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06|08|09

Consumers prefer communications over celebrations in recession: People taking control and getting good deals in downturn

Around half of UK consumers would sooner cut back on eating out, home improvements and holidays than give up communications services, according to new research from Ofcom.

Ofcom’s sixth Communications Market Report into the £52 billion TV, radio, broadband, telecoms and mobile industries reveals that these services remain important to consumers despite the recession.

When asked which items consumers were likely to cut back on in the recession, 47 per cent would choose to cut back on going out for dinner, 41 per cent on DIY and 41 per cent on holidays. This compares with only a fifth (19 per cent) who would cut back on mobile phone spend, 16 per cent on TV subscriptions and 10 per cent on their broadband services.

Consumers seeking out cheaper deals

Consumers continue to use their communications services more but are paying less for them. In May this year consumers spent an average of 25 minutes a day online at home – up from 9 minutes in 2004. Average household spend on internet services fell in real terms from £11.37 in 2007 to £10.71 in 2008.

The report also shows that consumers are seeking opportunities to save money on communications services. In the first quarter of 2009, nearly half of consumers (46 per cent) are taking a bundle of services – two or more services such as telecoms, broadband and TV - from one operator, up from 39 per cent twelve months previously.

Consumers are also looking for good deals and securing value for money. Nearly one in two (47 per cent) said that they are more likely to take a bundle of services now than they were twelve months ago.

Around a quarter of consumers said they would be more prepared to shop around now for their mobile phone service and broadband provider than a year ago (29 and 19 per cent respectively).

Some 70 per cent of mobile phone users said they would retain rather than upgrade their mobile handsets to save money on their bills. Since September 2008, a fifth (20 per cent) of all mobile phone contracts were SIM-only, where mobile phone users get a SIM card that can be used in a handset they already have.

SIM-only contracts typically offer lower monthly fees and also give consumers greater flexibility to shop around for the best deal as they often only require a one-month contractual commitment – around a quarter of new mobile contracts in the first quarter of 2009 (24 per cent) were for one month only, up from 10 per cent on the year.

However, 24-month contracts are also becoming increasingly popular as consumers commit to longer periods in return for lower monthly fees and inclusive, or heavily discounted, handsets. In the first quarter of 2009, more than one in ten new mobile contracts (13 per cent) were for a 24-month period, compared to only 2 per cent a year previously.

Viewers taking control and catching up

TV viewers are taking even more control over their TV schedules, choosing how, when and where to watch programmes either through a digital video recorder (DVR) or catch-up services on TV and online.

Our research shows that by the end of March this year more than a quarter of UK homes (27 per cent) had a DVR - an increase of 29 per cent since September 2008. Around 9 million DVRs have been sold in the UK, with the majority being Sky+ boxes (over 5 million).

In DVR homes, 15 per cent of TV viewing was timeshifted in 2008. Around a fifth (19 per cent) of viewing in Sky+ homes is timeshifted, more than for subscribers to Virgin Media’s V+ service who timeshifted 12 per cent of viewing. Some 9 per cent of viewing in Freeview DVR homes was time-shifted programmes.

Our research also suggests that DVR owners enjoy a better TV experience. Some 8 out of 10 TV viewers with a DVR say that they watched more programmes that they enjoy and over 40 per cent said that they watched a greater variety of programmes since getting a DVR.

As broadband speeds increase and services become more widespread, TV viewers are also catching-up on programmes online. Nearly a quarter of households (23 per cent) were watching catch-up TV online in 2008 compared to 17 per cent in 2007. Adults between 15-24 are most likely to watch catch-up TV online (33 per cent).

Online catch-up TV has been driven significantly by the BBC iPlayer. Some 15 per cent of internet users (5.2 million) now watch the BBC’s iPlayer service, double the figure this time last year. ITV’s catch-up service was next at 3.3 per cent.

More than three quarters of TV viewers (78 per cent) said that they enjoy programmes more because they had access to a catch-up service.

Broadband at home and on the move

Overall take up of broadband reached 68 per cent of households by the end of the first quarter of 2009. This is up from 58 per cent on the previous year, an increase of 17 per cent.

Many more consumers are taking up mobile broadband. In May of this year alone there were more than a quarter of a million new mobile broadband connections, up from 139,000 new connections in May 2008.

More than 1 in 10 households (12 per cent) has a mobile broadband connection and, of these, three-quarters (75 per cent) also had access to broadband through their landline. This suggests that many consumers are using mobile broadband to complement their landline connection rather than replace it. In addition to this some 8 million people in the UK had accessed the internet on their mobile phone in the first quarter of this year, an increase of more than 40 per cent on the previous year.

Younger people are both more likely to use mobile broadband and to have it as their only internet connection. Around one in six of 16-34 year olds live in a household with a mobile broadband connection, and one in three of these do not also have a landline broadband connection. Fewer than one in ten over-55s has a mobile broadband connection and only one in ten of these do not also have a landline broadband connection. In the over-65 group, less than one per cent surveyed relied solely on a mobile broadband connection.

Communications in the Nations and Regions

Ofcom has also today published separate Communications Market Reports for the UK’s Nations and Regions. The reports compare and measure take-up of communications services in Northern Ireland, Scotland, Wales and the English regions. In previous reports, take up of many communications services in the devolved Nations was lower than in England. This year’s report shows that, in the devolved Nations, take up is increasing rapidly and in many areas the gap between the UK and the Nations and Regions is closing.

Take up of broadband in each of the Nations has increased: by 13 per cent in Scotland (up from 53 per cent to 60 per cent); by nearly 25 per cent in Northern Ireland (up from 52 per cent to 64 per cent); and by a third in Wales (up from 45 per cent to 58 per cent). Take up remains slightly behind the UK average of 68 per cent.

UK key market developments

TV

Take up of digital television reached 89.2 per cent by the end of the first quarter, up from 87.1 per cent in 2008. In 2009, Exeter became the first ‘digital city’ in the UK in May 2009 when its analogue signal was permanently switched off.
By the end of March 2009 more than 2 million households had access to an HD service and 17.6 million HD-ready sets, in nearly 9 million households, have been sold in the UK.
TV revenues increased by 1.3 per cent to £11.2 billion during the year, driven mainly by subscriber revenue. However advertising revenue fell by £105 million.

Radio

By the end of the first quarter in 2009, a fifth (20.1 per cent) of all radio listening hours was on digital radio, up from 17.8 per cent on the year.
Nearly a third of adults (32 per cent) had access to a DAB radio (up from 27 per cent in twelve months) or had listened to the radio online (33 per cent, up from 29 per cent on the year) with 31 per cent of younger listeners aged 15-24 listening to radio via a mobile phone (up from 27 per cent on the year).
A total of 9 million DAB sets were sold by the first quarter of 2009, up from 7 million in 2008.
In the radio sector, revenue fell by 2.3 per cent in 2008 mainly due to falling advertising revenue.

Telecoms

There are almost 77 million mobile subscriptions in the UK - an increase of 3 million on the year. This means that on average people in the UK have more than one mobile subscription each.
The number of mobile phone users on a contract increased in 2008 by over 3 million to nearly 30 million. At the same time, pay as you go connections fell slightly for the first time, down by 100,000 to just under 47 million.
Consumers sent over 80 billion texts last year, an average of 100 texts per person, per month - up 29 per cent on the year. This appears to be driven by many mobile phone deals with large volumes of inclusive texts.
Consumers made more than 100 billion minutes of calls in the UK in 2008, an equivalent of 123 minutes, per mobile, per month up 6 per cent in twelve months.
Telecoms revenue grew by 0.4 per cent (£117 million) during 2008, fuelled by the growth in mobile voice and data revenue.

Convergence

Some 19 million (50 per cent) of internet users now visit Facebook, spending an average of nearly 6 hours per month on the site – up from 4 hours in May 2008. However, in the 15-24 age group use of social networking sites declined from 55 per cent in the first quarter of 2008 to 50 per cent in 2009.
There were 2.6 million Twitter users by May 2009 - up from 0.1 million on the previous year.
Some 21 per cent of internet users had used a VoIP service in 2008 compared with 14 per cent in 2007.

Demographics

Men are more likely to watch catch-up TV (26 per cent) than women (21 per cent).
Young people aged between15-24 are more than twice as likely to watch content online (33 per cent) than 55-64 year olds (14 per cent).
Nearly half of users of Channel 4’s on demand service are under 35 years old.

Communications capitals

The report measures take up of services in a selection of towns and cities across the UK’s nations and regions. Of the cities we surveyed, highlights include:

Mobile broadband - UK average 12 per cent: In England, Leeds has the highest take up of mobile broadband at 29 per cent. In Scotland, the Highlands and Islands lead the way with 22 per cent. In Wales, take up is highest in Swansea at 18 per cent and in Northern Ireland 8 per cent of households had mobile broadband. Overall take up was lowest in the Scottish Borders at 3 per cent.
Mobile-only households - UK average 12 per cent: Cardiff is the mobile-only capital with 29 per cent of mobile-only households. In England, Leicester had the highest take up of mobile only households at 25 per cent. Some 27 per cent of Glaswegian households were mobile-only and in Belfast, 24 per cent of households are mobile only. Overall take up was lowest in London at 6 per cent.
Bundles – UK average 46 per cent: In Scotland take up of bundles was highest in Dundee at 65 per cent of households, just ahead of Newport in Wales at 63 per cent. In England 59 per cent of households had a bundle of services and in Northern Ireland, take up of bundles was highest in Belfast at 51 per cent of households. Overall take up was lowest in Highlands and Islands at 15 per cent.

Peter Phillips, Ofcom Partner, Strategy & Market Developments said: “Despite the recession, people are spending more time watching TV, using their mobile phone or accessing the internet. They would rather do without meals out or holidays than give up their phone, broadband or pay TV package.

“Meanwhile, we are becoming more canny about the way we pay for these services. Almost half of us economise by taking a bundle of communications services from a single supplier, while one fifth opt for cheaper mobile contracts which don’t include an expensive new phone.

“As well as getting better deals we are demanding more control. Over 25 per cent of households now use a digital TV recorder to watch programmes at a time that suits us, and 23 per cent use online catch up services like the BBC iPlayer. One in eight households has a mobile broadband connection allowing them to use the internet on the move.”

Ends.