Communication Nation: UK consumers paying less but getting more

Video briefing

James Thickett introduces Ofcom's Communication Report for 2008

People in the UK are spending more time using communications services than ever before – but paying less for them, according to Ofcom’s latest annual report into the UK’s £51 billion communications industry.

Using more

The 365 page report shows that in 2007 we spent an average of 7 hours and 9 minutes a day using an array of communications services - up by 6 minutes from 2002. This includes watching television, surfing the net, using our mobiles, talking on a landline phone and listening to the radio.

Our mobile and internet use has increased by the greatest amount. Between 2002 and 2007 the time we spent talking and texting on our mobiles doubled, up from 5 minutes to 10 minutes each day. Meanwhile, time spent on PCs and lap-tops has grown fourfold between 2002 and 2007 - from 6 minutes to 24 minutes per person every day.

Paying less

Despite this growth in use and take up, when it comes to paying for communications services, consumers get more for their pound. Overall average household spend on communications services was £93.63 a month in 2007, a fall of £1.53 (1.6 per cent) on the average spend in 2006 and a fall of £4.31 (4.4 per cent) since 2004.

This compares to big price increases for other goods, with food prices up by almost 7 per cent and the overall retail price index (RPI) rising to 4.1 per cent in 2007.

There are three main reasons behind the fall in the price of communications services:

Discounts from bundles: Consumers are increasingly buying bundles of communications services - paying one fee for multiple services, which is generally cheaper than buying individual services from different providers. The number of households buying bundles of three or more services – for example landline, broadband and pay-TV – has almost doubled up from 18 per cent in 2006 to 32 per cent by March 2008.
Lower prices for broadband: The average household spend on internet and broadband services fell from £9.87 in 2006 to £9.45 in 2007.
Bargain hunting : An increasing proportion of us are switching between providers in order to get the best deal. By March 2008, 27 per cent of us had switched our internet provider at least once; 37 per cent had switched landline provider and 41 per cent had changed mobile provider.

Broadband: at home and on the move

Take-up of broadband through a landline grew from 52 per cent of households to 58 per cent in 12 months, mainly as a result of consumers upgrading from dial-up access to always-on broadband.

Following the launch of marketing campaigns for mobile broadband devices which enable consumers to access the internet on the move, there has been a surge in take-up with around 2 million adults in the UK saying that they had used a data card, USB modem or dongle to access the internet in March 2008.

The driver of this has been the sale of dongles – small devices plugged into the USB port of laptops enabling internet access via a mobile network. Between February and June 2008, the number of dongle sales to consumers nearly doubled from 69,000 to 133,000 a month. During this five month period, there were 511,000 new mobile broadband connections in the UK.

Three-quarters of all mobile broadband users say that they access the internet via their dongle while at home and two-thirds of mobile broadband users say that they use both dongles and their landline to connect to the internet.

More than one in ten mobile phone users have accessed the internet on their mobile phone with the number of 3G mobile connections growing by 60 per cent in 2007 to reach 12.5 million subscribers – an increase of 4.7 million in 12 months.

TV: online and on-demand

Whilst there has been a small increase in the number of minutes spent each day watching the TV (218 minutes in 2007, compared with 216 in 2006), we are increasingly taking control of our TV viewing. Viewers are watching programmes when they want and how they want, rather than just relying on the TV schedules.

The proportion of people with an internet connection who are watching TV programmes online more than doubled from 8 to 17 per cent in twelve months. The BBC iPlayer, which enables viewers to watch programmes up to a week after they were broadcast, delivered more than 700,000 daily video streams in May 2008.

Nearly a third of internet users (32 per cent) watched video clips and webcasts in 2007, compared to a fifth (21 per cent) in 2006. The number of UK internet users who watched YouTube, reached 9 million in April this year, nearly 50 per cent more than a year ago.

More of us are now able to choose when to watch, pause and rewind live TV. At the end of 2007 nearly 6 million households (23%) had a Digital Video Recorder (DVR) up by 53% in a year.

Environmentally aware – in theory but not in practice

With climate change high on the agenda it is not surprising that seven in ten people say that they care about the environment

And while a third of people are aware that their household devices consume more power now than they did two years ago, fewer than four in ten (39 per cent) consider the impact on the environment when buying a communications device. This is much lower than in other sectors. When we buy white goods, for example, more than half (54 per cent) said that the environment was a factor in their decision.

Two-thirds of us claim to turn devices off to save energy but many use power unnecessarily. More than half of us leave our set-top boxes on standby when not in use. If every set-top box in the UK is left on standby for one year this would use the same amount of power needed to make nearly 80 billion cups of tea.

Key Market Developments

Converged communications

We are increasingly listening to the radio online. The number of people listening to radio via the internet has increased to 14.5 million by May 2008, up 21 per cent from 12.0 million in November 2007.
Online advertising spend is up by almost 40 per cent year-on-year reaching £2.8 billion in 2007. For the first time, more money was spent on internet advertising than the combined advertising spending on ITV1, Channel 4, S4C and five (£2.4 billion). Paid-for search advertising still dominates the internet market up 39 per cent during 2007 at £1.6 billion. Classified advertising saw the largest increase in 2007 – up 54 per cent to £600 million while display advertising grew by 29 per cent in 2007 accounting for a further £600 million of advertising spend.
The vast majority of people (88 per cent) said that, when they use their DVRs, they use them to fast forward through advertisements.
The number of people using voice over internet protocol (VoIP) fell from 20 per cent in 2006 to 14 per cent in the first quarter of 2008.

Television and Radio

By July 2008, nearly 9 out of 10 households had digital television (87.2) compared to 7 out of 10 twelve months ago.
By March of this year, nearly 80 per cent of all TV sets sold in the UK were High-Definition (HD) ready, up from 50 per cent in twelve months. The number of HD subscriptions more than doubled to reach 829,000 over the same period.
People are favouring larger television screens - a fifth of all TV sales were for 33 inch screens and larger.
When asked which media activity would be missed the most, more than half of us (52 per cent) said it would be watching TV, up from 44 per cent in 2005. The next highest ‘most-missed’ activity would be using a mobile phone at 13 per cent, up from 10 per cent in 2005. Conversely, the 16-19 age group put their mobiles ahead of the television. Some 42 per cent of these teenagers said they would miss their mobile most. For them, watching TV came next at 20 per cent.
Over half (57 per cent) of viewing in homes with digital television was of the five main Public Service Broadcaster (PSB) channels, down slightly from 58 per cent in 2006.
That was more than offset by the viewing share of the PSBs’ other channels (such as ITV2, BBC Three and E4) which grew from 11 per cent to nearly 14 per cent of all viewing.
By March 2008, 7 million households (27 per cent) had a DAB radio set, up from 17 per cent on last year.

Telecoms

By the end of 2007, there were almost 74 million mobile connections serving a population of 60 million in the UK. This was an increase of 3.7 million connections since the end of 2006. The total number of mobile connections increased by 48 per cent in the five years from 2002.
Seven out of ten people with a mobile phone and a landline use their mobile to make calls, even when they are at home. One in ten people with a landline at home said that they never use it to make calls.
We are a nation of texters. In the UK, nearly 60 billion text messages were sent in 2007 - an increase of 36 per cent since 2006 and up by 234 per cent since 2002 when we sent 17 billion texts. The average mobile phone user sent 67 texts per month from each mobile compared to 53 texts per month in 2006.
The majority of children have access to the internet and most have a mobile phone but they use them in different ways. Boys aged 8-11are twice as likely to use the internet every day than girls of the same age (45 per cent compared to 22 per cent). Meanwhile girls aged 12 -15 are more likely to use a mobile phone than boys of the same age (74 per cent compared to 65 per cent).
Instant messaging is more popular than email amongst children with 62 per cent of 12-15 year old sending an instant message, compared with 43 per cent of them sending an email. Adults prefer to email – 80 per cent of adults sent an email compared to 34 per cent who used instant messaging.

Peter Phillips , Partner, Strategy and Market Development, said: “ We are spending more and more time with our communications devices but spending less on them. Our devotion to watching, listening and staying in touch wherever and whenever we want shows no sign of diminishing and, with healthy competition, overall prices offer increasing value for money. That is what consumers demand and what Ofcom helps deliver.”

NOTES FOR EDITORS

1. For the first time an interactive version of the key points in the document is available online at comment.ofcom.org.uk/cmr08