Home > Research and Market Data > Communications Market Reports > The Communications Market 2007 > 4 Telecommunications

The extract below is the introduction to the telecoms section of the report. To access a PDF of the full telecoms section, please click on the link

• Telecommunications [pdf]
  Print Version

4.1 The year in telecoms

4.1.1 UK telecoms industry key metrics

4.1.2 Overall costs for residential consumers fell by 13% in 2006

Increasing competition in the markets for fixed, mobile and broadband customers led to continued price falls for UK residential telecoms customers during 2006. Our analysis of the cost of a typical basket of residential telecoms services (consisting of a fixed line with average call volumes fixed at 2006 levels, two mobile phones also with 2006 usage levels and a broadband connection at average cost) shows that consumers would have paid £6.51 (9%) more for the same bundle of services in 2005 than in 2006 (Figure 4.1). In the five years to 2006 the cost saving on the same bundle of services was 38% in real terms.

The largest like-for-like cost saving in 2006 was for mobile services, down 13%. Although retail revenues from residential customers rose by 2% (mobile business revenues increased by 15%), this fall reflects lower prices per minute. This was driven by operators increasing the numbers of inclusive minutes in contracts (and usage has risen accordingly), while pre-pay prices have also fallen as competition heightens in a market where growth is slowing. The average cost of a residential broadband connection fell by around 9% during 2006, despite a doubling of the average blended headline speed to 3.6Mbit/s (rising to 4.6Mbit/s by June 2007). The cost of fixed access charges and calls at 2006 volumes fell by 2% per residential line, with average access charges going up (as rental packages increasingly include a bundle of calls) and call spend falling.

Rising take-up of bundled communications services has contributed to the falling costs of all services. (In this analysis the costs of individual services within a bundle have been allocated using the revenue splits in the raw data provided to Ofcom by communications providers).

Figure 4.1 Real cost of a basket of residential telecoms services

Source: Ofcom
Note: Figures include VAT; figures have been restated from the 2006 Communications Market Report to reflect more accurate data.

4.1.3 Local loop unbundling accelerates

A major driver of recent falls in the cost of telecoms services has been the accelerated rate of exchange unbundling. During 2006 the proportion of UK premises able to receive fixed-line and DSL broadband services based on local loop unbundling (LLU) increased from 40% to 67% and by the end of March 2007 this figure had further increased to 72% (Figure 4.2).

This level of availability was achieved through the unbundling of just 25% of BT’s 5,600 local exchanges. The high upfront cost of unbundling an exchange (related to the purchase and installation of equipment in an exchange) along with the relatively low cost associated with connecting each additional customer means that LLU operators have tended to locate equipment in exchanges connected to a large number of premises.

Figure 4.2 Proportion of unbundled exchanges and connected premises Source: Ofcom / operators

As exchanges covering a larger number of delivery points tend to be found in more densely populated areas (Figure 4.3), LLU availability is usually higher in urban than in rural areas. This can result in lower-priced fixed telecoms services being more widely available in urban areas; unbundling exchanges gives operators control over more of the value chain and access to economies of scale not available when using BT wholesale tariffs. They are then able to pass these savings on to consumers. Figure 4.3 Map of unbundled BT exchanges

Source: Ofcom / BT data; December 2006

Similarly, people living in areas without cable or an unbundled exchange (around 6.2m households at the end of March 2007) do not have access to broadband services with higher headline speeds than BT’s standard up to 8Mbit/s DSL offering (such as Be’s up to 24Mbit/s and BSkyB’s upto 16Mbit/s services). Around 4% of total UK fixed lines took LLU-based fixed-line or DSL services at the end of 2006, equating to 7% of premises in areas where LLU services were available (Figure 4.4). This was an increase of five percentage points on the previous year and more recent data show that LLU penetration in unbundled areas had further increased to 9% by the end of March 2007.

Figure 4.4 Proportion of premises in unbundled areas taking LLU services

Source: Ofcom / operators

The success of LLU fixed-line services in the UK has been partly driven by ‘free’ broadband offers. The launch of ‘free’ broadband by TalkTalk in April 2006 for those taking fixed-line services was a significant escalation in the industry battle for LLU customers. TalkTalk struggled to cope with the response to its offer and some customers have experienced connection delays, although there is evidence of improvements. In May 2006 Orange started to offer ‘free’ broadband to all customers committing to a minimum £35-a-month mobile contract. BSkyB followed with the introduction of a similar optional ‘free broadband’ proposition for customers taking its digital satellite services in July 2006.

Although LLU has opened up the retail market by allowing operators to offer differentiated services by installing their own equipment in exchanges, the wholesale market provides opportunities for an entrant to gain scale before deploying costly infrastructure of its own. Vodafone and the Post Office have agreed major wholesale deals with BT in the past year, while in May 2007 Cable & Wireless agreed terms to supply unbundled services to Virgin Media customers in parts of the country not served by Virgin’s cable network. By the end of 2006, 4.2 million lines were using BT wholesale line rental services, compared to 2.3 million a year previously (Figure 4.5). WLR growth has since slowed, and there were 4.3m WLR BT lines at the end of June 2007.

The launch of bundled voice and broadband services also prompted a large increase in carrier pre-selection (CPS) lines, whereby customers use another operator for voice calls but continue to pay a line rental to BT. CPS lines peaked at 6.3 million in 2006. However, the number has now begun to decline as CPS operators roll-out full LLU and migrate customers to LLU-based services: at the end of June 2007 there were 6.1m CPS lines.

Figure 4.5 Carrier pre-selection, wholesale line rental and LLU lines

Source: Ofcom / operators

4.1.4 BT’s share of voice call volumes falls below 50%

Growing take-up of wholesale line rental and LLU services has intensified competition in the UK fixed-line market, and in 2006 BT’s retail share of fixed voice call volumes (excluding NTS voice calls) fell to under 50% for the first time (Figure 4.6). Indirect operators (those offering services over another provider’s infrastructure such as CPS and WLR) were the main beneficiaries as their share of voice calls increased from 25% in 2005 to 28%. Virgin Media’s share of voice call volumes was unchanged at 15%, as was that of other direct network operators (9%).

Figure 4.6 Market share of fixed voice call volumes

Source: Ofcom / operators
Note: Excludes NTS voice calls

4.1.5 Majority of UK households have broadband

Ofcom data indicated that by March 2006, 13.3 million, or around 53% of UK households had a broadband internet connection. During 2006 we estimate that the number of residential broadband connections increased by 3.0 million, a slow-down from the 3.7 million increase in 2005, as household broadband penetration approaches that of all internet connections and PCs/laptops (64% and 71% respectively in Q1 2007).

Figure 4.7 UK residential internet connections

Source: Ofcom / operators Note: Figures have been restated from the 2006 Communications Market Report to reflect more accurate data

Broadband is becoming embedded in the daily lives of many consumers, making it vital to be able to switch provider quickly, efficiently and without disruption to service. In December 2006 Ofcom published a statement on the broadband migration process which contained a new general condition regarding Migrations Authorisation Codes (MACs), the codes required to switch DSL broadband provider . Under the new condition ISPs are obliged to provide customers who are out of contract and request a MAC with the code within five working days. This has made it easier for consumers to switch between DSL broadband services, including to LLU providers.

4.1.6 Broadband headline speeds double in 2006

While broadband prices continued to fall during 2006, headline connection speeds continued to increase. At the end of 2006 the average blended headline broadband speed across all residential and SME connections was 3.6Mbit/s, more than twice the figure of 1.6Mbit/s at the end of 2005, and by the end of June 2007 this had risen to 4.6Mbit/s (Figure 4.8).

Figure 4.8 UK broadband connections by headline connection speed

Source: Ofcom / operators

Headline speeds will continue to rise during the next year (although as discussed below, actual speeds experienced are often significantly lower). BT is upgrading the speed of its basic broadband connection to upto 8Mbit/s, and some LLU operators, like Be with its up to 24Mbit/s core proposition, are using speed as a point of differentiation. Virgin Media is in the process of upgrading its cable network and is offering broadband download speeds of up to 20Mbit/s. From 2008, BT’s 21CN will use ADSL2+ technology to potentially provide speeds of up to 24Mbit/s.The table below shows how these speeds translate into the time taken to accomplish various common online tasks.

Figure 4.9 Theoretical time taken to perform online activities

Source: Ofcom

UK broadband customers are therefore, on average, getting a better deal in terms of the cost and the headline ‘up to xMbit/s’ speed of their service. However, the actual speeds received by broadband users are often much lower than the headline speed of the connection and are affected by various factors including the quality and length of the physical line from the exchange to the customer’s premises, and connections being ‘contended’, meaning that during busy periods speeds will slow as multiple premises share the same bandwidth.

The level of take-up of ADSL for broadband access, which uses existing copper wires from exchange to the customer premises, places a constraint both on maximum broadband speeds and also on actual speeds experienced, which decline rapidly with distance from the exchange (Figure 4.10). These issues are discussed in detail in the Broadband Digital Progress report published by Ofcom in April 2007. The speed of cable broadband connections also varies with the number of simultaneous users.

Figure 4.10 Maximum DSL speeds by distance from BT exchange

Source: http://www.tpg.com.au/dslam/faq.php

UK operators do not currently seem to see a business case for rapid investment in access networks which can deliver higher speed residential services, such as fibre to the home (FTTH) or fibre to the cabinet. However, BT’s announcement that it plans to deploy FTTH to offer speeds of up to 70Mbit/s in greenfield sites in the future is the first sign that highly localised high-speed fibre access will become available to some residential consumers.

4.1.7 Cable broadband accounts for less than 25% of all connections

At the end of 2006 cable modem broadband accounted for 23.5% of all UK residential and SME broadband connections, a considerable drop from its 57.4% share in 2002 (Figure 4.11), although over time the number of cable broadband connections has increased from under 800,000 to over 3 million. Cable’s share of broadband connections has declined as a result of higher availability of DSL (nearly all premises are connected to a DSL-enabled exchange while cable broadband is only available to around 55% of households) and, more recently, increased competition from LLU operators.

The approach of Virgin Media, the UK’s largest cable provider, has been to promote its broadband offering bundled with TV, fixed-line and, more recently, mobile telephone services to consumers in its cabled areas. It has not sought to increase the footprint of its cable network, but has looked to increase the availability of its services by utilising wholesale LLU services. An agreement with Cable & Wireless (C&W) in May 2007 gained Virgin Media access to an additional 4 million UK households by the purchase of wholesale LLU services. Virgin Media was already providing broadband to over 250,000 off-net DSL customers via its Virgin.Net ISP, whose customers are currently being switched to C&W’s LLU network. It intends to launch a video on-demand IPTV service, combined with a Freeview digital terrestrial television (DTT) box, for its off-net customers.

Cable’s share was squeezed by LLU operators during 2006. Of particular note was BSkyB’s entry into the broadband market in June 2006, which put the company in direct competition with Virgin Media for triple-play (digital TV, fixed-line and broadband) customers. At the end of June 2007 BSkyB had 716,000 broadband customers.

Figure 4.11 Share of residential and SME broadband connections

Source: Ofcom / operators

4.1.8 Service bundling proliferates as LLU availability increases

A key benefit of LLU is that allowing operators to locate their own equipment in a BT exchange enables greater service differentiation as unbundlers are no longer tied to BT’s wholesale products. One outcome of this has been the proliferation of multiple communications service product bundling in the last 18 months (Figure 4.12), much of which is provided over unbundled local loops.

Figure 4.12 Bundled service offers from major suppliers, June 2007

Source: Pure Pricing
Note: Highlighted box denotes that the combination of services requires the purchase of additional services

Service bundling is popular with operators as it offers the potential to reduce churn in a market characterised by rising acquisition costs; it can also increase average revenue per user even though the prices of individual services are falling. Consumers typically benefit from discounts when buying a selection of communications services from a single operator and in many cases receive a single bill and point of contact for customer services.

IPTV services are slowly being introduced by LLU operators and in August 2006 Tiscali acquired Video Networks, operators of the London and Stevenage IPTV service HomeChoice. The service is being re-branded Tiscali TV and is being rolled out in a number of UK cities including Birmingham, Edinburgh and Newcastle, to be followed by parts of Leeds, Sheffield and Liverpool. Tiscali plans to launch its ‘triple-play’ service combining fixed-line, broadband and TV services in September 2007, and in July 2007 announced the purchase of Pipex’s broadband and voice divisions for £210m.

In December 2006 BT launched its hybrid IPTV service BT Vision, which combines a Freeview box with the ability to access additional video-on-demand films, TV programmes, and music videos over a DSL broadband connection. Orange also plans to launch an IPTV service (Orange TV) and BSkyB’s premium channels are already available to HomeChoice customers via BSkyB’s Sky by Wire service.

The complexities of quantifying broadband prices

Ofcom research in Q1 2007 indicated that 52% of people in the UK with broadband purchased it in conjunction with another communications service, thereby often receiving heavy discounts on the price of stand-alone broadband. Some suppliers provide free broadband when customers buy additional communications services, the cost of the broadband being subsidised by other services in the bundle.

A recent OECD report compared the lowest prices for broadband, on a cost per Mbit/s basis, across 30 countries, of which the UK ranked 16th. The UK data came from three ISPs (BT, HomeChoice and Telewest). As such it excluded pricing data from several leading LLU operators which are gaining market share as a result of their low-priced offerings. The report also looked at broadband prices in isolation, despite the fact that so many UK consumers now buy broadband as part of a bundle of services, and some of the largest broadband providers, like BSkyB, TalkTalk and Vodafone, do not supply stand-alone broadband products.

In the OECD’s analysis, Japan, which has implemented fibre to the home (FTTH) offering speeds of up to 100Mbit/s, had the lowest cost per Mbit/s. However, it is difficult to make a direct comparison of broadband packages between countries; differing topographies and population distributions mean that a service which is economically viable in one country may not be in another, due to the level of infrastructure investment required. UK broadband providers have not yet seen a rationale for the rollout of FTTH, meaning it is unlikely that the UK will be able to challenge the cost per minute of those nations with FTTH in the near-to-mid term.

There are also problems with using cost per Mbit/s as it fails to take into account that many consumers have yet to see the need for broadband speeds in excess of those already available in the UK. Recent Ofcom consumer research showed that broadband speeds were not the main barrier to the use of bandwidth-hungry services like video streaming in the UK (lack of interest was the key constraint).

Although international comparisons of broadband offerings and prices, such as the OECD report, can be useful, more complex analysis, taking into account service bundling and other points of service differentiation (such as data caps) is required. The 2007 edition of Ofcom’s International Communications Market Report (scheduled for publication around Christmas 2007) will explore this issue further and place UK broadband pricing in an international context.

4.1.9 Operators focus on retention

In a market characterised by high acquisition costs and falling growth, operators have focused strongly on customer retention over the last 18 months. The proliferation of bundled offers can be seen as a manifestation of this, with operators looking to tie customers in to multiple services with a longer contract term.

The migration to longer contracts is a key trend across the telecoms industry. Examples include AOL increasing the contract length on its 2Mbit/s and 8Mbit/s offers from 12 to 18 months in June 2007 and the accompaniment of BT’s fixed-line price reductions in June 2007 with minimum contract lengths of 18 months on Options 2 and 3. Orange Home is currently offering £300 off/a free laptop to anyone signing up for three years to their £14.99 a month DSL service.

However, it is in the mobile sector where the migration to longer-term contracts has been most pronounced. Until 2005, the maximum contract length available was 12 months; in the first three months of 2007, 79% of new contracts were for 18 months or longer (see Figure 4.13). In July 2007 the launch of a 24-month contract by O2 meant that all five network operators were offering customers two-year contracts.

In the USA, AT&T signed an exclusivity contract with Apple to supply the iPhone, and subscribers wishing to obtain the handset were only able to do so by signing up for a two-year contract, even though it was not subsidised. It is not clear whether this even longer-term approach to contracts will be repeated when the iPhone is launched in Europe later this year, although Apple is apparently seeking similar exclusivity deals with European carriers.

Figure 4.13 Lengths of new mobile contract connections

Source: GfK

Twelve-month contracts are still available on all networks, but the migration to longer contracts is a reflection of the lower prices offered to customers willing to commit for longer periods, as operators pass on the benefits of lower acquisition costs. One consequence of this is seen in the greater usage levels associated with lower prices and higher levels of inclusive voice and messaging. A second, longer-term consequence is likely to be a reduction in switching, while a third could be a longer handset replacement cycle which may place a constraint on the adoption of converged services by delaying take-up of new handset technologies.

4.1.10 Operators focus on direct sales rather than those through third-parties

During the last 18 months, motivated by their focus on customer retention and a desire to reduce acquisition costs, mobile operators have sought to increase sales through their own direct channels rather than through third-parties. O2’s purchase of The Link in June 2006 resulted in over 250 more operator-owned stores on the high-street, with O2 retaining around 100, 95 being sold on to 3UK and the remainder to other operators. Vodafone’s announcement in October 2006 that it was withdrawing from Carphone Warehouse was in part also motivated by a new focus on direct sales. And 3UK’s roll-out of over 100 new stores since October 2006 has resulted in the proportion of direct sales increasing from a claimed 33% to over 60% in May 2007.

Operators have also made some of their special offer tariffs available only through their own channels; for example, in July 2007, T-Mobile promoted free handsets with free cross-network calls 'only when you buy direct from us'. Similarly, all operators have focused on their own internet sales; for example, Orange’s web-exclusive offer in July 2007 offered free Orange-to-Orange texts on its Speak Easy tariff.

4.1.11 Substitution of fixed calls as mobile increases market share

Ofcom research indicates that by the end of 2006 there were as many mobile-only households as fixed-only households (10%). The vast majority of households have both mobile and fixed lines and the requirement to have a fixed line for DSL broadband access, combined with falling prices for fixed and broadband service combinations, constrains further decreases in fixed-line numbers. Research by Analysys in 2007 found that the UK had the second lowest proportion of mobile-only households in Europe (Sweden had the lowest).

However, there is evidence of accelerating substitution of fixed calls by mobile calls (Figure 4.14), driven by falling mobile prices and an increasing number of mobile contracts with a large number of inclusive minutes. This trend is likely to continue - GfK reports that in the first six months of 2007 sales of standard mobile tariffs with an attached package of over 300 minutes remained consistent at around 70%.

Figure 4.14 UK total outbound call volumes

Source: Ofcom / operators
Note: Figures include non-geographic voice; figures have been restated from the 2006 Communications Market Report to reflect more accurate data

Despite further growth in the number of mobile phone connections coming primarily from ownership of multiple handsets (at the end of 2006 there were 69.7 million active mobile connections, compared to the UK population of around 60 million), average outbound calls per mobile connection rose to over 100 minutes for the first time in 2006, with average calls per fixed line falling below 300 minutes.

Increasing use of voice over internet protocol (VoIP), which uses the internet to route voice calls, and can either be in the form of a computer software application (often instant messenger based) or a service which looks like a standard phone service, may also be having an impact on fixed-line voice volumes. However, Ofcom research finds that although use of VoIP is increasing (17% of adults with broadband have used VoIP at least once), in general the technology is still in the early-adopter phase. Only 14% of VoIP users claim to use it every day, and VoIP users are more likely to have the use of a mobile and a fixed line than UK adults as a whole.

4.1.12 ‘Digital mums’ and ’silver surfers’ change landscape of internet

As internet penetration has grown (to around two-thirds of UK households by the end of 2006), the demographic centre of gravity has shifted towards women and older users. Nielsen//NetRatings data from April 2007 show that women in the 18-34 age range are the most active internet users by time spent (Figure 4.15). Use falls with age, but over 50s (who make up 41% of the UK population) now account for nearly 30% of all time spent on the internet. As section 4.3.8 details, over 65 ‘silver surfers’ spend more time online per active user, at nearly 42 hours per month, than any other age group.

Figure 4.15 Total internet use by age, April 2007

Source: Nielsen//NetRatings, April 2007 – ‘At home’ data including internet applications

Analysis of surfing time shows that the average internet user spends one hour online each day and that Britain is a nation of shoppers and social networkers. eBay is a very clear leader in terms of total time spent on its web site, with in total, twice as much as second placed Bebo. Other social networking sites populate the top ten sites by time spent, including MySpace, Facebook, YouTube and Runescape (see for more details).

4.1.13 Different technologies deliver mobile broadband

With consumers increasingly using home wireless networks to access broadband internet in the home, and 3G mobile phones to access the internet elsewhere, the past 18 months have seen fixed and mobile operators invest in infrastructure, handsets and propositions designed to provide data services outside the home, and bridge the consumer experience inside and outside the home.

High-Speed Downlink Packet Access (HSDPA) is an upgrade to a WCDMA 3G network that enables an increase in peak download speeds from 384kbit/s to between 1.6Mbit/s or 3.6Mbit/s (and up to 14.4Mbit/s in the future), thereby enabling mobile operators to offer download speeds comparable to those typically experienced by residential broadband consumers. T-Mobile was the first UK operator to launch HSDPA services over its 3G network in August 2006, with the four other operators all having followed by July 2007. With limited availability of compatible handsets, HSDPA is currently primarily targeted at business users using PC data cards.

Meanwhile, a number of initiatives by fixed-line operators (e.g. BT), mobile providers (T-Mobile) and start-up WiFi network operators (e.g. The Cloud), sometimes with municipal support, have increased the number of public WiFi access points to 11,447 (at the end of March 2007, compared to 10,339 a year previously), according to Informa. This maintains the UK’s position as the European country with the most wireless ‘hotspots’ and 12 UK cities now have sizeable ‘joined up’ wireless zones.

WiFi networks potentially provide an alternative to fixed-line broadband access in highly populated areas, but the limited range of WiFi networks makes them impractical for wide geographical coverage. WiMAX technology offers longer-range coverage and in the long term represents a potential alternative to cellular networks for geographically-spread wireless broadband.

Pipex Wireless began the UK’s first commercial WiMAX trial in Milton Keynes in December 2006 and plans to launch in Manchester in late 2007 and then roll-out services to 50 UK towns and cities by 2009. However, because its licence (for the use of 3.6-4.2GHz spectrum) does not support mobility, in the absence of any future investments in mobile spectrum, Pipex will use WiMAX for fixed applications. It has stated plans to focus on providing backhaul for municipal WiFi deployments, while also offering a wireless local loop equivalent to consumers and businesses which require faster uplink services than those typically provided by basic DSL services.

WiFi-enabled cellular handsets represent a way of integrating home and public wireless networks with cellular networks, enabling customers to make VoIP calls when in range of a compatible WiFi router and mobile calls over a cellular network when out-of-range. Two UK companies are now offering ‘converged’ fixed and mobile services in this manner: BT (which launched BT Fusion in June 2005, initially over Bluetooth, but now uses WiFi technology) and Orange (which launched Orange Unique in September 2006).

4.1.14 Conditions in place for take-off of internet on mobile phones

Although non-SMS data revenue still only accounted for around 5% of mobile operators’ retail revenue in 2006, there are indications that the mobile internet may finally begin to deliver on some of its promises in the near future. In the past year, four key pre-conditions for the take-off of the mobile internet have been met. First, 3G use has become more widespread, with 7.8 million connections by the end of 2006, and penetration is expanding well beyond the base of 3G-only operator 3UK as other MNOs migrate their subscribers onto their 3G networks (Figure 4.16).

Figure 4.16 UK 3G subscriptions

Source: Ofcom/operators/Informa; includes estimates where Ofcom does not receive data from the operators

Second, the large majority of mobile handsets now have internet capability, with data from GfK showing that nearly 80% of the handsets sold in the first three months of 2006 had XHTML capability, which is required to enable internet pages to be correctly rendered on mobile phones. Third, the cost of browsing the mobile internet has reduced, with four of the five network operators offering ‘unlimited’ data tariffs (subject to a fair use policy) for £5 a month.

And finally, the services available are beginning to offer a customer experience approaching that available to users of the fixed-line internet, as internet site providers increasingly provide mobile-enhanced versions of their services, and mobile operators partner with the leading internet brands. All of the main five operators now promote search from Google, Yahoo or MSN and within the social networking category MySpace has partnered with Vodafone and Bebo with Orange.

4.1.15 New life in mobile advertising business models

Like the mobile internet, mobile advertising and the power of the ‘brand in the hand’ has been much-hyped for many years with little end result. However, with the development of the mobile internet, there is a new focus on mobile advertising and the development of new business models.

Two factors can be identified behind this. First, operators have largely failed to drive significant revenue from customer-paid content. Second, the introduction of flat-rate tariffs for open internet access has highlighted the imperative to use the intelligence they have about their customer base to prevent them from being reduced to the dumb pipe status of an ISP.

The most common new business model is a partnership between operators and online advertising service providers for search-based advertising. For example, Vodafone uses Google for internet search in return for a share of revenue from the ‘sponsored links’, while 3UK has a similar deal with Yahoo!.

In another model, operators are beginning to see opportunities to offer advertiser-funded content. In partnership with technology provider Rhythm, 3UK offers a large part of its video content free of charge to customers, who in return provide demographic data. This information is then used to serve highly-targeted adverts which are incorporated within the video.

Perhaps even more ambitious is a business model which proposes offering free calls and texts to customers in return for permission to serve adverts. This is the approach of new virtual network operator Blyk, which at the time of writing is scheduled for a UK launch in October 2007.

Back to top