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1.2.1 Introduction

In the main body of this document we provide an in-depth analysis of the communications market, on an industry-by-industry basis. This section presents a high-level overview of how the UK’s communications sector compares with those of our key comparator nations.

Figure 1.1 Key communications market indicators, 2006

Source: IDATE / industry data / national regulators / operator data / Informa

1.2.2 Communications sector revenues

Telecoms revenue more than twice those of broadcasting

Global communications revenue amounted to £873bn in 2006, with around 78% of this coming from telecoms (Figure 1.2).

Figure 1.2 Global communications sector revenues, 2001-2006

Source: IDATE DigiWorld and Ofcom calculations based on data drawn from PWC Global Entertainment and Media Outlook.

Telecoms also contributed the largest share of communications revenues in our seven key comparator countries in 2006, and accounted for 68% of total revenues across the seven countries (Figure 1.3). Within the UK, telecoms contributed 70% of total sector revenues.

The UK’s communications sector as a whole was the second largest in Europe, behind Germany (£41.8bn) and ahead of France (£30.2bn). However, the television industry in the UK is the largest in Europe, 10% bigger than Germany’s in 2006.

Figure 1.3 Communications sector revenues in key comparator countries, 2006

Source: IDATE / PWC Global Entertainment and Media Outlook 2007-2011 / Ofcom / National regulators

The UK has 20% higher revenue per head than Germany, France and Italy

With a population of around 300 million, the US represents by far the largest market of all our key comparator countries. However, its communications sector also generates the highest revenue per head in total (Figure 1.4), with the highest revenue per capita in television and radio, and the second highest (behind Canada) in radio.

With £609 per head, the UK generates 20% more revenue than any of the three other European countries analysed. Driven by a combination of higher advertising revenues, an annual licence fee bigger than in any other country except Germany and a mature pay-TV market, television revenues are over 50% higher per head than in France, Germany and Italy.

Figure 1.4 Communications revenue per capita in key comparator countries, 2006

Source: IDATE / industry data / CRTC / Ofcom

Telecoms is the fastest growing part of the UK communications sector

Perhaps because of its relative maturity, UK television revenues have grown more slowly in the five years to 2006 than in the other comparator countries, with the exception of Germany (Figure 1.5). Driven primarily by the growth of mobile telephony, but also by the take-up of broadband services, UK telecoms revenue has performed better and grown at an average rate of 5% a year during this period.

Overall, there are significant variations in the growth rates across the sectors and between countries; Italy and the US experienced the biggest growth in TV revenue, Italy and France had the biggest growth in telecoms revenue and the UK and Canada had the fastest growing radio industries.

Figure 1.5 Annual growth across communications industries, 2001-2006

Source: IDATE / Ofcom calculations using data from PWC Global Entertainment and Media Outlook 2007-2011 / Ofcom / National regulators

1.2.3 Take-up of communications services

UK leads in digital TV take-up

By the end of 2006, 76% of UK TV households received digital TV services. This is significantly higher than in any of the comparator countries and more than double the proportion of homes in Germany (Figure 1.6). The UK also has a comparatively high number of broadband connections per head, more than in every other country except Canada.

The number of mobile connections in the UK, Italy and Germany exceeds the population, as consumers use multiple SIM cards to swap between operators to secure the lowest prices, or have separate subscriptions for business and personal use. Lower mobile penetration in France, the US, Canada and Japan is partly caused by the much smaller proportion of pre-pay connections: customers with a monthly commitment on a contract plan are less likely to have multiple subscriptions. Japan has the longest established 3G market, and more than half of mobile customers have a 3G connection. Italy and the UK have the largest take-up of 3G among the other comparator countries, in part because of the market share of 3G-only operator Hutchison 3G (‘3’) in both countries.

Figure 1.6 Take-up of communications services, 2006

Source: IDATE / industry data / CRTC / Ofcom

Big growth in mobile, broadband and digital TV, as fixed lines decline

The number of fixed lines declined in all our comparator countries, except Germany, between 2001 and 2006 (Figure 1.7), as some consumers opted to have only a mobile connection. The fall was greatest in the US, perhaps because the widespread availability of cable means that many consumers do not need a fixed voice line in order to get broadband services, unlike those in countries where DSL is the main broadband platform.

Digital TV, mobile and broadband penetration all went up by at least 20 percentage points in every country between 2001 and 2006, illustrating the sweeping changes occurring in the communications sector. The UK had the second largest growth in mobile connections among the seven countries (after Italy), the third biggest growth in broadband connections (after Canada and Japan) and the second biggest growth in digital TV households (after Japan).

Figure 1.7 Change in take-up of communications services, 2001-2006

Source: IDATE / industry data / CRTC / Ofcom

1.2.4 Advertising revenue

UK has highest revenue per head from internet advertising

More revenue per head is generated from internet advertising in the UK than in any other country, and it now accounts for 14% of the UK’s total advertising revenue, more than outdoor, cinema and radio combined. In absolute terms, over twice as much revenue was generated in 2006 from internet advertising in the UK as in Germany, Italy and France combined (Figure 1.8).

Figure 1.8 Advertising revenue per head, 2006

Source: WARC 2007 and Ofcom analysis

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