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1.4.1 Introduction and methodology

In order to provide international comparisons for the prices paid for communications services by UK consumers, we have developed a benchmarking methodology that identifies the prices available to ‘typical’ consumers for baskets of telecoms and TV services in five comparator countries: the UK, France, Germany, Italy and the US.

This methodology builds on the one we used in Ofcom’s 2006 International Communications Market Report. Full details are provided in Appendix B, but the basic principles are as follows:

• We constructed five ’typical’ household types, which collectively may be seen as representative of the average population across our comparator countries.
• We defined a basket of communications services (fixed-line voice, broadband, pre-pay and post-pay mobile, and television) appropriate for each household type, breaking down the baskets into as much detail as practical (for example, mobile calls are broken down into calls to national fixed lines, calls to off-net mobiles, calls to on-net mobiles and international calls).
• The weighted use across all of the baskets was adjusted to ensure it is broadly aligned with average per-household use across our comparator countries.
• We then examined tariffs from the three largest providers within each country for each type of communications service and identified the tariff from each provider which offered the lowest price per month (based on tariffs available in October 2007) for the defined basket.
• In addition, we examined ‘bundled’ tariffs (for example, ‘triple-play’ services which offer a single bill for the delivery of fixed-line voice, broadband and television services), and identified where our households could get better value by subscribing to the bundled tariff.
• We also considered the costs of connection and hardware (equipment) that would be incurred by households (amortised over periods of time as detailed in Appendix B). This is necessary for two reasons: firstly, because they are material to the cost of ownership to the consumer; and, secondly, because they are often inseparable from the service price, as connection costs vary and some operators include subsidised or ‘free’ equipment (for example a mobile phone or a router) within their service proposition. In the analysis below, mobile phones are included within the service costs (as they are generally provided either free-of-charge or at a subsidised rate at the time of connection), while the costs of television and PC equipment are separately identified.
• All sales taxes and surcharges have also been included, in order to reflect the prices that consumers actually pay (although we do not account for differences in other areas of personal taxation policy within each country).
• All prices have been converted back to UK currency, using a Purchasing Power Parity (PPP) adjustment based on OECD comparative price levels in August 2007 (the latest period for which data were available), and the IMF average exchange rate for August 2007. PPP exchange rates are those at which a unit of currency can purchase a given basket of goods in both countries. When prices are converted into pounds using PPP rates, it shows whether, compared to the UK, the product or service is expensive relative to the wider basket of goods in the country in which it is sold. This interpretation should be kept in mind when viewing the results below.

In order to provide both an illustration of representative prices for the individual services in each country, and an illustration of the best value that consumers could get for their full ‘basket’ of services, we have provided two types of analysis for each basket.

The first (which we call ‘average single service’ pricing) illustrates the price of each individual service, as defined by the average of the lowest price tariff from each of the three largest operators for each service in each country, weighted by the market share of the service provider in order to ensure fair representation. This provides a useful comparison of the relative costs of communications services, but an important limitation is that single-service offers are sometimes not available from leading suppliers. For example, in the UK, Carphone Warehouse currently only offers broadband together with fixed voice, while BSkyB only offers broadband together with television.

The second type of analysis (which we call ‘best offer’ pricing) identifies the lowest price that a consumer could pay for this basket of services, including, where appropriate, by purchasing ‘bundled’ services. Our view is that this type of analysis is essential to understand pricing of communications services which are increasingly being delivered as multi-service propositions (examples in the UK include the ‘free’ broadband offer with TalkTalk’s voice service, or Sky’s See, Surf, Talk ‘triple-play’ offer which provides TV, voice and broadband, or Virgin’s ‘quad-play’ offer which includes TV, voice, broadband and mobile.) However, there are two key limitations to this type of analysis. Firstly, ‘bundled’ service offerings are typically not available to all consumers as they are generally geographically constrained to areas where premises are connected either to a cable network or to an unbundled telephone exchange. Secondly, although focusing on the ‘best offer’ provides insight into the lowest prices available to some customers, it is not as good a reflection of the prices that consumers are actually paying as the weighted average analysis which is possible when looking at single-service pricing.

We believe a multi-platform, basket-based approach is the most useful way of comparing international pricing of communications services. Nevertheless, there are a number of limitations to our methodology and the following notes and caveats are important in interpreting the analysis below.

• In looking only at tariffs offered by the three largest operators in each country, lower prices which might be available from smaller operators seeking to disrupt markets are not included, purely for practical reasons. Nevertheless, we believe that using the prices of the largest operators is appropriate, both because they are the best reflection of the general consumer experience and because they are in large part defined by the competitive environment in which they operate.
• The analysis assumes a wholly rational consumer who has a full understanding of his or her usage requirements and is prepared to shop around and undertake some often quite complex calculations to identify the tariff which offers the best value. Clearly, in reality, many consumers do not act in this way, but we believe the assumption is necessary in order to provide effective international comparisons.
• In order to calculate the weighted average, we have used market share calculations based on operators’ retail customers, where available and based on wholesale customers where not. It should be noted that market share calculations are based on the overall subscriber base, not the subscriber base for the particular tariff (for which data are not available).
• Tariffs are often highly complicated and sometimes have components that we have been unable to incorporate into our model. Three examples from the UK are:
  • fixed-line voice tariffs available from the UK’s three largest operators, which offer a ‘flat rate’ for national calls of up to one hour in duration – our model has all calls at three minutes in duration, so the benefit from making longer calls is not included;
  • a pre-pay mobile tariff which includes much-reduced rates after the first three minutes of use every day – our model assumes use is distributed evenly throughout the month; and
  • fixed-line and mobile tariffs which include free or reduced call rates to nominated ‘friends and family’ numbers – our model does not include any discounts for these types of tariffs.
• Pay-TV services constitute a component of three of the baskets we examine. However, it has not been possible to compare like-for-like subscriptions because of differences in the composition of basic and premium channel bundles across the five countries. As a consequence, quantitative comparison of international TV pricing is arguably less meaningful than for telecoms services. This issue is also present in the pricing of triple-play (voice, broadband and TV bundles), where there is large variation in TV content across our comparator countries.
• For some communications services in some countries there are only two operators with nationwide coverage and/or significant market share. In these instances, we have identified the best-value tariff from each of them and calculated a blended average based on their market shares.
• Some services are not available nation-wide. This is particularly true for services which are available only where local exchanges have been unbundled, and for IPTV, which requires a high-speed broadband connection, but is also true for cable TV and all types of broadband.
• A number of inclusive minutes and messages are typically bundled within phone tariffs. We assume that consumers use their allocation of inclusive services in the most cost-effective manner.
• In order to provide like-for-like comparison we have defined the mobile components within baskets as either post-pay or pre-pay. However, a consequence of this is that differences in the characteristics of the national markets are not captured within the model. For example, the UK fixed-line market is characterised by segmentation strategies where the leading operators do not generally offer post-pay contracts at less than £20 a month, and a large number of minutes are typically bundled with contract connections. (Data from GfK indicates that over 70% of UK mobile contracts included 300 or more minutes in the first half of 2007). Therefore, the low usage pattern of post-pay subscribers in basket 4 and basket 5 would potentially be better served by a pre-pay contract.

1.4.2 Basket 1: a low-use household with basic needs

Our first basket contains a usage pattern typical of a retired low-income couple in any of our comparator countries. They use a fixed line for all voice calls, and spend around five minutes a day making local calls and two minutes a day making national calls. They only occasionally make calls to a mobile. They do not have pay-TV, but do use free multichannel digital services which are available over the terrestrial platform in all of the five countries.

Figure 1.10 Composition of basket 1

Source: Ofcom

Using a weighted average of the best-value tariffs from the three largest operators in each country, for this basic basket of fixed-line calls the US has the lowest prices (Figure 1.11). Within Europe, Germany and France are 10-15% less expensive than the UK and Italy.

With its emphasis on local calls, this basket favours those countries where local calls are typically included free of charge, as is the case in the US and (for two of the three tariffs) in France. In all countries, most operators offer inclusive local and/or national calls for an increase in the monthly fee, but the usage levels in this basket did not in most cases justify our household making the upgrade.

UK line rental prices (between £10.50 and £11 for the tariffs analysed) are higher than in the other international countries analysed, while the lower basic rental prices in the US (where rental charges for two of the three tariffs are less than £2.50), contribute to its relatively low pricing.

There is also significant variation in the cost of the television licence across the five countries (which, along with hardware, represents the only television costs for this basket, which does not take pay-TV services). With higher investment per head in public service broadcasting than the other countries, the TV licence is most expensive in Germany and the UK, at around £11 a month. In contrast, there is no licence fee in the US, where public funding for television (which is much lower per head than in the European countries) is raised by alternative means.

Figure 1.11 Basket 1 - comparative single service pricing

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

In looking at the ‘best-value’ tariff available from any one of the three largest operators in each country, there is a wider variation in prices (Figure 1.12).

In Italy, a tariff from an alternative network with around 10% market share is nearly 50% less expensive for this basket of services than the best deal available from the incumbent (which has over 80% market share). In the US the best-value tariff for this basket is from the third largest operator, and is over 50% less expensive than the equivalent tariff from the largest operator – but is only available in 14 western states.

By comparison, there is much less variation between the pricing of the largest three operators in the UK, France and Germany.

Figure 1.12 Basket 1 - Comparative ‘best offer’ pricing

Source: Ofcom using data supplied by IDATE
Note: Lowest price available for basket of services from any of the three largest operators by market share in each country, October 2007; PPP adjusted

1.4.3 Basket 2: a broadband household with basic needs

The second basket is representative of a couple of ‘late adopters’ who have one pre-pay mobile connection which they use occasionally (an average of two minutes a day), and a basic level broadband contract. They make around 15 minutes of calls a day on their fixed line, around two-thirds of which are local calls, although they do also call mobiles for 30 minutes a month and make occasional international calls. They do not subscribe to pay-TV services.

Figure 1.13 Composition of basket 2

Source: Ofcom

The overall pricing pattern for this basket is significantly different from the lower-usage basket 1. For this basket, the UK offers the lowest prices, both for fixed line and mobile (again, calculated as a weighted average of the largest three operators) (Figure 1.14).

The lower fixed-line pricing in the UK is a consequence of the UK’s inclusive call packages: for this particular basket, a household achieves the lowest overall price from all three operators by purchasing unlimited local and national calls ‘added-on’ to the basic line rental.

By contrast, the US market is characterised by relatively low-cost line rental, but relatively expensive metered national calls, so that costs increase proportionally more with higher use. However, calls to mobiles are free on all the US tariffs included in the analysis, whereas they account for 10-15% of the cost of the fixed-line basket for the European countries. This is caused by the interconnection model in the US (see Section 1.3.10 for more details), which typically results in mobile callers being charged for the calls they receive.

The lower prices in the UK and Italy for the pre-pay mobile are a reflection of more diversified pre-pay markets with a wider choice of tariffs. The UK is the only country with five mobile network operators, where around 65% of mobile connections are pre-pay; in Italy there are four mobile network operators, and around 90% of connections are pre-pay. By contrast, the pre-pay market is much less developed in both France (35% of mobile connections) and the US (8%).

The US is over 50% cheaper than any of the European countries for standalone broadband pricing, although, as discussed below, this is more a consequence of a different approach to pricing, where broadband is less commonly ‘bundled’ in the price of a fixed-line package.

Figure 1.14 Basket 2 - comparative single service pricing

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

In all of the European countries, there are major cost savings to be made by buying this basket of services within a ‘broadband and voice’ bundle (Figure 1.15), and in France and Germany, the ‘best deal’ available for this bundle is less expensive than the weighted average of the best-value tariffs for voice services only. The best-value deal in the UK is promoted as a voice package with ‘free’ broadband, and also includes a ‘free’ laptop PC (which is why there are no PC equipment costs within the UK pricing). In Italy, ‘bundled’ offers tend to also include television services and, as a result, the best deal available to meet the needs of this basket in Italy is significantly more expensive but offers inclusive television and a headline broadband speed of up to 20 Mbit/s.

In the US, the best value for this basket of services is offered by purchasing voice services and broadband as separate packages from different suppliers. This reflects a different pricing structure which is in part related to the different market structure in the US; in the majority of areas, local duopolies are in place with the incumbent telecoms company in competition with the local cable operator for the supply of voice and broadband services. Whereas in the European countries new entrants have looked to gain market share by offering bundled services, in the US there has not been the same level of market disruption and operators have looked to the incremental pricing of services, particularly at the lower end of the market.

One important caveat here is that in all of the countries the ‘best-value’ deals detailed in Figure 1.15 are not available to all consumers; all of the European offers are from alternative operators to the incumbent and are only available in areas where they have ‘unbundled’ the local exchange (i.e. installed their own equipment) or laid cable, while in the US all operators are regional.

Figure 1.15 Basket 2 - comparative ‘best offer’ pricing

Source: Ofcom using data supplied by IDATE
Note: Lowest price available for basket of services from any of the three largest operators by market share in each country, October 2007; PPP adjusted

1.4.4 Basket 3: a mobile ‘power user’

Our third basket represents a single-person household with use typical of a young professional. They have no fixed-line, but use their mobile subscription for internet browsing, and subscribe to a basic pay-TV package to get additional entertainment channels.

Figure 1.16 Composition of basket 3

Source: Ofcom

As a weighted average of the best offers available from the three largest operators in each country, the UK has the lowest overall pricing, largely as a result of significantly lower mobile costs, while the highest overall prices are in Germany, largely because of mobile prices, which are 25% higher than in its European counterparts (Figure 1.17).

Mobile prices in the US are inflated by the unavailability of data ‘add-ons’ from two of the three operators considered; the metered ‘per MB’ cost that is applied amounts to 45% and 56% respectively of the overall cost for these two tariffs, which pushes up the weighted average price significantly. However, the cost of receiving calls (which is unique to the US among the countries in our analysis) is not included as the basket has been defined as including only outbound calls.

It is a feature of the pricing of each of the top three mobile operators in every country that, for this particular basket, the customer can get best value by purchasing a monthly tariff that includes all of the 360 minutes of calls to mobile and national fixed lines. The lower price in the UK is a reflection of the availability of lower basic tariff prices for the same number of inclusive minutes and SMS text messages than in other countries, while the higher prices in Germany are largely due to the higher tariff price for the same number of inclusive minutes.

If MMS picture messages and data use were not included in the basket, the UK’s relative pricing would be even lower in comparison to France, Germany and Italy. The three operators in the UK price MMS at between 25p and 36p per message, meaning that the overall MMS cost is between 12% and 17% of the overall cost of the basket (which includes 30 MMS messages). By comparison, MMS messages are typically 20-50% less expensive in the other countries (and one Italian tariff and one US tariff include them within the overall access price). Similarly, in the UK, pricing for a data ‘add on’ necessary to meet the requirement of the basket ranges between £7.50 and £8.00 across the three tariffs analysed, whereas in Italy data is included within the tariff price and in France it is around 30% less expensive.

Our mobile pricing analysis also includes the price of the mobile handset within the service price (as paid at the time of subscription). For this particular basket, the handset is least expensive to UK mobile subscribers, with a high-end handset included at no additional charge within the monthly access price for two of the three tariffs analysed.

This basket also includes basic ‘entry-level’ pay-TV services, which is defined as the lowest subscription required to receive channels in addition to those available on free-to-view television. Because of the variation in type and quality of programming, like-for-like comparison is more problematic than for telecoms services. Italy has the lowest price, driven primarily by the 15 Euro cost of its cheapest service, which is available from the country’s satellite provider (Sky Italia), which has 89% market share.

Figure 1.17 Basket 3 - comparative single service pricing

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

For the mobile component of this basket, a tariff from the one US operator which offers a data ‘add-on’ means that the US has the lowest ‘best offer’ pricing (Figure 1.18). However, if the price of inbound calls were also to be included, it is likely that the pricing of this tariff would be more expensive than in the UK, France and Italy.

Among the European countries, the UK offers the least expensive ‘best offer’ mobile pricing, although only marginally lower than France. The fact that the best-value offer in the UK is less than 1% cheaper than the weighted average of the best deals from the three largest operators is an illustration of how similar the overall pricing is for this particular basket of services.

In terms of the best deal available for entry-level TV pricing, there is a similar pattern to that of the weighted average pricing, although an IPTV tariff in the US offers a price that is less than 50% of the prices available from the two largest cable providers. There is considerable variation between the least expensive platform in each country; in Italy, the lowest price offer is from a satellite operator, while cable operators offer the lowest prices in the UK and Germany, and IPTV offers the lowest prices in France and the US.

Figure 1.18 Basket 3 - comparative ‘best offer’ pricing

Source: Ofcom using data supplied by IDATE Note: Lowest price available for basket of services from any of the three largest operators by market share in each country, October 2007; PPP adjusted

1.4.5 Basket 4: a family household with multiple needs

Basket 4 represents a family of four with two parents on mobile contracts and two children with pre-pay mobile connections. Adults and children have different mobile needs, with the children being much heavier users of text messaging. However, they are all cost-conscious and favour using the fixed line whenever possible, which gets fairly heavy use, with around 30 minutes of calls a day. The family are also heavy users of the internet and require a high-speed connection, and subscribe to entry-level pay-TV services.

Figure 1.19 Composition of basket 4

Source: Ofcom

In terms of overall pricing, there is little difference between the European countries, with US prices higher, due to mobile pricing being 38% more expensive in the US than in any other country (Figure 1.20).

In terms of fixed-line voice pricing, the US and the UK are the least expensive, for the same reasons as for basket 2, which contains similar voice volumes.

Overall, the UK and Italy offer the lowest prices for mobile, primarily as a result of the lower prices for the two pre-pay components in the basket. Of all the European countries, France has the lowest post-pay costs, but the highest pre-pay costs, which is representative of a segmentation strategy in which low-end users are targeted with low value contracts. A feature of German pre-pay pricing is that a minimum top-up is required each month in order to secure lower calling rates: the result is that the pre-pay connection with the highest use is the least expensive of any of the pre-pay tariffs, with prices becoming significantly more expensive for lower use.

Mobile pricing in the US for this basket is over 30% higher than for any other country. This is the consequence of two features of the US market. Firstly, pre-pay (which has lower take-up than in the European countries) is significantly more expensive. Secondly, low-price contracts are not available from the three main operators; their lowest-price contracts have a higher monthly fee and include more inclusive minutes (the two adults in this basket only require 120 and 60 voice minutes respectively, whereas the tariffs which offer the lowest price for this basket include 450 minutes, 430 minutes and 235 minutes respectively).

The requirement for high-speed broadband pushes up the price well beyond that of basket 2, in every country except France where the three largest operators have all invested in ADSL2+ to offer standard speeds of 20Mbit/s. In all the other countries, there is widespread differential pricing based on broadband speed; this is most evident in the US, where the poor quality of legacy copper wire telephone lines means that high-speed broadband cannot generally be offered via DSL.

The pricing for entry-level pay-TV is the same as for basket 3 above.

Figure 1.20 Basket 4 - comparative single service pricing

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

The requirement within this basket for fixed-line voice, broadband and entry-level pay-TV means that in all countries ‘triple-play’ offers the best deal (Figure 1.21). However, although ‘quad-play’ deals (also including mobile) are available in all countries, none of them offer better value for this particular basket than the separate purchase of all mobile services.

France and Italy have the lowest price triple-play services. However, the television component in both of these tariffs is delivered via the internet (IPTV), and as such they are only available in areas where the triple-play operator has unbundled the exchange and is able to guarantee actual connection speeds of greater than 3Mbit/s, the minimum for receiving standard definition TV.

Figure 1.21 Basket 4 - comparative ‘best offer’ pricing

Source: Ofcom using data supplied by IDATE
Note: Lowest price available for basket of services from any of the three largest operators by market share in each country, October 2007; PPP adjusted

1.4.6 Basket 5: a couple with high use of mobile, broadband and TV

Our final basket is typical of a young couple of high-end users, who have low price sensitivity. They both have mobile connections and are fairly heavy users of both voice and (to a lesser extent) SMS, and also have a fixed connection on which they make more than average international calls and calls to mobile. They have a premium television package for watching the latest sport and movies, and have high-end equipment for all services.

Figure 1.22 Composition of basket 5

Source: Ofcom

Overall for this package, Germany is cheapest (Figure 1.23), primarily as a result of lower pricing for a premium television package (which we have defined as including the fullest package of live football (or NFL) from the top domestic league, in addition to first-run movies from the major Hollywood studios). This is in line with the overall pattern of television consumption in Germany where pay-TV has higher penetration (63%) than in the UK (46%) but only generates £37 per head compared to £58 in the UK. Bundesliga rights are less expensive than comparative rights for the top football leagues in the UK and Italy, and are available from the rights holder (Premiere) as an add-on to cable and satellite television packages from other operators for a fee of 10 Euros a month.

Among the European countries, France has the most expensive pay-TV pricing. However, it should be noted that this is in part a consequence of the way in which the basket has been defined, which is not a good fit for the tariffs available from France. There are tariffs available that offer either some top-league French football and first-run movies, or the best package of top-league football and second-run movies, for around 60% of the price of subscribing to both the best football and the best movie packages (which is the requirement for this basket). In addition, the French tariff includes high-definition channels (which are not a requirement for the basket), and charges an additional premium for Digital Video Recorder (DVR) services (which are included in the basket). By contrast, the tariffs in the UK do not offer high-definition channels, but do include a PVR service.

Fixed-line voice pricing for this basket is lowest in the US, largely because calls to mobiles are included within all of the tariffs analysed (this is because of the US charging model whereby mobile users are usually charged for incoming calls). Of the European countries, the UK’s fixed-line voice pricing is lowest, primarily because of the discounted pricing that is available from all three operators for calls to mobile and international calls when an additional ‘add-on’ is purchased. By contrast, the best-value tariffs from the three Italian operators do not offer any such deals and as a consequence international and mobile calling is significantly more expensive.

Italy has the most expensive mobile pricing for this basket of services. There are two key reasons for this. Firstly, there is less handset subsidy in Italy than in the other countries (we have included the handset cost within the service cost so that we can take account of subsidies in comparing pricing), and the high-end handset required by the first member of the household accounts for a weighted average of 13% of the overall mobile cost for this household in Italy, compared to 11% in the UK and just 7% in Germany. Secondly, the Italian post-pay contract market is much smaller than in the other countries (accounting for less than 10% of all mobile connections, compared to 92% in the US, 65% in France, 48% in Germany and 35% in the UK at the end of 2006), which results in a less diversified market and a smaller range of tariffs.

Broadband prices are the same as for basket 4, which has the same requirements for this service.

Figure 1.23 Basket 5 - comparative single service pricing

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

Once again, there are significant cost savings to be made for this basket of services if services are purchased within a bundle from the same operator (Figure 1.24). However, the cost savings are proportionally lower than for basket 4 (Figure 1.21) because of the inclusion of premium pay-TV services – which are typically an ‘add-on’ to a basic level service and so do not offer cost savings if purchased within a triple-play or quad-play subscription rather than on a standalone basis.

The UK is the only country where a quad-play service offers the best value for this basket of services (one of the two mobile subscriptions is included within the quad-play deal, the second is purchased as a standalone service).

France offers the lowest prices for triple-play services, with the television component of the lowest price tariff for this basket delivered via IPTV. France has the most developed IPTV market in the world, with 1.5 million customers receiving it at the end of 2006. Alternative operators Neuf Cegetel and Free have invested in unbundling telephone exchanges, and have been battling for market share by offering triple-play services using ADSL2+ and, (particularly in Paris) high-speed fibre networks. The incumbent, France Telecom, has responded by offering its own IPTV and triple-play service (under the Orange brand), and by offering differential pricing whereby customers who are connected to an exchange which has been unbundled by another operator are charged a lower overall price (the line rental fee is waived), than customers who are connected to an exchange that has not been unbundled. A consequence is that the lowest prices are generally restricted to cities and large towns.

Figure 1.24 Basket 5 - comparative ‘best offer’ pricing

Source: Ofcom using data supplied by IDATE
Note: Lowest price available for basket of services from any of the three largest operators by market share in each country, October 2007; PPP adjusted

1.4.7 Conclusion

Figure 1.25 and Figure 1.26 below summarise the service pricing of each basket in each country (TV and PC equipment costs and TV licence costs are excluded). From this, the following conclusions can be drawn:

• In all countries, service bundling offers much better value than buying services on a standalone basis. Broadband and voice can typically be purchased in all countries except the US for little more than the price of the voice service alone, while triple-play or quad-play services are the most cost-effective way to receive voice, broadband and pay-TV services in every country for all three of the baskets where all services were taken. (It should again be noted, however, that ‘voice and broadband’ and triple-play services have limited geographical availability as they can generally only be received in cabled areas and / or areas where exchanges have been unbundled by alternative operators).
• In terms of single-service pricing, the UK offers the lowest overall prices for three of the five baskets, driven by cheaper mobile services and generally lower pricing of fixed-line services (except for the low-usage basket 1, where the relatively higher-cost line rental in the UK makes it more expensive than Germany, France and the US). Basic broadband prices are lowest in the US and high-speed broadband is least expensive in France. Premium pay-TV is least expensive in Germany.
• In terms of the ‘best deals’, France offers the lowest prices for triple-play services – largely driven by three-way competition between France Telecom, Neuf Cegetel and Free for the delivery of phone, broadband and TV services via high-speed ADSL or fibre networks. However, the availability of these services will be much lower than the equivalent services which are delivered over cable or a combination of broadband and satellite in the other four countries.
• Bundled services appear to offer less value in the US than in Europe, perhaps as a consequence of less diversification in local markets, with the incumbent telco and the local cable operator typically competing in a duopoly to serve fixed voice, broadband and TV services to customers.

Figure 1.25 Comparative ‘single service’ pricing for all countries

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

Figure 1.26 Comparative ‘best offer’ pricing for all countries

Source: Ofcom using data supplied by IDATE
Note: Weighted average of best-value tariff from each of the three largest operators by market share in each country, October 2007; PPP adjusted

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