga owned-station, ceased broadcasting in May Together, the biggest digital-only stations captured a 1.2% share in Q Despite not enjoying nationwide distribution on DAB (though it is on Freeview), The Hits, owned by Emap, was the biggest digital-only commercial radio station, with a reach of 970,000 and over three million listening hours in Q Planet Rock had listening hours of almost two and one half million in Q and a reach of 461,000. Smash Hits had a reach over half a million and had two million total listening hours in Q (Figure 2.59). Figure 2.59: Commercial digital-only stations Commercial digital-only stations Listening hours Weekly reach (000s) (000s) The Hits Digital Planet Rock Smash Hits Digital Prime Time Q Digital Heat Digital Mojo Digital The Arrow One Word Core The Storm Source: RAJAR Q

99 Radio s audience peak comes at breakfast time and the home is the main listening location The pattern of listening over the course of the day remained stable over Breakfast is, as ever, the peak time for radio listening with listening declining gradually over the rest of the day. In Q1 2006, the breakfast audience stood at 14 million listeners; mid-morning attracted 11 million, while the afternoon audience was 9 million strong. Early evening held its audience at 9 million, but by evening time that figure fell to 4 million, with 2 million remaining overnight. (Figure 2.60). Figure 2.60: Patterns of listening across the day Listeners (millions) Breakfast Mid Afternoon PM Drive Evening Overnight Peak Morning Source: RAJAR Q1 2006, all listeners All BBC Network Radio All Local Commercial BBC Local/Regional All National Commercial Station popularity at breakfast followed a pattern comparable to the overall share of the radio market. Radio 1 and Radio 2 led with 7.7m and 6.1m listeners respectively. Radio 4 followed with 6.1m. Classic FM was the largest commercial national operator at breakfast with a reach of almost 3 million, followed by the combined listening to Virgin AM/FM stations with 1.2 million breakfast listeners (Figure 2.61). Figure 2.61: Breakfast-time reach of national stations Breakfast reach (000s) 10, , ` 6,000 4, , BBC Radio 1 BBC Radio 2 BBC Radio 3 BBC Radio 4 BBC Radio FIVE LIVE Classic FM talksport Total Virgin (AM/FM) Q Q Source: RAJAR Q

100 The location of radio listening in 2005 remained broadly similar to that in the previous year. Well over two-thirds of listening (70%) was in the home, followed by in the car (16%) and at work (13%) (Figure 2.62). The rising popularity of Podcasts may result in some changes to these patterns of listening, particularly among younger people. Figure 2.62: Location of listening Car 16% Elsewhere 1% Work 13% Home 70% Source: RAJAR Q1 2006, all listeners The listener profile continues to be skewed towards an older demographic Weekly listening patterns by demographic remained broadly stable in RAJAR s survey for Q revealed that, as in previous quarters, children (age 4 to 14) listened to less radio than other age groups (though listening is growing among this demographic). Respondents amount of listening tended to increase with age, peaking at 55 years and over. On average, men listened to the radio for over two hours longer per week than women, with C2DE listening exceeding that of ABC1s by two and a half hours per week (Figure 2.63). Figure 2.63: Demographic profile of overall listening Hours 30 Average listening 22.1 hours Children Adult men Adult women Children ABC1 adults C2DE adults Source: RAJAR Q1 2006, all listeners In aggregate, listeners to UK-wide analogue radio stations reflect a range of demographics. BBC stations, however, attracted a higher proportion of ABC1 and older listeners than their commercial rivals, while both digital and analogue commercial brands had a tendency to attract younger listeners (Figure 2.64). 99

101 Figure 2.64: Positioning of national radio stations/brands Choice The Hits Core Kiss 1Xtra Smash Hits Capital Life The Storm Kerrang! Q Younger Xfm Virgin Extreme Galaxy heat Radio 1 Virgin Groove Virgin Rock Virgin Century Heart Planet Rock 6 Music Yaar Mojo talksport Sunrise Magic oneword Radio 5 Commercial analogue BBC Commercial digital ABC1 Capital Gold Classic Gold Primetime Radio 2 LBC BBC7 Classic FM BBC World Radio 4 Radio 3 Gridlines mark UK population profile Source : RAJAR Q1 2006/RAB Note : Due to the relatively small audiences of some of the stations, their position from quarter to quarter may change significantly. Consistently high satisfaction with radio listening Ofcom s consumer research continues to point to a high level of satisfaction with UK radio output, with nearly half of all listeners registering their satisfaction with what they heard on the radio (Figure 2.65). Ninety-three percent said that they were either very satisfied or fairly satisfied with radio content, with just 5% expressing a mild or strong dissatisfaction with the output. Figure 2.65: Listeners satisfaction with radio content Percentage of respondents 50% 40% 45% 48% 30% 20% 10% 0% 4% Very satisfied Fairly satisfied Neither Fairly dissatisfied Very dissatisfied Source: Ofcom research, Q The research also suggests that listeners are highly satisfied with local coverage, particularly with local news, weather and traffic (all at around 70%). Around half were satisfied with coverage of local sports, events and community issues. The areas with the highest level of dissatisfaction were property (8%), local music / bands (7%), community issues (7%) and local politics (6%) (Figure 2.66). 3% 1% 100

102 Figure 2.66: How satisfied are you with the coverage of the following local issues and events on the radio? Percentage of respondents 80% 71% 68% 69% 60% 40% 53% 40% 49% 47% 36% 49% Satisfied 20% 0% 1% 2% 2% 3% 7% 6% 18% 8% 5% 6% 7% Dissatisfied Local news Local traffic & travel Local weather Local sport Local music / bands Local events Property Local advertising Politics Community issues Note: Remaining percent are don t knows Source: Ofcom research, Q Ofcom s research points to a degree of loyalty among radio listeners to a relatively small number of stations. Eighty-seven percent of those surveyed listened on average to three or fewer stations (Figure 2.67). Figure 2.67: In an average week how many different radio stations do you choose to listen to? Percentage of respondents 50% 40% 30% 41% 30% 20% 10% 0% 16% 7% 2% 2% One Two Three Four Five Six or more Source: Ofcom research, Q Loyalty to a small number of stations does not seem to be driven by a lack of variety. Satisfaction with the choice and range of radio stations is high, at 89% (very or fairly satisfied). Just 6% were very or slightly dissatisfied (Figure 2.68). 101

103 Figure 2.68: How satisfied are you with the choice of radio stations available in your area? Percentage of respondents 50% 40% 30% 20% 40% 49% 10% 0% 5% 2% 2% Very satisfied Fairly satisfied Neither Fairly dissatisfied Very dissatisfied Source: Ofcom research, Q Listeners in Scotland and Northern Ireland prefer local radio Analysis of listening patterns by nation exposes some significant behavioural differences in particular, listening in Scotland and Northern Ireland demonstrates a preference for local output. In Scotland, local commercial radio registered the highest share of listening of any station category (43% against a UK average of 32%). The BBC network s share of 36% in Scotland was correspondingly lower than the UK average of 42% (Figure 2.69). In Northern Ireland, the BBC network s share of listening was the lowest in the UK at 27%, a full 17 percentage points below the UK average of 44%. However, listening to BBC local and national services, Radio Ulster and Radio Foyle, at 27%, stood much higher than the UK average of 11%. With overall BBC share in Northern Ireland (at 54%) comparable to the UK average (55%), this points to a substitution of network listening for local and national radio listening. Listening patterns in Wales were similar to the UK average, with the BBC attracting a 60% share overall, commercial radio 36%, and other stations 3% (compared to UK averages of 55%, 43% and 2% respectively). Listening in England followed the UK national pattern mainly because the English population accounts for a substantial proportion of all listening hours. 102

104 Figure 2.69: Share of listening hours by nation Percent of listening hours Other Local Commercial National Commercial BBC Local/National BBC Network 100% 80% 60% 40% 20% 0% 2% 3% 3% 32% 24% 43% 11% 12% 11% 10% 14% 9% 45% 36% 46% 2% 9% 32% 27% 10% 11% 11% 27% 44% 27% England Scotland Wales Northern Ireland UK TOTAL Average weekly listening 24.0 hours 22.4 hours 23.8 hours 22.3 hours 23.8 hours Reach 89.5% 89.7% 90.2% 89.7% 90.0% Source: RAJAR Q1 2006, all listeners Level of listeners offence to radio content remains unchanged The Ofcom research regularly asks people Have you ever found anything on radio to be offensive?. The majority, 75% (86% in 2004), had never been offended by radio content, with 16% rarely offended by radio content. Ten percent registered occasional or frequent offence (Figure 2.70). 103

105 Figure 2.70: How often have you found radio to be offensive? Percent of respondents 80% 70% 60% 50% 40% 30% 20% 10% 2% 0% 8% Frequently Sometimes Rarely Never Source: Ofcom Q (Figures are rounded). Of those who claimed they had been offended, 53% felt that the offensive material should not have been broadcast on the radio, although a significant minority (35%) felt that it should (and 12% didn t know). The main response of those offended was to switch off the radio or switch over the station (44% and 29% respectively) (Figure 2.71). 16% 75% Figure 2.71: Action taken as a result of offence Percent of respondents 50% 43% 40% 30% 20% 10% 0% 20% 21% Switched off Switched over Did nothing/continued listening 15% Discuss with other people 3% Complain to broadcaster 0% Complain to regulator 6% Other Source: Ofcom research Q Base: All who had been offended by a radio programme 104

106 The Communications Market Telecommunications 105

107 Contents 3.1 Key themes Telecoms prices fall, driven by increased competition Broadband gets faster, but consumers are unaware of small print TV comes to mobile and broadband Over half of online year olds regularly use social networking websites The year in telecoms Fixed-line revenue falls again, but mobile and broadband continue to 112 grow Mobile TV and internet TV take big steps forward LLU takes off, spurred by new regulatory environment Broadband pricing gets aggressive Major mergers and acquisitions drive bundling strategies Residential VoIP gains traction G grows further WiFi gets joined up The telecoms industry Introduction Total telecoms turnover rises to 46.6bn BT remains the largest UK telco Mobile continues as the dominant contributor to UK revenue Market share of telecoms connections continues to fragment Mobile connections grow while fixed lines fall Fewer fixed lines, despite increased competition Fixed-line call volumes decline Fixed-line charges fall again Total fixed-line voice revenue continues to drop CPS continues strong growth Competition further dents BT s fixed-line volume share Broadband continues as the fastest-growing telecoms platform BT increases its share of the wholesale broadband market BT remains the market leader in broadband retail subscriptions

108 Mobile remains the most important telecoms revenue generator Mobile termination rates fall again Off-net mobile prices fall steeply Mobile subscriptions continue strong growth For business users, mobile spend eats further into fixed-line BT halts its decline in business fixed call volume share IP-based solutions for corporate customers offer further growth for 153 fixed network providers 3.4 The telecoms user Introduction Slight decline in household spend on telecoms services Mobile penetration now at near-saturation, internet still rising Mobile gaining ground as main method of making calls SMS usage continues to grow BT volumes fall further as switching levels increase Residential prices continue to fall across the board Residential consumers are broadly satisfied with fixed and mobile 163 services Non-SMS mobile data use starts to grow Internet take-up grows, fuelled by broadband Availability and take-up of higher-speed broadband both grow Some consumers are still confused about broadband limitations Most non-internet homes are voluntarily excluded A higher proportion now use the internet every day Broadband subscribers download more video/audio than dial-up 170 subscribers Google tops the online destination charts Social networking and blogging sites take off Residential satisfaction with internet services grows SME mobile penetration falls Business fixed-line spend falls again as business fixed-line call volumes continue to decline Larger SMEs switch fixed calls and mobile suppliers more often Broadband now dominates SME internet connectivity

109 3.1 Key themes Telecoms prices fall, driven by increased competition During 2005, prices of all main telecoms services fell to new lows. Our analysis shows that a household basket of residential services (comprising one fixed-line connection plus calls at 2005 volumes/line, two mobile subscriptions plus calls at 2005 volumes/subscription, and one broadband connection), has fallen by over 30% in real terms since 2000, to around 76/month (Figure 3.1). Figure 3.1: Real price of a basket of residential telecoms services per month (2005 prices) Broadband Mobile voice & text Fixed voice calls Fixed access Source: Ofcom/operators Note: Includes VAT; excludes NTS voice calls Prices have been driven by strong competition among operators over the past couple of years, and by falling costs. Consumers can now choose between a multitude of fixed-line call operators, mobile service providers and broadband players. Some of this competition has been facilitated by the opening up of incumbents networks, aided by regulatory intervention where necessary Broadband gets faster, but some consumers are unaware of limitations By the end of March 2006, there were 11.1 million broadband connections to homes and smaller businesses in the UK, making it a truly mass-market product for the first time (Figure 3.2). DSL broadband at a minimum of 512kbit/s is now available to over 95% of homes and businesses in the UK, in addition to the 45% of UK homes passed by cable broadband. 108

110 Figure 3.2: Internet connections by type Millions Dial-up Q Source: Ofcom Broadband In addition to widespread availability, consumers now have an increased choice of broadband service providers. Over DSL, BT has for many years provided wholesale access to alternative ISPs via its DataStream and IPStream products, essentially enabling these other ISPs to resell retail services over BT access lines. During 2005 and the first half of 2006, alternative DSL operators also stepped up their investments in local loop unbundling (LLU), which enables them to take over exchange lines from BT and offer their own broadband products to consumers. LLU is discussed in more depth in section BT itself introduced a new combined broadband and wireless IP telephony product in June 2006 the first time that a major UK broadband ISP has fully integrated voice over IP (VoIP) into its offering. Together with the cable operators and the fast-growing wireless broadband sector, consumers have never had more choice of broadband products, pricing packages and access platforms. This in turn has fuelled the growth of broadband take-up and consumption. In general, consumers in the UK are becoming increasingly familiar with broadband and the issues surrounding it. However, our research indicates that the majority of consumers are still unaware of two issues that might affect their user experience: contention ratios and usage caps. Both terms are defined and discussed in length in section 3.4; in short, contention ratio is a measure of the number of users simultaneously sharing bandwidth, and usage caps are limits on the volume of data that each user can download in a given time period (usually per month). Both contention ratios and usage caps are near-ubiquitous in broadband service agreements. Most users are either unaware of the terms and/or the underlying concepts, or have an incorrect understanding of how these terms apply to them. For example, 90% of all adults with broadband connections had never heard the term contention ratio. Similarly, over 70% believed that there was no usage cap on their broadband connection. At present, the broadband user experience is rarely affected by either contention ratios or usage caps, apart from for users who regularly download large amounts of content. To date, internet operators have progressively introduced more capacity into their broadband networks to minimise the impact on end-users. However, the twin issues of contention ratios and usage caps could become more significant as increasing numbers of consumers start to use high-speed broadband connections, 109

111 particularly for services such as streaming TV which require large volumes of data at a constant delivery rate TV comes to mobile and broadband During 2005 and the first half of 2006, the availability of TV programming over both mobile and broadband platforms increased significantly saw 3G mobile networks introduce streaming TV channels as part of their product sets, and a number of mobile operators also trialled TV using a variety of technologies. Over the internet, the BBC conducted a major trial of broadband TV, and has begun to offer a number of archive programmes for download via its website. BSkyB has also moved into the internet video market, with its Sky by Broadband product, and ITV has plans to accelerate IPTV rollout over the coming year. Homechoice, which has been offering TV services over broadband since 2002, now has around 45,000 subscribers in the London area. These developments are an important step in the evolution of the internet and mobile markets, as they signal a significant stage in the convergence of PCs, mobile devices and home entertainment systems. New devices are expected to exploit this potential, with set-top boxes containing DSL connections for broadband connectivity already in production (for example, BT Vision s Philips-made set-top box). From a service provision perspective, operators with mobile, internet and traditional TV divisions will be able to offer an enhanced TV-based product that operates over all of these platforms. These operators may also face competitive pressures from owners or aggregators of content (such as itunes, Sony, Google, BSkyB or the BBC), who see these platforms as new delivery mechanisms Over half of online year olds regularly use social networking websites During 2005, the internet became an increasingly important resource for keeping up social contacts and establishing new ones, and for the use of personal homepages and online journals. This may be due to a combination of the network effect of increasing always-on broadband connections, and the increasing ease of use of the underlying online applications saw particularly high growth in the popularity of social networking websites: portals such as MySpace and Bebo were among the UK s top 10 most visited sites in April 2006, attracting significant monthly audiences. Our primary research showed that over two in five adults with the internet had used social networking websites for keeping up with friends. The age group showed even higher levels of participation: 70% have used these types of websites, with over half doing so on at least a weekly basis. At least 14% of all adult internet users had posted material to a weblog or general website, by either writing a comment or posting a photo or video. Again, this proportion was far higher among the young 37% of year-olds reported that they had posted. Additionally, our research suggests that over one million UK adults have used the internet as a way of publishing content and opinion: this suggests either that consumers have gained a new voice via the internet, or that they are bypassing traditional media platforms. The high growth in social networking sites and in other areas of user-generated internet content does not seem to be merely an ephemeral phenomenon. Many industry observers believe that this could signal the next stage in the democratisation of the internet meaning that consumers are no longer merely end users of information and services provided by a smaller number of hosts/content generators, but instead are increasingly becoming both consumers and generators themselves. The growth in social networking sites also brings with it a number of 110

112 important opportunities and concerns. For example, is it possible for commercial entities to make money from these types of sites? And is it possible or desirable to control content over the internet, when potentially billions of individuals can now generate, aggregate and disseminate information across the globe? Our research findings and a further discussion are included in section

113 3.2 The year in telecoms Fixed-line revenue falls again, but mobile and broadband continue to grow Total 2005 telecoms revenue was 46.6 billion, of which 38.3 billion was retail revenue (i.e. revenue from end-users); retail revenue rose by 5.5% compared to Mobile telecoms comprised 13.1 billion (34%) of total retail telecoms revenue up from 12.1 billion in 2004 and fixed line revenue fell from 10.8 billion in 2004 to 9.8 billion in Internet (including broadband) rose by 17% to 3.4bn. 31% of 2005 UK call volumes were from mobiles a rise of three percentage points from 2004, and 11 percentage points higher than in By the end of 2005, almost six million of BT s fixed exchange lines took some or all of their voice services from another operator using carrier pre-selection (CPS) 1.2 million more lines than at the end of By the end of March 2006, 11.1 million of the UK s homes and small businesses had broadband internet connections; over 7.5 million of these connections were via DSL, compared with 5 million DSL connections a year previously Mobile TV and internet TV take big steps forward During 2005 and early 2006, a number of significant developments took place in the evolution of broadband and mobile as distribution platforms for TV services. The main developments are outlined below, together with an analysis of the potential issues surrounding these new methods of TV delivery. Mobile operators launch TV services over 3G In the second half of 2005, most of the UK s network operators introduced live streaming TV over 3G. The pricing structure differs for each operator s offering subscribers pay a charge for a package of programmes, but this is either for a set time period (usually a month), or for a certain number of viewing hours. Streaming TV is very bandwidth-intensive, so the per viewing hour pricing model might become more prevalent as subscriber uptake increases. O2 trials TV over DVB-H In September 2005, mobile operator O2 began a trial of mobile TV using DVB-H technology, in conjunction with broadcaster Arqiva. DVB-H (Digital Video Broadcasting - Handheld) is a one of a number of standards for transmitting TV signals to mobile devices, and was developed in part by Nokia. It has been adopted as the preferred standard by ETSI (European Telecommunications Standards Institute) and the EBU (European Broadcasting Union). The trial took place in the Oxford area among 375 volunteers, using speciallydeveloped Nokia devices, and showing a variety of broadcast TV channels (including all five free-to-air channels, CNN, Sky News and MTV). The results indicated that viewers watched on average over three hours of mobile TV per week, with each viewing session lasting an average of 23 minutes. Perhaps surprisingly, 36% said they used the service most often when they were at home, and the most popular viewing times were before 9am, between 12pm and 2pm, and between 6pm and 8pm. 112

114 BT and Virgin Mobile trial TV over DAB In mid 2005, BT and Virgin Mobile teamed up to trial the BT Movio (previously known as BT Livetime) mobile TV service, using the existing DAB network and technology. The trial was conducted with about 1,000 users in the London area, who were issued with Trilogy smartphones which were developed in part by BT, and which are capable of receiving DAB mobile TV as well as DAB radio. The DAB-IP standard used by BT for mobile TV broadcasting differs from DVB-H in that it uses a different technical standard (known as Eureka 147) and different area of the radio spectrum. The trial indicated that users watched an average of 66 minutes of TV per week, and listening to an average of 95 minutes of radio per week over the same device. This compares with reported viewing of around three hours per week in the O2 trial. As with the O2 trial, the most popular viewing times were early in the morning or in the early evening, and again a surprising amount of mobile TV viewing took place within the home. New broadband TV trials and service launches take place Over the year to May 2006, several of the UK s major broadcasters and internet service providers either conducted trials of broadband TV, or started offering commercial IPTV-based services. These are summarised in Figure 3.3 below: Figure 3.3: Trials or launches of IPTV services during 2005 and 2006 Company Date of trial Details or launch BBC Sep 2005 Launched Integrated Media Player (imp) branded MyBBCPlayer to 5,000 trialists until February Runs on Microsoft Windows; allows users to download TV and radio programmes from the bbc.co.uk website to their PC and watch or listen to them for seven days after the transmission date. Trial used Microsoft DRM (Digital Rights Management) to delete programmes seven days after airing (and to prevent users from ing files or sharing them via disc), and used Quova s GeographicIP technology which the BBC claims is '99.8% effective' in ensuring that only viewers in the UK can use the service. Exploited peer-to-peer (P2P) distribution technology from Kontiki (P2P enables content to be delivered to a user not only from the BBC server where it originates, but also from other users online PCs that have copies of the requested content). BSkyB Jan 2006 Launched Sky by Broadband video download service which delivers movies and sports clips via broadband, also using Kontiki s peer-to-peer solution. Sky s ownership of movies and sports content is critical, as both are proven drivers of consumer demand in multichannel TV. The service is available to eligible Sky digital customers at no extra charge. Typically customers have a 30-day window to watch over 1,000 movies (at present the offering has only a limited number of box office hits or must have titles). 113

115 Company Date of trial Details or launch AOL Early 2006 Launched broadband-to-pc TV service In2TV. Claims to offer the largest collection of free television shows on the web, featuring classic archive episodes in genrethemed channels, viral videos (video clips that become widely downloaded owing to fame or notoriety of their content) and interactive games. Again, the peer-to-peer download mechanism is based on technology from Kontiki. BT Sep 2006 BT Vision launch planned for Q The service will use dedicated set-top boxes to deliver on-demand programming to the television, rather than to the PC. Packaged (or linear) TV channels will be delivered through a Freeview connection. However, BT has reportedly encountered difficulties with both hardware and software development, which may result in a delayed launch. Channel 4 Mid-2005 Launched its IPTV documentary service, FourDocs. MTV Apr 2006 Launched its Overdrive service in the UK in April 2006, featuring music videos, news and movie trailers. Issues facing TV over mobile and broadband Despite the small-scale introduction of TV services over these new platforms, some significant challenges lie ahead before mobile TV and IPTV become truly massmarket products. These are mainly technical issues, most of which concern capacity constraints at various points of the delivery network. The major challenges can be categorised as follows: Last-mile broadband connectivity: In the UK, most broadband connections are either DSL connections using copper twisted-pair networks, or cable connections over the cable operators fibre and coaxial networks. DSL subscribers, in particular, may suffer in an IPTV world from a capacity bottleneck between the local exchange and the home. Current DSL technology typically allows for data to be delivered downstream at between 512kbit/s (for premises situated over 10km from the exchange) up to as much as 24Mbit/s (for premises with less than 1km or so of copper wire between them and a suitably-equipped exchange). The average connection speed is now around 2Mbit/s, with 8Mbit/s becoming increasingly common. For cable subscribers, 10Mbit/s is becoming a standard connection speed, requiring relatively modest network upgrade, and some analysts estimate that as much as 100Mbit/s could be achievable following the deployment of new network equipment. Given that standard TV-quality video requires a constant 3Mbit/s per channel, and HDTV requires over 6Mbit/s (using MPEG-4 encryption), it is clear that the constraints of the local loop might prove a barrier to the widespread rollout of IPTV, particularly in HDTV format. However, as DSL technology improves, and as compression technology further reduces the bandwidth requirements of streaming TV, this may become less of an issue in the future. However, a further (and, as yet, lesser-known) issue may have an important impact on the commercial viability of mass-market IPTV. This issue is called 114

116 contention a measure of how many users are simultaneously sharing the same bandwidth (see below). Operators are likely to invest in improving contention ratios as and when demand for high-bandwidth streaming services such as IPTV increases. Internet backbone capacity: As more and more users demand video content via the internet, an increasing strain will be placed on the core internet network that connects servers to homes, and which crosses the globe. The internet was designed primarily to handle short bursts of information that could be split up into smaller packets, routed to their destination in any order, then reassembled into a coherent collection once they reached their recipient. Applications such as streaming TV, on the other hand, require the internet to carry a constant high-bitrate stream of information, and reassemble it in more-or-less real time so that the recipient can watch live TV. This places a large extra burden on the network, as does the sheer volume of information involved when transporting millions of individual TV videostreams. In order to reduce demands on both the core networks and host servers (as well as a way of reducing central content storage costs), IPTV operators have pioneered the use of peer-to-peer (P2P) technology. This allows users to access their desired video content from multiple sources the original host (e.g. the BBC), plus any other individual users who are online and who have previously downloaded the same content. This creates a mesh network, where individuals act effectively as mini-hosts, thereby spreading traffic flows. However, the two major constraints of P2P are that it is virtually incapable of handling live streaming video (it can only be used for archive downloading), and that users who receive content from a peer mini-host are limited by the peer s uplink speed which is typically far lower than the user s download speed due to the asymmetric nature of most broadband connections. Even when P2P technology is deployed, the signs are that core networks could become congested. For example, industry traffic analysts estimate that currently over 40% of the world s total core internet traffic is attributable to just one P2P technology, BitTorrent. At an ISP level, many operators are refusing to support IPTV multicasting where multiple users share a single video stream owing to its high demands on the network. In the UK, the BBC, ITV and Channel 4 have all announced multicast trials or roll-outs of their digital channels. However, ISPs serving over 70% of broadband connections (including BT and AOL) will not carry multicast IPTV at present. User experience: The success of TV delivery to mobiles and via DSL may be largely dependent on the quality of the user experience. This experience includes the device over which the programmes are viewed, the quality of service, and the environment within which viewing takes place. For mobile TV, the form factor (the look, shape and design), battery life and usability of consumer devices are all likely to be important; despite strong recent improvements, analysis of current (and prototype) handsets shows that there may still be some way to go before the right design, technology and manufacturing processes are found. For broadband TV, the major issue is the viewing environment. At present, nearly all IPTV is delivered to, and viewed at, the user s PC. The PC itself is often situated in a part of the house that is inconvenient for TV viewing, and almost never in front of soft furnishing. It is unclear whether, for example, 115

117 films (a sit back in comfort experience) will see much demand in a sit forward at your PC environment. Operators and hardware manufacturers recognise this anomaly, and have started to devise ways of either shifting downloaded content to the main home entertainment centre (e.g. the main TV/PVR/VCR system) via mechanisms such as wireless transfer, or providing a DSL feed direct into the home hub (e.g. BT Vision s Freeview/DSL set-top box). Spectrum: For delivery of TV to mobile devices, access to sufficient amounts of spectrum and the efficient use of that spectrum is paramount. Use of the 3G networks for streaming video delivery uses significant portions of total 3G spectrum availability. 3G may therefore be used to deliver on-demand programming (for example, user-requested music videos), rather than linear broadcast TV. However, new technologies that sit operate over 3G spectrum, such as TDtv and others, may be used in the future for broadcast TV over 3G, though the development of the MBMS standard offers a way of using 3G capacity much more efficiently for this purpose. There is a wide range of alternative broadcast mobile TV technologies, such as DVB-H, T-DBM, DAB and MediaFLO. These could allow multi-channel broadcast without using any of the 3G spectrum (which could still be used for voice and advanced data services). However, this would require subscriber handsets to be capable of multi-technology operation (at least a combination of 3G and another technology) over various frequency ranges. Additionally and importantly it would require access to additional quantities of radio spectrum. Rights/regulation: These new TV delivery platforms, particularly broadband TV, present significant challenges surrounding rights management and regulatory policy. The whole issue of digital rights management remains complicated, despite numerous solutions that seem effective, but which are proprietary and closed. Geographic IP address recognition software can be used to limit access by location, and copy-protection software can guard against unauthorised file transfers and, if required, delete programmes after a defined time period. However, the vastly-distributed nature of the internet still gives rise to major rights issues, particularly over high-value rights such as premium sports or movies. The broadcasting, internet and software industries are expected to address, and hopefully solve, most of these issues over the next 2-3 years. The negotiation of programme rights and windows remains critical and is likely to be the subject of ongoing discussion with organisations such as PACT (the independent television producers association). Regulatory issues will also play an important part in the roll-out of TV over broadband and mobile. At an international level, governments and regulators will need to decide whether video content over these new platforms should be licensed, and whether it is desirable or even possible to regulate TV content over mobile and broadband. A separate regulatory issue concerns the role of the BBC: a full-scale rollout of the MyBBCplayer IPTV product would be subject to the BBC s new Public Value Test (PVT). Under new government policy this will be the first time the test which will be required for all new BBC services, and which includes a market impact assessment to be carried out by Ofcom is applied by the new BBC Trust. 116

118 3.2.3 LLU takes off, spurred by new regulatory environment In the year to May 2006, local loop unbundling (LLU) began a period of significant growth in the UK. LLU essentially entails an alternative telecoms service provider placing equipment in a given BT exchange, which then enables that provider to take over from BT (or Kingston Communications in the Hull area) the operation of any local line between that exchange and the premises of any user on the exchange. Up until mid-2005, LLU growth in the UK was relatively slow (70,000 unbundled lines by the end of June 2005); by the end of 2005, there were only around 210,000 unbundled lines representing 2% of all broadband connections. However, during 2005 a number of major service providers started to offer services over LLU, and take-up gathered pace by the end of March 2006 there were 360,000 unbundled lines, representing growth of over 70% in the first three months of the year (Figure 3.4). By the end of June 2006, this number had increased further, to 580,000. Figure 3.4: Unbundled local loops 000 s Q Q2 Q3 Q4 Q Q2 Source: Office of the Telecoms Adjudicator This increase in LLU uptake was due in no small part to the commitment of investment and marketing resource by LLU operators, under a new regulatory regime that offered these operators more certainty surrounding costs and provision. In particular, the following took place during 2005: There were ongoing improvements in products and systems facilitated by the Office of the Telecommunications Adjudicator There was development of the bulk migration processes that allowed ISPs to easily migrate from using BT s wholesale broadband products to LLU. The intention behind these bulk migration processes is to enable high volume-perday deployments of unbundled lines, based on projected demand. The implementation of these processes started in earnest in the autumn of There were improvements in the quality and performance of LLU. There were reductions in certain LLU prices, on top of earlier reductions in As part of BT s Enterprise Act Undertakings BT has to provide equivalent access services to its competitors as it does to other parts of BT. This agreement was followed by the creation of Openreach, a new arm s-length

119 business unit of BT dealing exclusively with network operation and provision to third parties including provision to BT s own retail services arm. Increased speed on LLU LLU allows providers to use different technologies from BT, such as ADSL2+, which enables broadband services at much higher speeds than the first wave of ADSLbased services. New alternative LLU operators such as Bulldog, Easynet and Be continued their roll-out of service offerings of up to 24Mbit/s broadband throughout the first half of 2006, with up to 8Mbit/s services becoming a standard offering from the majority of providers. Higher-speed DSL in trials A potential future technology is very high bit-rate DSL (VDSL and VDSL2) deployment, which can provide downstream speeds of up to 50Mbit/s (although VDSL2 is theoretically capable of as much as 250Mbit/s), and upstream speeds in the region of 25Mbit/s. Ntl carried out a VDSL2 trial in Kent in early 2006, achieving typical downstream speeds of around 50Mbit/s. LLU consumer switching problems As LLU take-up has increased, levels of switching service provider have increased amongst end-users looking for improved pricing or service offerings. The process of switching broadband suppliers is technically complex, and generally the processes and systems within LLU operators have evolved to support consumer switching. However, there is often reluctance among some service providers to provide a Migration Authorisation Code (MAC) a necessary step in the switching process as it enables identification of the line in question, and must be passed on to the new service provider by the switching consumer. In April 2006, Ofcom announced that it would be working closely with Openreach and LLU operators to improve the processes for allowing easy consumer switching, and issued a public consultation on this subject Broadband pricing gets aggressive Throughout 2005, broadband prices continued to decline as speeds increased. These trends were driven by a combination of lower equipment costs, increased growth and scale, and more competition particularly from LLU operators. Figure 3.5 below indicates that the average cost of a 512K broadband access fell from 30 to 16 over the course of the year. Recent announcements by Carphone Warehouse and Orange would seem to indicate that price erosion is continuing, with operators keen to bundle broadband with other offers in order to tie consumers in and maximise price reductions. 118

120 Figure 3.5: Comparison of average broadband prices over time per month Source: Ofcom / operators 512kbit/s 1Mbit/s >1Mbit/s Over 2005, nearly all of the major broadband service providers lowered their prices for each given connection speed. Figure 3.6 shows how the main ISPs reduced prices over the three years to May 2005, and also how their product suites moved higher up the speed curve. In this context, it is worth noting that most DSL offerings as of May 2006 were marketed as up to X Mbit/s. 119

121 Figure 3.6: Comparison of broadband offerings by major ISPs Max speed Dec 02 Dec 03 Dec 04 May 06 Mbit/s BT NTL Telewest AOL Wanadoo / Orange Tiscali NOTE: These prices represent the cheapest service on offer (excluding introductory offers), and do not take into account capacity limits Source: Ofcom/operators 120

122 Bundled pricing heralds the introduction of free broadband In March 2006, broadband pricing models evolved dramatically, with the introduction of free broadband by Carphone Warehouse (CPW). CPW s offer was designed to translate its existing fixed-line customer base into broadband subscribers, and also to attract new customers to its combined product set. The bundled pricing offer gave customers within its exchange footprint who signed up to its fixed-line line rental product plus monthly call bundle (for a combined 20.99/month) a free broadband internet connection. The broadband service is a constituent of the total bundle price (implying a lower price for the fixed-line elements of the bundle). The offer has been very successful for CPW in June 2006, the company announced that it had signed up 340,000 new broadband customers in the eight weeks since launch, causing backlogs in installation. Other operators have now begun to respond to the success of CPW s marketing and pricing strategies. Orange (having re-branded its Wanadoo ISP to Orange Broadband in early 2006), launched a free broadband offer in May 2006 to customers who took certain monthly-contract Orange mobile services. In June 2006, mobile network operator O2 announced that it was to acquire LLU internet player Be; most analysts believe that O2 will use the acquisition as a means to offer fixed/mobile/broadband service bundling. In July 2006, BSkyB announced that it would offer free broadband at 2Mbit/s to all Sky TV subscribers. Other operators are reportedly considering similar approaches. However, the success of such a strategy relies on operators having reach across various communications segments (mobile + broadband, cable TV + broadband, fixed-line + broadband, or any combination), and careful control of costs and investment Major mergers and acquisitions drive bundling strategies During the second half of 2005 and early 2006, there was a range of corporate activity in the telecoms sector. These mergers and acquisitions (M&A) have reshaped the UK telecoms landscape to a significant degree, and have resulted in increased opportunities for operators to bundle services either at a marketing, pricing or billing level, or potentially as a truly converged package. A brief summary of the main pieces of M&A activity is included below. Ntl and Telewest combine, then ntl acquires Virgin Mobile In October 2005, ntl announced an agreed bid of around 3.4 billion for rival cable operator Telewest (subsequently technically restructured as a takeover of ntl by Telewest, in order to avoid change-of-control conditions for Telewest). This deal passed clearance from the Office of Fair Trading (OFT) in December 2005, and completed in March Subsequently, the newly-enlarged ntl announced an agreed 919m bid for Virgin Mobile, which had over 4 million mobile subscribers as of March The combined ntl:telewest had 5.1 million subscribers as of March 2006, of which over 2.2 million were broadband internet subscribers. The combined companies cable networks currently pass around 12.6 million of the UK s 25.1 million homes. When Virgin Mobile was added, the enlarged company had 9.2m revenuegenerating units (although it is unclear how many Virgin Mobile subscribers are also ntl:telewest cable customers). The new company could become the first in the UK to be able to offer quadruple-play services spanning pay TV, fixed-line telephones, mobile and internet. This in turn 121

123 could act as a driver for convergence of services and devices, particularly in the area of fixed/broadband/mobile convergence using voice over IP technology. BSkyB buys Easynet Also in October 2005, BSkyB announced a recommended bid for LLU (local loop unbundling) operator Easynet for 211 million. The transaction was cleared by the Office of Fair Trading in January 2006, and completed in February In buying Easynet, BSkyB has added a major UK distribution platform to its satellite network. Easynet will provide Sky with high-speed broadband access to around 6 million UK households through unbundled local exchanges the operator has already unbundled 232 UK exchanges covering 4.4 million UK households, and has plans to unbundle up to a further 120 during 2006). In July 2006, BSkyB announced that it would offer free broadband via Easynet to all of its satellite TV subscribers. BSkyB has stated that broadband offers a significant opportunity to evolve its business model, offering a potential source both of new customers and of new revenues. Broadband connectivity will allow BSkyB to offer advanced interactive, targeted services and programming (for example, full on-demand operability and narrowcasting) a facility that is difficult if not impossible to achieve over a satellite link, even with a telephone return path. BSkyB has also stated that a broadband strategy is essential for it to best compete in a rapidly converging landscape. The prospect of home hubs and device convergence is coming ever closer as broadband speeds increase, devices become more intelligent and more unified, and home data storage becomes smaller and cheaper. Cable & Wireless acquires Energis In August 2005, Cable & Wireless (C&W) issued an agreed bid of 780 million for Energis, which completed in early By acquiring Energis, C&W has cemented its position as the second operator in the UK business telephony and data services sector, behind BT. Energis owned significant amounts of fibre network infrastructure, which, when combined with C&W s IP backbone network, creates a powerful facilities-based operator capable of delivering next-generation products and services. C&W announced at the time of the bid that it believed it needed to become a largerscale operator in order to compete effectively in the UK communications market. Energis gives it a greatly enhanced presence in the corporate and large business market, and is seen by analysts as the last major acquisition-related piece in the jigsaw for C&W s corporate strategy. C&W announced in February 2006 that it was to separate into two distinct business units UK and International. In June 2006, C&W UK announced that it would focus exclusively on wholesale and corporate services, and that it would convert Bulldog into a wholesale LLU operator offering broadband access services to third-party internet service providers. Telefonica acquires O2 In January 2006 Spain s Telefonica acquired UK mobile network operator O2, in a deal worth around 17.7 billion. The acquisition was cleared in early January by the European Commission, which had been concerned about potential distortions in international roaming charges. In return for the Commission s approval, Telefonica has undertaken to withdraw from its international cellular roaming alliance with Deutsche Telekom, France Telecom and Telecom Italia. 122

124 In acquiring O2, Telefonica has gained control of a UK nationwide 2G network and partial-coverage 3G network, together with almost 16 million directly-controlled UK customers (plus a further 1 million through the Tesco Mobile MVNO joint venture). It also now controls O2 s operations in Germany (9.8 million subscribers) and Ireland (1.6 million subscibers). In the year to March 2005, O2 generated revenues of 6.7 billion, EBITDA of 1.8 billion, and pre-tax profit of 309 million. One of the more compelling reasons for O2 to accept the Telefonica offer was the geographic fit: there is no overlap between the two companies operations, and Telefonica s strength in Spain and Latin America fits well with O2 s northern European presence. Telefonica has a strong corporate fixed-line presence in Germany (Telefonica Deutschland), which it plans to merge into O2 with the aim of offering fixed-mobile convergence (FMC) services to business customers. Telefonica has stated that O2 will retain its brand, and will continue to be based in the UK, with a management board reporting to the Telefonica main board in Spain. O2 s CEO Peter Erskine remains in charge (as Chairman and CEO), and also joined the main board of Telefonica. The acquisition of O2 means that all but one of the UK s mobile network operators with the exception of Vodafone are now owned by companies based outside the UK. Bundling gains ground 2005 and early 2006 saw a marked increase in the types of bundled services that were both offered and taken up in the UK. This was mainly due to the increased number of operators that developed the facility to offer bundles for the first time, particularly in the area of broadband/fixed-line bundling. Figure 3.7 shows how the number of households taking broadband/fixed and broadband/fixed/cable TV bundles increased over the year to Q1 2006: Figure 3.7: Number of bundled households for broadband/fixed-line and broadband/fixed-line/pay-tv services Households 000 s Source: Ofcom research The increase in penetration of these particular double- and triple-play bundles is reflected in their relative representation in the total spectrum of bundled services: by Q1 2006, broadband/fixed and broadband/fixed/pay-tv bundles made up 58% of all bundles, compared with 42% a year previously (Figure 3.8) Q Q Q Broadband + fixed + cable TV Broadband + fixed 123

125 Figure 3.8: Proportion of bundled services by type Proportion of bundles 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Ofcom research 14% 13% 9% 5% 4% 4% 13% 15% 16% 16% 23% 19% 18% 13% 12% 36% 40% 30% Q1 05 Q3 05 Q1 06 Other Fixed, Dial-up & MCTV Fixed & MCTV Fixed & Dial-up Fixed, BB and MCTV Fixed & BB Definition of triple-play and quadruple-play services Multi-play (or service bundling) is a marketing term describing the provision of different communications services by organisations that traditionally only offered one or two of those services. Multi-play is a catch-all term; usually, the terms triple-play or quadruple-play are used for a more specific description (high-speed internet, television, and telephone; and high-speed internet, television, telephone, and mobile phone services respectively). Challenges in delivering bundled services The challenges in offering increased service bundles are mostly associated with determining the right business model, backend processes, customer care support and economic environment, rather than technology. For example, using the right billing platform to address a variety of subscriber demographics, or having the appropriate subscriber density to financially justify introduction of the service, can greatly affect the viability and success of multi-play services. In addition to these challenges, there are a number of technical issues associated with the rollout of service bundles. Voice, video and high-speed data all have different characteristics, and consequently place different burdens on the network that provides access to these services. Voice services (if delivered via IP networks) are greatly affected by jitter (the variation in the time between packets arriving via the network), whereas packet loss or packet re-ordering has a greater effect on video and data services. If the same access network and network resources are being used for the delivery of the service bundles, then some kind of Quality of Service mechanism generally needs to be employed. Developments in bundling offers Throughout 2005 and early 2006, there were a number of market developments that helped to stimulate bundling. In addition to the mergers and acquisitions described above, a number of other important developments took place: Orange and Wanadoo: As part of France Telecom s new convergence strategy, Wanadoo UK was re-branded as Orange Broadband in May

126 Orange now markets bundled broadband, fixed-line and mobile services under a unified brand and billing structure. Improved terms for wholesale line rental (WLR) and LLU: Regulatory policy has brought lower prices and increased investment security to the WLR and LLU markets, resulting in more operators gaining the confidence to expand into these areas from their traditional platform bases. Technology developments in bundled services The following developments have either stimulated the provision and take-up of bundled services, or are forecast to have an increasing influence over the next 18 months: IP Multimedia Subsystem (IMS): IMS is a standardised Next Generation Networking (NGN) architecture for telecom operators that want to provide mobile and fixed multimedia services. Although converged service provision over IMS is not likely to materialise for a few years, industry players are building momentum to put themselves in a favourable position to use IMS for multi-play services. High-speed mobile: Increased bandwidth availability on all platforms (including mobile) presents a great opportunity for content and service providers to expand their content and service offerings onto more platforms. Unlicensed Mobile Access (UMA): this is seen as an interim solution for provision of fixed-mobile convergence services such as BT s Fusion. LLU: Proliferation of LLU has enabled alternative service providers to reach more homes directly (rather than by using BT s wholesale product set), and to provide a different product and price offering than BT. VoIP: IP voice provision allows service providers to compete with traditional voice service providers such as BT, without any requirement for physical asset investment. The incumbent voice service providers are themselves are looking into new ways of keeping or increasing their customer base, such as service bundles and multi-play. IPTV, VoD: These applications allow broadband service providers to offer video services over broadband networks, and thereby compete with traditional multichannel TV providers such as BSkyB and cable TV. At the same time, traditional TV operators like BSkyB are also looking to utilise this technology to reach customers that cannot currently receive their services, and to expand the functionality of TV services offered. Benefits of bundling for operators Bundling services provides operators with a number of significant advantages, mainly in the areas of customer retention, procurement savings, marketing cost savings and general operating efficiencies. These are summarised below: Better content provision: As the provision of certain telecoms services becomes more commoditised, service and content providers are looking for 125

127 new markets for their existing content offerings. By offering content over multiple platforms, operators could also reduce their per-platform content procurement costs by signing multi-platform deals. Greater brand power: The acquisition of Virgin Mobile by ntl, and subsequent proposed re-branding of the entire operation to the Virgin name, demonstrates the impact of branding on consumer choice. Several other players are capitalising on their brand name in order to enter multiple markets. Reduced churn-rates: From a provider perspective, bundling reduces churn rates: relative lifetime value from quad-play services could be significantly higher than that of pure-play offerings. Consumer benefits of bundling Bundled offers can be attractive to consumers, not only from a cost perspective, but also because of other issues such as increased ease of use and single point of contact. The main consumer benefits are outlined below: Price: the combined cost of procuring the three services from one provider is often more economical than buying from two or three different service providers. Single point of contact: the ability to have contact with only one provider in terms of billing, payment, and customer service can be of great benefit to many consumers. Simplification: bundling removes the need to choose between service providers and product combinations. New services: some new services only become possible by buying bundled packages (for example, converged fixed/mobile telephony) However, bundled services can sometimes be a disadvantage for consumers: Switching: consumers cannot easily move or change services. In addition, there are not yet many multi-play services available in the UK market, and each has different characteristics. This leads to a difficulty in comparing offerings. Confusion: consumers can be confused by the different varieties of bundles, leading to difficulty in choosing the products that best meet their needs. Choice: bundling can force consumers to buy elements that either they do not need, or do not match their desired specifications (e.g. broadband speed). Lack of redundancy: If all services are delivered on the same platform, then the consumer does not have any alternative if the platform goes down Residential VoIP gains traction According to our market estimates, by May 2006 there were more than 1.8 million active residential voice over IP (VoIP) households in the UK. Of these, we estimate that around 300,000 were using BT s VoIP products, roughly 150,000 were using 126

128 Wanadoo s (now renamed Orange s) service, and the remainder were using a variety of VoIP services, such as Skype and Vonage. However, estimates for the use of VoIP are difficult, since voice traffic sent over the internet looks similar to any type of data. Therefore, most current estimates take account of consumer surveys, in addition to operator data. Cheap prices and flexibility attract consumers Many residential users are drawn to VoIP because of its low price structure, particularly for free calls that are wholly within the internet domain. Aside from a monthly subscription charged by some operators, calls to other VoIP users are free and unlimited, and calls to traditional fixed-line or mobile networks are usually cheap (the main constituent of these prices is the termination rate payable to the terminating fixed or mobile operator). The tariff structure of some of the larger UK VoIP providers is shown in Figure 3.9: Figure 3.9: Most popular UK VoIP offerings Monthly rental cost Signup costs Daytime/ National call rate (pence) Free calls to users of same services? Any free calls to other services e.g. PSTN, Mobile? Emergency Skype Vonage BT Communicator BT Broadband Talk Orange PlusNet VoIP Cheap Yes Yes Yes Yes Yes Yes Yes No Yes No No Off-peak included in bundle No Yes Yes Yes Yes No No calls Type of VoIP* Type 3 Type 1&2 Type 3 Type 1 Type 1 Type 3 Type 3 Source: Ofcom / operators * See next page for description of VoIP types Figure 3.9 below shows some of the newer VoIP offerings that were introduced in early 2006, and which are receiving significant media coverage: No No 127

129 Figure 3.10: New UK VoIP offerings Monthly rental cost Google Talk Tesco VOIP Dixon s Freetalk Signup costs Daytime/ National call rate (pence) Free calls to users of same services? Any free calls to other services e.g. PSTN, mobile? Yes Yes Yes N/A Yes Yes Emergency calls No No No Type of VoIP* Type 3 Type 2 Type 1 Source: Ofcom / operators Apart from a lower cost structure, many consumers are also drawn to VoIP for the flexibility it provides in terms of the ability to make the call from anywhere with a broadband connection fixed or wireless. With more than 10 million broadbandconnected households in the UK by May 2006, and with the number of wireless hotspots in UK growing rapidly, the number of active VoIP users may increase significantly over the next three years. For VoIP to become truly mobile and pervasive, the cooperation of the established mobile operators will be required, as they have access to each user s geographical location and are able to hand over service as the user roams within network reach. VoIP comes in several forms In the UK market today, three main different types of VoIP product exist: Type 1: the most common current type of VoIP, achieved through the use of a device called an ATA (Analogue Telephone Adaptor). The ATA allows the user to connect a standard phone to the computer or internet connection for use with VoIP. Providers like Vonage bundle ATAs free with their service, and Wanadoo s livebox also falls into this category. Implementation software is either supplied with the ATA, or is available to download; in either case, user setup is straightforward. Type 2: this is delivered through specialized VoIP phones which look just like normal phones with a handset, cradle and buttons. However, instead of having a standard RJ-11 phone connector, IP phones have an RJ-45 Ethernet connector. They connect directly to the broadband access device and have all the hardware and software necessary to handle the IP call. Tesco provides such a handset ( 19.97) in its VoIP offer. The latest VoIP phones are WiFi enabled, allowing consumers to use VoIP in hotspots. Vonage provides such a handset for Type 3: this type is available through free downloadable software from the internet that is loaded onto the PC; calls are typically made using a headset and microphone connected to the PC. Most software-based VoIP providers 128

130 offer free calls to users of the same service. The most popular softwarebased service is Skype. Another notable software service is Googletalk. Issues for VoIP A key issue for VoIP today is reliability. The current Public Switched Telephone Network is a robust and almost fail-safe system for delivering phone calls. Phones just work, and consumers have come to expect a constantly-operating phone system. The same cannot be said for the elements that carry the VoIP call including the client software, consumer device, the broadband access network, and the VoIP call servers. The technology (i.e. the software and hardware that support VoIP) is new, and needs time to mature before it can provide the same levels of reliability. Indeed, many VoIP operators themselves position their product as a complement to the PSTN, rather than a replacement. Some of the specific reliability areas where VoIP currently falls short are: Power: VoIP is dependant on mains power. PSTN phones run on power that is provided over the line from the central exchange office. Even if the power goes down, the phone (unless it is cordless) still works. With VoIP, lack of mains power means no phone. Emergency access: Most VoIP services do not provide access to emergency numbers. Even if they do, access is not as reliable as via the PSTN or mobile networks. In addition, emergency authorities may not be able to locate where the call was made, as VoIP calls may be made from anywhere with a broadband connection i.e. there is no way to derive a geographic location from an IP address. Broadband downtime: Because VoIP uses an internet broadband connection, it is susceptible to all the downtimes associated with residential broadband services. These include downtime of access and authentication servers, and lower levels of resilience in broadband networks Factors affecting call quality of service: o latency (delays in packet delivery, leading to time delays over the call) o jitter (variation in timing of packet delivery, leading to garbled speech) o packet loss (leading to loss of parts of the voice conversation) Computing limitations: Many VoIP services are dependant on individual PCs of varying specifications and power. A call can be affected by issues connected to the PC itself, such as processor drain. In a worst-case scenario, a computer can crash in the middle of an important call. Before VoIP uptake can become a truly mass-market proposition, other issues will also need to be addressed. These include: quality of service (QOS); integration with other home systems e.g. home security and TV; security and privacy issues; further simplification of the setup and configuration process; support for PSTN-like experience and functionality. Other potential future issues with VoIP may be SPIT (Spam over Internet Telephony, which appears to have already begun), and viruses. 129

131 G grows further In 2005, all the UK mobile operators stepped up their focus on 3G networks and services. For the first time, handset-based (as opposed to laptop data cards) 3G services were actively marketed and advertised by operators other than 3UK, further stimulating consumer awareness of 3G. Consumer research conducted for Ofcom s Consumer Panel shows in that Q4 2005, 29% of adults understood the term 3G, compared with 15% a year previously (however, two-thirds of adults were aware of mobile services allowing video calls). Figure 3.11 below shows how 3G subscriptions have grown since Up until the start of 2005, 3UK dominated the residential 3G market (most of Vodafone s 65,000 connections by the end of 2004 were business 3G data cards). By the end of 2005, however, Vodafone and Orange had both added significant numbers of 3G customers. Figure 3.11: UK 3G subscriptions Subscriptions 000 s Q Q Q4 Source: Ofcom / operators T-Mobile O2 Orange Vodafone 3UK HSDPA boosts 3G speeds By mid-2006, all five mobile network operators had rolled out commercial 3G networks to major urban areas (3UK leads in terms of total network coverage, with a reported >88% UK population coverage). Operators are now either trialling or planning to deploy higher-bandwidth HSDPA services. HSDPA (high-speed downlink packet access) offers data rates in excess of the maximum of 384Kbit/s offered by 3G: average achievable HSDPA data speeds are around 1-1.5Mbit/s, with a theoretical peak of 14Mbit/s. Working with Manx Telecom in the Isle of Man, O2 became the first operator in the world to launch a commercial HSDPA-enabled network in early The other 3G operators are expected to introduce commercial HSDPA during 2006 and Increased 3G take-up drives new products and aggregation approaches As more subscribers start using 3G services, operators have started to introduce innovative services such as 3UK s SeeMeTV, which allows users to share selfgenerated mobile videos under a revenue-sharing model. New services such as this have demonstrated that 3G is an appealing technology, but one which must be supplemented by user-friendly services. 3UK also operates a very active music 130

132 service that recently exceeded 1 million downloads per month, claiming a substantial share of total UK full-track downloads (mobile and fixed). As 3G penetration increases, mobile operators are increasingly departing from the walled-garden approach (where consumers only have access to a limited selection of content chosen by the operator) that used to be the dominant model for data service provision over 3G networks. This approach was in contrast to the standard internet proposition, where consumers have automatic access to all global content at all times. Direct-to-Consumer (D2C) content provision by independent content providers increases available content offerings while adding value to available service offerings. Innovative data packages such as T-Mobile s Web n Walk are also starting to appear, aiming to increase data usage and revenue. However T-Mobile has adopted a usage policy that essentially prohibits VoIP, Instant Messaging, file sharing and media streaming over the Web n Walk service. Vodafone is also adopting new charging models that integrate data usage fees into download fees, thus simplifying the proposition for consumers and content providers, and removing barriers to higher content and data service usage. UK 3G data use is comparatively high Average data revenue as percentage of ARPU (average revenue per user) in the UK is among the highest in the world. However, this revenue is currently derived mainly from SMS traffic. In 2005, 3UK was ranked third worldwide, with 30% of its 3G revenues coming from data, while O2 was fifth with 28% (according to Informa Telecoms & Media). As of May 2006, 355 3G handsets models are available worldwide while 32 models support HSDPA. 3G adapts to face threats While HSPA (HSDPA plus HSUPA i.e. high speed downlink and uplink) and other technologies offer enhanced performance over existing 3G standards, alternative wireless technologies such as WiFi and WiMAX can, in certain cases, provide alternative paths for wireless access to users, by offering wireless broadband access. Operators are looking into ways to further enhance the performance of their networks by adopting or integrating competing wireless technologies within their networks. 3GPP LTE (Long Term Evolution) aims to develop standards that will enable operators to compete with technologies such as WiFi/WiMAX but also to compete with fixed broadband technologies such as ADSL and VDSL by offering speeds of up to 100Mbit/s. Figure 3.12 shows how various types of 3G compare. 131

133 Figure 3.12: Comparison of various 3G overlay technologies Source: Analysys WiFi gets joined up According to Jiwire.com, the UK is second only to the US in the league table of public hotspot numbers, with over 14,000. Nearly all urban areas in the UK are covered by numerous hotspots in cafes, bars, stations, shops and public spaces. As discussed below, WiFi received two considerable boosts in 2005/06, with the introduction of WiFi-enabled phones and the introduction of city-wide WiFi clouds. WiFi / WiMAX standards There is a confusingly large array of standards surrounding WiFi and WiMAX, which often baffles consumers. All WiFi technologies are designated x, where the x is a letter varying according to the exact flavour (e.g a, b, g, n). However, some of these differing standards are not compatible with each other, leading to further confusion. Most current WiFi hotspots use b or g standards. However, the newer n standard, which supports higher data rates, is expected to be ratified by the IEEE (the standards governing body) by 2007, after which it will be increasingly deployed in public WiFi networks. An un-ratified version, known as pre-11n, is already in use in many home wireless networks. By contrast, WiMAX standards fall under the designation X, where X is a combination of a letter and/or publication date. The two main current standards of WiMAX are (fixed WiMAX, also known as 16D) and e-2005 (mobile WiMAX). 132

The Communications Market: Digital Progress Report

The Communications Market: Digital Progress Report The Communications Market: Digital Progress Report Digital TV, 2009 This is Ofcom s twenty-third Digital Progress Report covering developments in multichannel television. The data are the latest available

More information

The Communications Market: Digital Progress Report

The Communications Market: Digital Progress Report The Communications Market: Digital Progress Report Digital TV, Q2 2007 This is the fifteenth Ofcom Digital Progress Report covering developments in digital television take-up. The data are the latest available

More information

Northern Ireland: setting the scene

Northern Ireland: setting the scene Northern Ireland: setting the scene Key facts about Northern Ireland Figure Nation UK Population 1,779m (mid-2009 estimate); population is estimated to have risen by 5.6%, or 94,000 people, since 2001

More information

THE SVOD REPORT: CHARTING THE GROWTH IN SVOD SERVICES ACROSS THE UK 1 DAILY CONSOLIDATED TV VIEWING 2 UNMATCHED VIEWING

THE SVOD REPORT: CHARTING THE GROWTH IN SVOD SERVICES ACROSS THE UK 1 DAILY CONSOLIDATED TV VIEWING 2 UNMATCHED VIEWING 1 THE REPORT: CHARTING THE GROWTH IN SERVICES ACROSS THE UK January 218 In the UK, television is still king. We are investing in ever larger sets; more than half of all UK households have a at least 4

More information

Public Service Broadcasting Annual Report 2011

Public Service Broadcasting Annual Report 2011 Public Service Broadcasting Annual Report 2011 Research Document Publication date: 21st July 2011 1 Public Service Broadcasting: Annual Report 2011 Executive summary Ofcom has a duty to assess the designated

More information

Digital Television Update Q4 2004

Digital Television Update Q4 2004 Digital Television Update Q4 2004 This is the fifth of Ofcom s Digital Television Update quarterly reports. As far as possible, data is based upon the latest figures provided by platform operators; however,

More information

Joint submission by BBC, ITV, Channel 4, Channel 5, S4C, Arqiva 1 and SDN to Culture Media and Sport Committee inquiry into Spectrum

Joint submission by BBC, ITV, Channel 4, Channel 5, S4C, Arqiva 1 and SDN to Culture Media and Sport Committee inquiry into Spectrum Joint submission by BBC, ITV, Channel 4, Channel 5, S4C, Arqiva 1 and SDN to Culture Media and Sport Committee inquiry into Spectrum 1. Introduction and summary The above-named organisations welcome the

More information

Wales. BBC in the nations

Wales. BBC in the nations Wales The BBC s expenditure in Wales during /16 was 177.7 million across all services and platforms. Total expenditure represents an increase of 8.5 million on network content and 1.7 million on local

More information

2 Television and audio-visual content Recent developments in Scotland

2 Television and audio-visual content Recent developments in Scotland 2 Television and audio-visual content 2 2.1 Recent developments in Scottish Government In October 2011 the Scottish Government published its final progress report on the Scottish Broadcasting Commission

More information

Response to Ofcom Consultation The future use of the 700MHz band. Response from Freesat. 29 August 2014

Response to Ofcom Consultation The future use of the 700MHz band. Response from Freesat. 29 August 2014 Response to Ofcom Consultation The future use of the 700MHz band Response from Freesat 29 August 2014 1 1 About Freesat Freesat is a subscription free satellite and IP TV service offering digital television

More information

Communications Market Report: Northern Ireland

Communications Market Report: Northern Ireland Communications Market Report: Northern Ireland Research Document Publication date: 19 August 2010 Introduction This is Ofcom s fifth annual review of communications markets in Northern Ireland. The report

More information

FACTSHEET 4 Consumption of broadcast TV

FACTSHEET 4 Consumption of broadcast TV FACTSHEET 4 Consumption of broadcast TV Oxford Media Convention March 2017 1 This factsheet has been compiled by Ofcom and provides some background information to aid discussion at the 2017 Oxford Media

More information

BSAC Business Briefing. TV Consumption Trends in the Multi-Screen Era. October 2012

BSAC Business Briefing. TV Consumption Trends in the Multi-Screen Era. October 2012 BSAC Business Briefing TV Consumption Trends in the Multi-Screen Era October 2012 Traditional TV Viewing Is Holding Up Well Despite all the hype about social networking, over-the-top video services, smartphones,

More information

Department for Culture, Media and Sport. The balance of payments between television platforms and public service broadcasters

Department for Culture, Media and Sport. The balance of payments between television platforms and public service broadcasters Response to consultation: Department for Culture, Media and Sport The balance of payments between television platforms and public service broadcasters 26 June 2015 1 [BLANK] 2 1. Introduction About Digital

More information

Communications Market Report: England

Communications Market Report: England Communications Market Report: Research Document Publication date: 19 August 2010 Introduction This is Ofcom s fifth annual review of communications markets in. The report offers a detailed overview of

More information

DTG Response to Ofcom Consultation: Licensing Local Television How Ofcom would exercise its new powers and duties being proposed by Government

DTG Response to Ofcom Consultation: Licensing Local Television How Ofcom would exercise its new powers and duties being proposed by Government DTG Response to Ofcom Consultation: Licensing Local Television How Ofcom would exercise its new powers and duties being proposed by Government 16 th March 2012 The Digital TV Group s (DTG) response to

More information

2. Television and audio visual

2. Television and audio visual 2. Television and audio visual 0 Figure 2.1 Industry metrics UK television industry 2005 2006 2007 2008 2009 2010 Total TV industry revenue ( bn) 10.5 10.6 11.1 11.2 11.1 11.7 Proportion of revenue generated

More information

Broadband Changes Everything

Broadband Changes Everything Broadband Changes Everything OECD Roundtable On Communications Convergence UK Department of Trade and Industry Conference Centre London June 2-3, 2005 Michael Hennessy President Canadian Cable Telecommunications

More information

Communications Market Report: Northern Ireland

Communications Market Report: Northern Ireland Communications Market Report: Northern Ireland Research Document Publication date: 18 July Introduction Welcome to Ofcom s annual review of communications markets in Northern Ireland. This report gives

More information

Ofcom s second public service broadcasting review Phase 2: preparing for the digital future - Response from Nickelodeon UK

Ofcom s second public service broadcasting review Phase 2: preparing for the digital future - Response from Nickelodeon UK Ofcom s second public service broadcasting review Phase 2: preparing for the digital future - Response from Nickelodeon UK Nickelodeon UK Nickelodeon UK is the No. commercial children s TV network in the

More information

BBC Trust Changes to HD channels Assessment of significance

BBC Trust Changes to HD channels Assessment of significance BBC Trust Changes to HD channels Assessment of significance May 2012 Getting the best out of the BBC for licence fee payers Contents BBC Trust / Assessment of significance The Trust s decision 1 Background

More information

Ofcom and Digital UK Switchover Tracker Survey. Switchover Progress Report Q1 2007

Ofcom and Digital UK Switchover Tracker Survey. Switchover Progress Report Q1 2007 Ofcom and Digital UK Switchover Tracker Survey Switchover Progress Report Q1 2007 Publication Date: 8th May 2007 Contents Executive Summary 2 Chapter 1 The Q1 2007 Dashboards: 6 (1) By Regions (2) By Consumer

More information

North West Media Briefing

North West Media Briefing Digital Television Switchover North West Media Briefing Gemma McNeilis Smith & Smith PR 0161 236 5560 / 07962 532 098 gemma@smithandsmithpr.co.uk October 2009 What is digital TV switchover? Switchover

More information

49 ƒ. Communications Market Report: Scotland

49 ƒ. Communications Market Report: Scotland 49 ƒ Communications Market Report: Research Document Publication date: 4 August Introduction This is Ofcom s sixth annual review of communications markets in, offering an overview of the take-up and use

More information

A quarterly review of population trends and changes in how people can watch television

A quarterly review of population trends and changes in how people can watch television 1 A quarterly review of population trends and changes in how people can watch television 217 Analysis by 2 CONTENTS 3 THE PRIMARY ROLE OF SECONDARY TV SETS Secondary TV sets are becoming increasingly important

More information

In accordance with the Trust s Syndication Policy for BBC on-demand content. 2

In accordance with the Trust s Syndication Policy for BBC on-demand content. 2 BBC One This service licence describes the most important characteristics of BBC One, including how it contributes to the BBC s public purposes. Service Licences are the core of the BBC s governance system.

More information

Digital Day 2016 Overview of findings

Digital Day 2016 Overview of findings Digital Day 2016 Overview of findings Research Document Publication date: 5 th August 2016 About this document This document provides an overview of the core results from our 2016 Digital Day study, drawing

More information

Digital Switchover in Chinese Taipei

Digital Switchover in Chinese Taipei 2010/TEL41/LSG/RR/005 Session 2 Digital Switchover in Chinese Taipei Purpose: Information Submitted by: Chinese Taipei Regulatory Roundtable Chinese Taipei 7 May 2010 Digital Switchover in Chinese Taipei

More information

AUSTRALIAN SUBSCRIPTION TELEVISION AND RADIO ASSOCIATION

AUSTRALIAN SUBSCRIPTION TELEVISION AND RADIO ASSOCIATION 7 December 2015 Intellectual Property Arrangements Inquiry Productivity Commission GPO Box 1428 CANBERRA CITY ACT 2601 By email: intellectual.property@pc.gov.au Dear Sir/Madam The Australian Subscription

More information

The long term future of UHF spectrum

The long term future of UHF spectrum The long term future of UHF spectrum A response by Vodafone to the Ofcom discussion paper Developing a framework for the long term future of UHF spectrum bands IV and V 1 Introduction 15 June 2011 (amended

More information

GROWING VOICE COMPETITION SPOTLIGHTS URGENCY OF IP TRANSITION By Patrick Brogan, Vice President of Industry Analysis

GROWING VOICE COMPETITION SPOTLIGHTS URGENCY OF IP TRANSITION By Patrick Brogan, Vice President of Industry Analysis RESEARCH BRIEF NOVEMBER 22, 2013 GROWING VOICE COMPETITION SPOTLIGHTS URGENCY OF IP TRANSITION By Patrick Brogan, Vice President of Industry Analysis An updated USTelecom analysis of residential voice

More information

AUSTRALIAN MULTI-SCREEN REPORT QUARTER

AUSTRALIAN MULTI-SCREEN REPORT QUARTER AUSTRALIAN MULTI-SCREEN REPORT QUARTER 02 Australian viewing trends across multiple screens Since its introduction in Q4 2011, The Australian Multi- Screen Report has tracked the impact of digital technologies,

More information

The Future of Digital Terrestrial Television Enabling new services for viewers

The Future of Digital Terrestrial Television Enabling new services for viewers Ofcom The Future of Digital Terrestrial Television Enabling new services for viewers Ofcom Consumer Workshop 19 February 2008 Ofcom 1 Objectives of DTT consumer workshop To review the proposals outlined

More information

Communications Market Report: Northern Ireland

Communications Market Report: Northern Ireland Communications Market Report: Northern Ireland Research Document Publication date: 1 August 2013 Introduction Welcome to Ofcom s annual Communications Market Report for Northern Ireland. The report gives

More information

Future of TV. Features and Benefits

Future of TV. Features and Benefits Future of TV This report assesses the future of TV in all its forms, encompassing content, technology, consumer appliances and devices, mobile devices, evolving media and broadcast business models, the

More information

TMT Conference. London, 7 th June 2006

TMT Conference. London, 7 th June 2006 TMT Conference London, 7 th June 2006 Mediaset 2003-2006, Consistency with our Strategy Focus on the Core Business Profitability Assessing All the Growth Opportunities November 2002 TECHNOLOGICAL DEVELOPMENT

More information

BBC Television Services Review

BBC Television Services Review BBC Television Services Review Quantitative audience research assessing BBC One, BBC Two and BBC Four s delivery of the BBC s Public Purposes Prepared for: November 2010 Prepared by: Trevor Vagg and Sara

More information

Introduction. Introductory remarks

Introduction. Introductory remarks Communications Consumer Panel and ACOD s response to Ofcom s consultation on the UK preparations for the World Radiocommunication Conference 2015 (WRC-15) Introduction The Communications Consumer Panel

More information

KANZ BROADBAND SUMMIT DIGITAL MEDIA OPPORTUNITIES DIGITAL CONTENT INITIATIVES Kim Dalton Director of Television ABC 3 November 2009

KANZ BROADBAND SUMMIT DIGITAL MEDIA OPPORTUNITIES DIGITAL CONTENT INITIATIVES Kim Dalton Director of Television ABC 3 November 2009 KANZ BROADBAND SUMMIT DIGITAL MEDIA OPPORTUNITIES DIGITAL CONTENT INITIATIVES Kim Dalton Director of Television ABC 3 November 2009 We live in interesting times. This is true of many things but especially

More information

B - PSB Audience Impact. PSB Report 2013 Information pack August 2013

B - PSB Audience Impact. PSB Report 2013 Information pack August 2013 B - PSB Audience Impact PSB Report 2013 Information pack August 2013 Contents Page Background 2 Overview of PSB television 11 Nations and regions news 27 Individual PSB channel summaries 35 Overall satisfaction

More information

MEDIA NATIONS: UK Published 18 July 2018

MEDIA NATIONS: UK Published 18 July 2018 MEDIA NATIONS: UK 2018 Published 18 July 2018 About this document This is Ofcom s first annual Media Nations report. The report reviews key trends in the television and audiovisual sector as well as the

More information

Communications Market Report United Kingdom Published 3 August 2017

Communications Market Report United Kingdom Published 3 August 2017 Communications Market Report United Kingdom Published 3 August 2017 Angel of the North About this document The report contains statistics and analysis of the UK communications sector. It is a reference

More information

PSB Review 2008 Research findings

PSB Review 2008 Research findings PSB Review 2008 Research findings Contents Introduction 2 Broadcaster output data 3 PAGE Broadcaster investment data 23 Audience viewing habits 27 Audience research summary 41 The purposes of TV 44 Role

More information

Connected Life Market Watch:

Connected Life Market Watch: Connected Life Market Watch: Transitions in U.K. Consumer Video Entertainment Cisco Internet Business Solutions Group October 2010 Internet Business Solutions Group 1 Connected Life Market Watch Program:

More information

Interim use of 600 MHz for DTT

Interim use of 600 MHz for DTT Interim use of 600 MHz for DTT Executive summary The BBC, Channel 4 and Arqiva have developed a proposal to make interim use of the 600 MHz band to provide additional Digital Terrestrial Television (DTT)

More information

The BBC s services: audiences in Scotland

The BBC s services: audiences in Scotland The BBC s services: audiences in Scotland Publication date: 29 March 2017 The BBC s services: audiences in Scotland About this document The operating licence for the BBC s UK public services will set the

More information

PSB Annual Report 2015 PSB Audience Opinion Annex. Published July 2015

PSB Annual Report 2015 PSB Audience Opinion Annex. Published July 2015 PSB Annual Report 2015 PSB Audience Opinion Annex Published July 2015 Contents Page Background 2 Overview of PSB television 5 Overall satisfaction with PSB 19 Nations and regions news 29 Children s PSB

More information

DIGITAL SWITCHOVER & THE BBC S ROLE

DIGITAL SWITCHOVER & THE BBC S ROLE DIGITAL SWITCHOVER & THE BBC S ROLE Dr David Levy Controller, Public Policy BBC OXFORD UNIVERSITY, JULY 2006 1 2 What s special about Digital TV? Changing standards is relatively common Gas, Currencies

More information

Ofcom s Annual Report on the BBC: 2017/18. Annex 2: BBC Performance Report

Ofcom s Annual Report on the BBC: 2017/18. Annex 2: BBC Performance Report Ofcom s Annual Report on the BBC: 2017/18 Contents Section Overview 4 Core BBC audience metrics 8 Public purpose 1: news and current affairs 13 Public purpose 2: learning 35 Public purpose 3: creative,

More information

TV Subscriptions and Licence Fees

TV Subscriptions and Licence Fees TV Subscriptions and Licence Fees The revision of the Federal Law on Radio and Television (RTVA) will direct more license fees to local radio and TV stations. Swiss TV providers are expanding their Replay-Functions.

More information

BBC Three. Part l: Key characteristics of the service

BBC Three. Part l: Key characteristics of the service BBC Three This service licence describes the most important characteristics of BBC Three, including how it contributes to the BBC s public purposes. Service Licences are the core of the BBC s governance

More information

THE NATIONAL ASSOCIATION OF BROADCASTER S WRITTEN SUBMISSION ON THE INDEPENDENT COMMUNICATIONS AUTHORITY OF SOUTH AFRICA S DISCUSSION DOCUMENT ON THE

THE NATIONAL ASSOCIATION OF BROADCASTER S WRITTEN SUBMISSION ON THE INDEPENDENT COMMUNICATIONS AUTHORITY OF SOUTH AFRICA S DISCUSSION DOCUMENT ON THE THE NATIONAL ASSOCIATION OF BROADCASTER S WRITTEN SUBMISSION ON THE INDEPENDENT COMMUNICATIONS AUTHORITY OF SOUTH AFRICA S DISCUSSION DOCUMENT ON THE REGULATION OF IPTV AND VOD 26 MARCH 2010 1. Introduction

More information

Brief for: Commercial Communications in Commercial Programming

Brief for: Commercial Communications in Commercial Programming Brief for: Commercial Communications in Commercial Programming October 2010 1 ABOUT UK MUSIC UK Music is the umbrella organisation which represents the collective interests of the UK s commercial music

More information

Australian Broadcasting Corporation. submission to. National Cultural Policy Consultation

Australian Broadcasting Corporation. submission to. National Cultural Policy Consultation Australian Broadcasting Corporation submission to National Cultural Policy Consultation February 2010 Introduction The Australian Broadcasting Corporation (ABC) welcomes the opportunity to provide a submission

More information

FILM, TV & GAMES CONFERENCE 2015

FILM, TV & GAMES CONFERENCE 2015 FILM, TV & GAMES CONFERENCE 2015 Sponsored by April 2015 at The Royal Institution Session 5: Movie Market Update Ben Keen, Chief Analyst & VP, Media, IHS This report summarises a session that took place

More information

BBC Trust service review The BBC s children s services

BBC Trust service review The BBC s children s services BBC Trust service review The BBC s children s services September 2013 Getting the best out of the BBC for licence fee payers Contents Introduction 1 Executive Summary 5 Part 1: Context and Performance

More information

D PSB Audience Impact. PSB Report 2011 Information pack June 2012

D PSB Audience Impact. PSB Report 2011 Information pack June 2012 D PSB Audience Impact PSB Report 2011 Information pack June 2012 Contents Page Background 2 Overview of PSB television 11 Nations and regions news 25 Individual PSB channel summaries 33 Overall satisfaction

More information

The Pathway To Ultrabroadband Networks: Lessons From Consumer Behavior

The Pathway To Ultrabroadband Networks: Lessons From Consumer Behavior The Pathway To Ultrabroadband Networks: Lessons From Consumer Behavior John Carey Fordham Business Schools Draft This paper begins with the premise that a major use of ultrabroadband networks in the home

More information

Code of Practice on Changes to Existing Transmission and Reception Arrangements

Code of Practice on Changes to Existing Transmission and Reception Arrangements Code of Practice on Changes to Existing Transmission and Reception Arrangements Publication date: 11 March 2016 Code of Practice on Changes to Existing Transmission and Reception Arrangements Contents

More information

Consultation on Repurposing the 600 MHz Band. Notice No. SLPB Published in the Canada Gazette, Part 1 Dated January 3, 2015

Consultation on Repurposing the 600 MHz Band. Notice No. SLPB Published in the Canada Gazette, Part 1 Dated January 3, 2015 Consultation on Repurposing the 600 MHz Band Notice No. SLPB-005-14 Published in the Canada Gazette, Part 1 Dated January 3, 2015 Comments of Ontario Ministry of Economic Development, Employment and Infrastructure

More information

Delivering Quality First consultation. Submission to BBC Trust from BBC Audience Council for Scotland. December 2011

Delivering Quality First consultation. Submission to BBC Trust from BBC Audience Council for Scotland. December 2011 Delivering Quality First consultation Submission to BBC Trust from BBC Audience Council for Scotland 1. Exec Summary December 2011 Members believe that the DQF proposals offer a practical high-level framework

More information

Response to the Digital Dividend Review from Northern Visions/NvTv, 23 Donegall Street, Belfast BT1 2FF. Tel:

Response to the Digital Dividend Review from Northern Visions/NvTv, 23 Donegall Street, Belfast BT1 2FF. Tel: Response to the Digital Dividend Review from Northern Visions/NvTv, 23 Donegall Street, Belfast BT1 2FF. Tel: 028 9024 5495 Northern Visions is an open access media centre offering skills training, project

More information

FILM ON DIGITAL VIDEO

FILM ON DIGITAL VIDEO FILM ON DIGITAL VIDEO BFI RESEARCH AND STATISTICS PUBLISHED OCTOBER 2017 Digital video enables audiences to access films through a range of devices, anytime, anywhere. Revenues for on-demand services in

More information

UKTV response to Ofcom consultation: Notice of proposed change to L-DTPS licence obligations of ESTV Limited (the local TV Licensee for London)

UKTV response to Ofcom consultation: Notice of proposed change to L-DTPS licence obligations of ESTV Limited (the local TV Licensee for London) UKTV response to Ofcom consultation: Notice of proposed change to L-DTPS licence obligations of ESTV Limited (the local TV Licensee for London) Responses close: 26 August 2014, 10am About UKTV UKTV is

More information

Operating licence for the BBC s UK Public Services

Operating licence for the BBC s UK Public Services Operating licence for the BBC s UK Public Services Issued on: 13 October 2017 About this document This is the operating licence for the BBC s UK Public Services. It sets the regulatory conditions that

More information

EBU view How should we use the digital dividend?

EBU view How should we use the digital dividend? EBU view How should we use the digital dividend? Long-term public interest versus short-term profit Revised April 2009 CONTENT How should we use the digital dividend? The EBU s key concerns Why is the

More information

The Communications Market in England. 2 TV and audio-visual content

The Communications Market in England. 2 TV and audio-visual content The Communications Market in 2 2 TV and audio-visual content 45 2.1 TV and audio-visual content 2.1.1 Recent developments in HD and 3D TV Towards the end of 2009, Freeview started technical transmission

More information

Internet driven convergence: innovation and discontinuity

Internet driven convergence: innovation and discontinuity Internet driven convergence: innovation and discontinuity AGCOM-IIC Workshop, Rome Brian Williamson 28 May 2009 Plum Consulting 17-19 Bedford Street, Covent Garden, London, WC2E 9HP T +44 (0)20 7868 5340

More information

The ABC and the changing media landscape

The ABC and the changing media landscape The ABC and the changing media landscape 1 THE ABC AND THE MEDIA LANDSCAPE The Australian media is and always has been characterised by a mix of publicly-funded broadcasters and commercial media operators.

More information

The social and cultural purposes of television today.

The social and cultural purposes of television today. Equity response to Public Service Television for the 21st Century A Public Inquiry Equity is the UK based union representing over 39,000 creative workers. Our membership includes actors and other performers

More information

TV Subscriptions and Licence Fees

TV Subscriptions and Licence Fees TV Subscriptions and Licence Fees By mid-2015, UPC Cablecom had switched off analogue TV service completely in all of Switzerland. UPC Cablecom and Swisscom resist OTT competition by offering unlimited

More information

Digital Switchover Management of Transition Coverage Issues Statement

Digital Switchover Management of Transition Coverage Issues Statement Digital Switchover Management of Transition Coverage Issues Statement Statement Publication date: 16 May 2007 Contents Section Annex Page 1 Summary 1 2 Introduction 2 3 Comments received on the revised

More information

BBC Trust Service Reviews

BBC Trust Service Reviews BBC Trust Service Reviews Progress report, July 2015 Introduction The Trust is required to review every BBC service once every five years. At the end of each service review, the Trust publishes a report

More information

Jersey Competition Regulatory Authority ( JCRA ) Decision M799/11 PUBLIC VERSION. Proposed Joint Venture. between. Scripps Networks Interactive Inc.

Jersey Competition Regulatory Authority ( JCRA ) Decision M799/11 PUBLIC VERSION. Proposed Joint Venture. between. Scripps Networks Interactive Inc. Jersey Competition Regulatory Authority ( JCRA ) Decision M799/11 PUBLIC VERSION Proposed Joint Venture between Scripps Networks Interactive Inc. and BBC Worldwide Limited The Notified Transaction 1. On

More information

ThinkTV FACT PACK NEW ZEALAND JAN TO DEC 2017

ThinkTV FACT PACK NEW ZEALAND JAN TO DEC 2017 ThinkTV FACT PACK NEW ZEALAND JAN TO DEC 2017 TV Has Changed NEW ZEALAND Today s TV is a sensory experience enjoyed by over 3 million viewers every week. Powered by new technologies to make TV available

More information

Television access services report 2015

Television access services report 2015 Television access services report 2015 Statement Publication date: 7 April 2016 About this document Under the Communications Act 2003, certain television broadcasters licensed by Ofcom are required to

More information

THE SVOD REPORT CHARTING THE GROWTH IN SVOD SERVICES ACROSS THE UK 1 TOTAL TV: AVERAGE DAILY MINUTES

THE SVOD REPORT CHARTING THE GROWTH IN SVOD SERVICES ACROSS THE UK 1 TOTAL TV: AVERAGE DAILY MINUTES 1 THE SVOD REPORT CHARTING THE GROWTH IN SVOD SERVICES ACROSS THE UK January 219 A lot can change in a year. In 218, England had a football team that the public actually enjoyed watching and the Beast

More information

AUSTRALIAN MULTI-SCREEN REPORT QUARTER

AUSTRALIAN MULTI-SCREEN REPORT QUARTER AUSTRALIAN MULTI-SCREEN REPORT QUARTER 03 Australian viewing trends across multiple screens The Australian Multi-Screen Report shows Australian homes have more screens, channel and platform choices and

More information

6.3 DRIVERS OF CONSUMER ADOPTION

6.3 DRIVERS OF CONSUMER ADOPTION 6.3 DRIVERS OF CONSUMER ADOPTION The main drivers for the take-up of DTT by consumers in South Africa are likely to be: Affordability of STBs and potential subsidies for STBs is the single most important

More information

Changes to BBC services second consultation on proposed changes to BBC Three, BBC One, BBC iplayer and CBBC

Changes to BBC services second consultation on proposed changes to BBC Three, BBC One, BBC iplayer and CBBC Changes to BBC services second consultation on proposed changes to BBC Three, BBC One, BBC iplayer and CBBC Response from the Commercial Broadcasters Association to the BBC Trust September 2015 Executive

More information

Note for Applicants on Coverage of Forth Valley Local Television

Note for Applicants on Coverage of Forth Valley Local Television Note for Applicants on Coverage of Forth Valley Local Television Publication date: May 2014 Contents Section Page 1 Transmitter location 2 2 Assumptions and Caveats 3 3 Indicative Household Coverage 7

More information

UK 700MHz Strategy and Digital Terrestrial Television update. Chris Woolford, Director of International Affairs, Ofcom 3 rd October 2013

UK 700MHz Strategy and Digital Terrestrial Television update. Chris Woolford, Director of International Affairs, Ofcom 3 rd October 2013 UK 700MHz Strategy and Digital Terrestrial Television update Chris Woolford, Director of International Affairs, Ofcom 3 rd October 2013 1 Ofcom decided on its UHF strategy last year Our dual objectives

More information

3. Television and audio-visual

3. Television and audio-visual 3. Television and audio-visual 3. Key Market Developments Figure 3.1 TV industry metrics UK FRA GER ITA USA CAN JPN AUS ESP NED SWE IRL POL BRA RUS IND CHN TV revenue ( bn) 11.3 10.4 11.0 8.1 94.0 4.0

More information

BBC Red Button: Service Review

BBC Red Button: Service Review BBC Red Button: Service Review Quantitative audience research assessing the BBC Red Button service s delivery of the BBC s Public Purposes Prepared for: October 2010 Prepared by: Trevor Vagg, Kantar Media

More information

Ofcom review of public service television broadcasting. Phase 3 Competition for quality

Ofcom review of public service television broadcasting. Phase 3 Competition for quality Ofcom review of public service television broadcasting Phase 3 Competition for quality Issued: 8 February 2005 Contents Page Foreword 2 1 Executive summary 5 2 Securing PSB in the digital age 20 3 Reflecting

More information

USO OFCOM Consultation Comments

USO OFCOM Consultation Comments Input by ViaSat to Support the Universal Service Obligation (USO) Consultation High Capacity Satellite (HCS) Broadband EXECUTIVE SUMMARY The USO is the latest, and welcomed, commitment to improve the delivery

More information

Digital Switch Over Experiences across Europe

Digital Switch Over Experiences across Europe Digital Switch Over Experiences across Europe ITU International Symposium- Digital Switchover Geneva June 17th Bernard Pauchon Chairman DigiTAG Spectrum and Networks Group Table of content What is DigiTAG

More information

The Communications Market in Scotland. 2 TV and audio-visual content

The Communications Market in Scotland. 2 TV and audio-visual content The Communications Market in 2 2 TV and audio-visual content 49 2.1 TV and audio-visual content 2.1.1 Recent developments in The Scottish Government and Scottish Broadcasting Commission In September 2009,

More information

1. Introduction. 2. Part A: Executive Summary

1. Introduction. 2. Part A: Executive Summary MTN'S RESPONSE TO ICASA'S INQUIRY INTO SUBSCRIPTION TELEVISION BROADCASTING SERVICES IN TERMS OF SECTION 4 B OF THE ICASA ACT 13 OF 2000 IN GORVENMENT GAZETTE NO. 41070 DATED 25 AUGUST 2017 1 P a g e 1.

More information

Regulatory framework for the assignment of the second digital dividend in Croatia

Regulatory framework for the assignment of the second digital dividend in Croatia Regulatory framework for the assignment of the second digital dividend in Croatia Infofest 2015 Budva, Montenegro 28. September, 2015 1 (17) AGENDA 1 INTRODUCTION 2 INTERNATIONAL REGULATORY FRAMEWORK 3

More information

What Impact Will Over-the-Top Video Have on My Bottom Line

What Impact Will Over-the-Top Video Have on My Bottom Line What Impact Will Over-the-Top Video Have on My Bottom Line March 27, 2018 Doug Eidahl, VP Legal & Regulatory 2211 N. Minnesota St. Mitchell, SD 57301 The Changing CATV-Video Market 2 Recent Losses - Largest

More information

DEN Networks Limited Investor Update: Q1 FY

DEN Networks Limited Investor Update: Q1 FY DEN Networks Limited Investor Update: QUARTER FINANCIALS I. CONSOLIDATED 1. Year on Year ( vs. Q1 FY 2012-13) Consolidated Revenues Up 37% Y-o-Y Consolidated Revenues for Q1 FY 14 were Rs 275.42 crores

More information

Broadcast TV Technical Codes. Updates and amendments

Broadcast TV Technical Codes. Updates and amendments Broadcast TV Technical Codes Updates and amendments Statement Publication date: 9 November 2016 1 About this document Ofcom sets technical standards for the digital terrestrial TV platform (also often

More information

Author. Sreeja VN. Media Analyst. Dataxis Asia

Author. Sreeja VN. Media Analyst. Dataxis Asia Author Sreeja VN Media Analyst Dataxis Asia Sreeja is an analyst with Dataxis Asia and works out of Bangalore office in India. She is involved in tracking cable, DTH, IPTV, OTT, Mobile TV and content information

More information

International Workshop, Electrical Enduse Efficiency, 5th March Residential electricity consumption

International Workshop, Electrical Enduse Efficiency, 5th March Residential electricity consumption International Workshop, Electrical Enduse Efficiency, 5th March 2010 Residential electricity consumption Despite national efforts, electricity consumption is growing at nearly twice the rate estimated

More information

Communications Market Report: Scotland

Communications Market Report: Scotland Communications Market Report: Research Document Publication date: 4 August 2016 Introduction This is Ofcom s 11th annual review of communications markets in, offering an overview of the take-up and use

More information

6 th Annual TMT Conference. Barcelona, 15 th -17 th November 2006

6 th Annual TMT Conference. Barcelona, 15 th -17 th November 2006 6 th Annual TMT Conference Barcelona, 15 th -17 th November 2006 1 Mediaset Group Structure Italian Business International Spanish Business Gestevision Tele5 Tele5 (52%) (50.1%) Advertising Sales Force

More information

Introduction slide 1 Digital Television 1. produced consumed New companies online continuation experimentation fragmenting reception dispersed

Introduction slide 1 Digital Television 1. produced consumed New companies online continuation experimentation fragmenting reception dispersed Introduction slide 1 Digital Television 1. Digital systems of delivery are shaping how television is both produced and consumed New companies online The new media companies are a combination of both continuation

More information

Awarding the UK s digital dividend

Awarding the UK s digital dividend Digital dividend: challenges and opportunities in the new digital era Awarding the UK s digital dividend Matthew Conway, Director of Operations, Spectrum Policy Group February 24, 2009 1 What is the UK

More information

Television, Internet and Mobile Usage in the U.S. A2/M2 Three Screen Report

Television, Internet and Mobile Usage in the U.S. A2/M2 Three Screen Report Television, Internet and Mobile Usage in the U.S. A2/M2 Three Screen Report VOLUME 5 2nd Quarter 2009 Viewership on the Rise as More Video Content Spans All Three Screens 57% of Internet Consumers Use

More information