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1.3 The Communications Consumer

1.3.1 Introduction

With an improved range of digital services on offer across telecoms and broadcasting, both use and household expenditure on communications services is rising. Viewing and listening figures for digital radio and television are both higher than in analogue only households. ARPU has risen as pay television subscribers migrating to digital have proved willing to pay for devices such as PVRs. And the manufacturers of the hardware used to receive digital services have come to expect increasingly short product replacement cycles – particularly for mobile handsets.

1.3.2 Consumption – new services over new platforms

Consumers are increasingly changing the way in which they access communications services, and broadening the range of services they use. Digital TV viewers can now use devices like the “red button” to access enhanced or interactive content; 2.5G and 3G mobile users can send pictures and video respectively over their mobile phones; broadband internet users can now download their entire music libraries from the internet, then download music to portable audio devices, thus bypassing the need to buy and store CDs – this trend will inevitably extend to video material as broadband speeds increase and compression technology evolves.

Interactive and digital radio services are proving increasingly important to both consumers and broadcasters. In addition to the 4.4m hours of listening to the BBC’s on-demand radio services in February, listening to “digital only ”^(-1-) stations accounted for 8.3% of all commercial radio audiences by the end of 2004.

Listening via ‘non-traditional’ means is also rising. Radio via digital television continues to grow strongly, with RAJAR figures showing that nearly a third of all adults had at some time listened to radio using their television set by the end of 2004. However, although reach is higher through television, share is higher on DAB, possibly reflecting the impact of additional choice or perhaps the fact that keen listeners have tended to be early adopters of the technology.

The number of adults who claimed ever to have listened to radio via the internet has risen to 16.3%, up from 15.1% in 2003. In addition to increased choice, through access to thousands of foreign stations (as well as the majority of the UK services), listening via the internet may demonstrate radio’s value as a secondary medium. For example radio can serve as a background whilst browsing the internet, something screen-based services struggle to offer. Listening via mobile phones is also increasing, although so far this has been via an analogue radio tuner included in the handset.

Increasing channel budgets for the main television channels over the past six years have not halted the increasing fragmentation of the TV audience. This trend has been apparent for several years as digital take-up grows. Between 1994 and 2004, ITV1’s share declined from 39.5% to 22.8%, and BBC ONE’s from 32.4% to 24.7%. Meanwhile, the combined share of the digital channels has steadily increased from 6.6% in 1994 to 26.2% in 2004 – in other words they now account for more viewing share than either BBC ONE or ITV1. However, this overall trend conceals significant differences between cable, satellite and Freeview homes: the main five channels combined account for just over half of viewing in cable and satellite homes, compared to over 80% of viewing in Freeview homes.

The main five channels still reach a wide cross-section of the audience: on average, all of them except Five were watched for at least fifteen minutes each week by more than half of all viewers. Nonetheless, some of the more traditional public service genres find it harder to secure a place in increasingly competitive schedules.

In mobile telecoms, the four major networks continue to dominate, with new entrant 3UK only recently starting to make inroads. More interesting is the continued rise of MVNOs (mobile virtual network operators), who “piggy-back” on one or other of the UK networks to offer competing mobile services. Virgin Mobile, which operates over the T-Mobile network, is the most successful MVNO, with over 4 million active subscribers by March 2005. Tesco Mobile, which launched at the end of 2003 over the O2 network, had over 500,000 subscribers by December 2004.

Figure 1.7: Take-up of other household communications devices

% of Households

 

Source: Ofcom - The Public’s View
Note: PC penetration was 64% as at February 2004

Other emerging technologies are vying for the time of consumers. As in 2003, DVD is currently the fastest growing new home technology, with 68% of adults claiming to own a DVD player at the end of 2004 (up from 5% in 2000). This contrasts with VCR ownership which is now static at 85% of households.

Personal Video Recorders (PVRs) are the most recent and least established technology in the television marketplace but may have the greatest potential to change the way people consume TV in the long run. During 2004, penetration of these devices increased from 2% to 10% - driven almost entirely by BSkyB’s aggressive roll-out of its Sky+ PVR service.

Use of the internet and interactive services is also on the increase, and this is mirrored by the continued rise in PC ownership. By the end of 2004, there was at least one PC in 65% of UK households.

1.3.3 Consumption – digital households spend more money

The adoption of a range of new technologies and digital services across television and telephony (excluding some elements of installation, equipment and maintenance) caused a further rise in the impact of communications on household expenditure.

Figure 1.8: Average weekly household communications spend
£/week

Source: Ofcom / operators / licensees / BBC

Weekly household expenditure on television, radio and telephony rose from £14.45 to £19.78 between 2000 and 2004, and now accounts for 4.0% of total household expenditure, a rise of 0.1% since last year. Growth has been particularly strong in mobile telephony and internet and broadband television, which cost the average household £6.57 and £1.59 per week respectively. Average weekly household spend on television also increased, by 30p per week to £5.38.

Footnotes:

1.-“Digital-only” listening consists of listening to stations only available on digital platforms and listening to analogue stations that broadcast on digital platforms outside of their analogue listening area. It does not include listening to analogue stations on their .

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