Telcos have accounted for roughly 50% of growth in the media and communications industry, which stood at a £0.4 billion increase to £56 billion, a rise of 0.9%.
According to Ofcom’s Communications Market Report 2016, the telco industry grew by £200 million over the course of 2015, which has been attributed to the growth of 4G and bundled packages, amongst other factors. 4G coverage is now available to 97.8% of the UK and 80% of households now have access to superfast broadband. Uptake now stands at 48% of adults and 37% of fixed broadband connections are providing actual speeds of 30Mbit/s. 4G coverage is now almost on par with 2G and 3G services.
Telcos were also bolstered by an increase in bundled services, which saw an increase when comparing Q1 2016 to 2015. The bundled services are generally viewed as the industry’s fight against the trend of being relegated to the likes of a utility. 68% of households reported buying at least two of their communications services together in a bundle in 2016, which demonstrated an increase from 63% in 2015. Dual-play packages of landline and broadband, and triple-play packages of landline, broadband and TV, were the most popular.
The report also highlighted the continual shift in the way the UK consumes popular media, as on-demand services become more popular and more adults shift towards OTT services such as WhatsApp. Live TV could be seen as one of the casualties of the report as viewing fell by 5.5 minutes year on year, while recorded and catch-up viewing within a week of broadcast increased by 1.3 minutes. The number of adults who used Video-on-Demand (VoD) services increased over the course of 2015, and while this growth is slowing in some demographics, paid-for services are increasing becoming more popular.
A more worrying sign for the live broadcasting segment could be seen in the breakdown of the age demographics. Although those in the 65+ bracket are continuing to watch live TV, 83% watch live TV over VoD, in the ‘Adult’ age bracket, this number decreases to 63%. The 16-24 age bracket, which could be seen as the future target market for numerous live TV broadcasters claim they spend 37% of their time watching live TV against VoD. Overall, the number of people who view live TV over the course of the week has declined by three percentage points.
These statistics imply there is a shift in the way the younger generations in the UK consume popular media, posing the challenge to traditional broadcasters, who to date may not have considered VoD services such as Netflix as a direct competitor. This is also backed up by the increase in average data usage from households (fixed-line), which grew by 41% over the 12 month period. While a concern to the live broadcasters, this could be seen as a lifeline for the telco industry which is becoming increasingly reliant on bundled services to counter the challenge of the OTT’s.
When looking at the OTT’s, there once again has been an increase in popularity. The number of people who are using the instant messaging services such as WhatsApp is up from 28% to 43%, and photo/ video messaging (MMS) has risen to more than a fifth of adults in a given week. These services have been at the expense of SMS and email, which has seen a decline year-on-year of eight and seven percentage points respectively.
The shift implies a shift in the means in which consumers interact with the media and communications industry. While the utility concern has been on at the forefront of the industry for some time, the increasing popularity of bundled services and VoD services, could offer compensation. That said, the OTT’s are becoming more prominent not only in the younger generations but also the older, demographics which could be seen as somewhat of a cash-cow for the telcos. The 16-24 year old demographic are more likely to embrace the new offerings, though the trend can be seen to be penetrating the ‘Adult’ demographics also.
With this in mind, Philip Marnick, Ofcom’s Group Director of Spectrum, believes the trends will impact the allocation of spectrum.
“One of Ofcom’s key jobs is to manage the UK’s spectrum to enable existing services to grow and new services to develop and come to the market,” said Marnick in the report. “We often hear about the demands for more spectrum to support the increasing demand for mobile data, which is expected to increase by as much as 31 times by 2020 in Western Europe.
“As most spectrum is occupied, we have to consider moving one service to make way for another; for example, squeezing up TV to make more spectrum (700MHz) available for mobile. As part of this, and given the high levels of use of wireless microphones, we are now enabling these to share with aeronautical services.
“We are already looking at the spectrum needs of 5G, which will provide higher capacity networks that are more responsive and can offer faster speeds. This will open up a new range of frequencies in the millimetric bands – an area of spectrum in which satellites provide TV, radio navigation services, support for emergency services, and broadband for very remote locations, on land, in the air and at sea.”
The role of Ofcom is to ensure all services work effectively without interference, though the picture is becoming increasingly complicated with the faster introduction of new services. Alongside the greater reliance on mobile technologies and data, autonomous cars and the connected home may require exclusive spectrum, adding to the “three dimensional jigsaw”.