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1.1.1 The scope and structure of this report

This is the first in a series of regular reports which aim to provide a robust and statistically-driven international context for the UK communications sector.

It forms part of Ofcom’s Communications Market Report (CMR) range, which includes regular publications covering the UK as a whole, the UK’s nations and regions, and ad hoc reports covering specific sectors and topics.

The document seeks to provide an overview of the telecoms, television and radio sectors for a range of countries, considering each from an industry and consumer perspective. It offers a round-up of recent developments alongside some more general context.

The report draws comparisons between the UK and six key countries - France, Germany, Italy, the US, Japan and China. Where we feel it adds significantly to the analysis, we also look at five other nations - the Netherlands, Poland, the Republic of Ireland , Sweden and Spain. (To assist the reader, we keep all twelve countries in this order in bar charts throughout the document).

These were selected from a number of candidate countries as those that provide an interesting contrast to the UK, owing to their different stages of development and regulatory approaches, but also those where the information available to us is accurate and up to date.

Most data cover the 2005 calendar year, with five year historical time series where applicable, using nominal figures. In the price benchmarking we have used PPP (Purchasing Power Parity) in order to remove the effects of short-term exchange rate fluctuations in our comparisons. This is necessary to avoid reporting a comparison of consumer experience among countries which is driven more by exchange rate movements than by the underlying position of the respective consumers. For other data sets, such as statistics on revenues, we have used current exchange rates. This is because for comparisons at a point in time, rather than assessments of long term relativities, we believe the current exchange rate is more relevant. We do not offer market forecasts and seek to avoid value judgements except where clearly supported by the data.

The document follows the structure of the UK Communications Market Report, starting with an Overview, which draws out two key themes which span the report – convergence, and the consumption habits of the 18-24 age-range – and then consolidates the information contained in the rest of the document to place the UK in context.

It then provides three main sections - Telecoms, Television and Radio - each providing information on:

• Industry size, structure and financing;
• Availability, take-up and use of products and services; and
• Consumer attitudes and behaviour.

At the back of the report there is a quick reference section with background information on the economies, demographics and political and regulatory structures of the key comparator countries covered.

Finally, we include appendices detailing the methodology behind the international consumer survey and the price benchmarking exercise.

1.1.2 The rationale for the Communications Market International Report

The report meets Ofcom’s regulatory principle of researching markets constantly; it was also a key commitment in the 2006/7 Annual Plan as part of our aim of understanding the sector and our stakeholders. Following a survey conducted into views on the UK CMR earlier this year, we found strong UK stakeholder demand for more Ofcom research reports, with a particular interest expressed in coverage of international issues.

We believe that the desire for a deeper understanding of the international arena is driven by the ongoing globalisation of communications services and business models, and the growing exposure of UK operators to developments abroad, from both a market and regulatory perspective.

Although there are a variety of broadcasting and telecoms market reports available, none captures the combination of industry analysis, service coverage and consumption data, alongside an examination of consumer behaviour across the whole sector, which we feel is required to provide a comprehensive context for the UK communications market.

In addition, there appears to be a particular gap in comparative cross-country analysis of the use of new converged and online services; we have commissioned original research to help improve understanding of consumer behaviour in this pivotal and growing area.

A related issue is the importance of trying to benchmark communications service prices internationally in a meaningful way, to help describe the market in each country. Existing studies do not take account of the price implications of bundled services (for example the “free” broadband offers available from fixed line, mobile and pay television operators in the UK”) or the cost of equipment ownership. We have tried to address these.

We aim to provide an objective assessment of these issues with a contextual narrative, using primary data where possible.

1.1.3 The methodology used to compile this report

The document was written using a mixture of desk research and conversations with industry bodies, operators, regulators and commentators. The data were gathered with the support of research and consultancy firm IDATE, which supplied additional market information, helped to verify sources and provided market estimates where necessary. In addition, we commissioned Synovate to conduct original research into one key area where we found little information available; the provision of communications services via the internet. We focused this research on broadband users (using an online survey with 2,781 respondents) in order to gain insight into the habits of those more easily able to take advantage of data-intensive download services.

We have also conducted a new price benchmarking exercise which aims to take into account the cost of hardware ownership and to incorporate the tariffs available to consumers who take ‘bundles’ of communications services. This work looks at the prices available from the incumbent operator and its main competitors (it does not purport to offer an exhaustive list of tariffs) for each of our key comparator countries for the typical consumption patterns of a selection of household types. A full explanation of the methodology can be found in Appendix A. This benchmarking study was compiled with the assistance of Bristol York consultancy. Starting in 2007, we aim to conduct a wide-ranging discussion with interested parties to expand and evolve both the methodology and the output; we welcome all input and suggestions.

We endeavour to ensure that the data in this report are comprehensive and the most accurate currently available. However, with a document so wide in scope, and with reliance on third parties for some data, there will always be omissions and occasional inaccuracies; Ofcom welcomes comment on the content and style of its Communications Market reports 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. This report should not be seen as recommending best buys and should not be relied upon when making any purchase decisions. Ofcom has conducted its own checks on the data in this report and while we consider it to be correct, Ofcom makes no representation or warranty, express or implied, with respect to information contained here and accepts no liability in respect of any of the results published, statements made, or any subsequent decisions taken by any person in reliance on the report.

1.1.4 Acknowledgements:

We would like to thank the following organisations which have granted us permission to use their data: AMR International Limited, Analysys, the British Broadcasting Corporation, DigiTag, the Department of Trade & Industry, the European Audiovisual Observatory, the European Broadcasting Union and the individual Members of the EBU Information and Statistics Network, Eureca Research, Euronomitor, Global Insight, Informa, Law Business Research Ltd, Japan Broadcasting Corporation (NHK), Médiamétrie/Eurodata TV, Ovum, PBS, PricewaterhouseCoopers, Screen Digest, and the World Advertising Research Center Ltd.

• 1.2 Key themes

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