Discussion forum - Post and discuss topics here.

Highlight from Ofcom's 2008 Comms Market report

 
Picture of Dean Bubley
Highlight from Ofcom's 2008 Comms Market report
by Dean Bubley - Monday, 18 August 2008, 11:40 AM
 
In my view, UK Regulator Ofcom does a sterling job of putting out useful research documents about the real state of the market for communications services, including quite a lot of original surveys and analysis. It also seems to phrase its questions in consumer surveys in a fashion intended not to give biased views - something which is conspicuously different from much of the PR-led "research" that I see.

Ofcom's just released a huge new report on the current state of the industry, incorporating telecoms, broadcasting and related services.

Some interesting insights I've spotted so far:

  • Quite a lot of discussion of the resilience of fixed-line comms in the face of the mobile onslaught. Rather than direct fixed-mobile substitution, it appears that the UK sees more mobile-initiated incremental use of voice. Fixed minutes have dropped about 17bn minutes in total over 6 years, but mobile call volumes have risen by 38bn minutes. The UK outbound call total is still around 60/40 fixed:mobile, and 88% of homes still have a fixed line.
  • The proportion of mobile-only households has been pretty static for the past few years, currently at 11%. This is considerably lower than elsewhere in Europe (eg 37% in Italy), and is possibly reflecting the prevalence of ADSL. Most mobile-only users are from lower socioeconomic groups.
  • 44% of UK adults use SMS daily, against 36% using the Internet
  • More than 100k+ new mobile broadband connections per month in the UK in H1 2008, with the rate of sign-up accelerating. 75% of dongle users are now using their mobile connection at home.
  • Nearly half of adults with home broadband use WiFi
  • 11% of UK mobile phone owners use the device to connect to the Internet, and 7% use it to send email. (It looks like the survey Ofcom commissioned didn't define "the Internet", so this might include some closed WAP usage too - consumers probably don't have a full view on what "the Internet" is at a technical level).
  • VoIP usage appears to have fallen from 20% of consumers in late 2006, to 14% in early 2008. However, I suspect that this masks the fact that many instances of VoIP (eg BT's broadband circuit-replacement service, or corporate IP-PBXs), don't make it obvious to the user.
  • Over two-thirds of mobile broadband users also have fixed-line broadband
  • UK mobile subscribers send an average 67 SMS per month (or 82 / month per head, taking account of multiple subs-per-person). MMS use is only 0.37 messages per user per month.
  • Slight increase in overall fixed-line subscriptions in 2007 - attributed to business lines.
  • Overall UK non-SMS mobile data revenues were flat in 2007 vs 2006 at £1bn. I reckon that's because the data pre-dates the big rise in mobile dongle sales, and also reflects price pressures on things like ringtones. Ofcom also attributes this to adoption of flatrate data plans vs. pay-per-MB.
  • UK prepay mobile ARPU has been flat at £9 / month for the last 4 years. That's a big issue for operators wanting to sell data services to prepay subs in my view.
  • 17% of mobile subscriptions in the UK were on 3G at end-2007, although there's not much detail on the actual usage of 3G for non-voice applications.
  • Overall, UK households allocate 3.3% of total spending to telecom services. That's been flat since 2003 - ie the slice of the pie isn't getting any bigger relative to food/rent/entertainment/travel etc.
  • 94% of new mobile subscriptions are bundled with handsets.
  • 11% of UK adults have >1 SIM card. Among 16-24yo users, this rises to 16%. There's an estimate that of the second devices in use in the UK, 1m are 3G dongles, 0.7m are BlackBerries or similar, and 8m are genuine "second handsets". There's also another 8m "barely active" devices that are used as backups, or legacy numbers that get occasional inbound calls or SMS

Picture of Peter Sandberg
Re: Highlight from Ofcom's 2008 Comms Market report
by Peter Sandberg - Monday, 18 August 2008, 1:00 PM
 

Thanks for the highlights Dean.

/Peter Sandberg

Picture of Romi Parmar
Re: Highlight from Ofcom's 2008 Comms Market report
by Romi Parmar - Wednesday, 20 August 2008, 12:30 PM
 

Thanks Dean,

Over at 3g.co.uk there is some interesting comment on the report from Hugh Roberts, Senior Strategist at Patni Telecoms Consulting, suggesting that “whilst the increase in mobile broadband could be regarded as great news for mobile operators, the reality is less enticing. The increase in the use of dongles shows that consumers are bypassing the handset environment, effectively turning the mobile networks into bit pipes.” Says Hugh Roberts, Senior Strategist at Patni Telecoms Consulting. “It’s really a vote of no confidence in the mobile industry – the operators aren’t doing their jobs. Where’s the value add to enable premium ancillary services for the mobile networks? Well publicised subscription-based (predatory) all-you-can-eat pricing is driving take up and indeed is encouraging FMS (fixed mobile substitution), but many of these packages will not be giving as good a margin on network capacity utilisation as other offerings, particularly if customers are able to use VoIP directly from their PCs. - This is a simple, compelling, well priced, and non-convergent offering.”  

To my mind he couldn’t be more wrong on this last point. I am surprised that so few have realized that the dongle business is just going to be a lucrative but very temporary market that will come to a sudden end fueled by handsets with better data capabilities and inclusive mobile data plans. Obviously the growth is supported by customers preference for the open internet as opposed to the walled garden offerings from operators but doesn’t it just take one look at the latest Skypephone S2 mobile (http://www.three.co.uk/personal/mobiles_/discover.omp?CID=1218698836875&PAYG=true & http://www.3g.co.uk/PR/August2008/6504.htm) offering from H3G UK to put paid to the idea that Mobile Phones and Dongles are non-convergent?

To my mind until now this hasn’t happened only because the software add on solutions (like JoikuSpot etc) make such battery demands but products like this Skypephone s2 that can double as a dongle will be able to take a sizeable chunk of this market particularly when unlimited* mobile data is being already being provided inclusively or bundled with mobile operator subscriptions (eg. on all Vodafone >£20 contracts and for £5 add-on’s with the likes of H3G UK) and (as pointed to by Dean’s useful list of OFCOM stat highlights) over two-thirds of mobile broadband users also already have fixed-line broadband.  

Romi

blog.the3gdatingagency.com

Picture of Dean Bubley
Re: Highlight from Ofcom's 2008 Comms Market report
by Dean Bubley - Wednesday, 20 August 2008, 6:25 PM
 
Hi Romi

I violently disagree with most of what Hugh Roberts is quoted as saying.

"The increase in the use of dongles shows that consumers are bypassing the handset environment, effectively turning the mobile networks into bit pipes"

That is nonsense. Dongles are being used *as well as* handsets, but for different tasks at different times. Their growth proves that customers *want pipes*, something which has been evident for years. The challenge for operators is to move from being dumb pipes to (slightly) smarter pipes, without getting in their users' way.

"will not be giving as good a margin on network capacity utilisation as other offerings"

Of course. Operators have grown complacent, lulled by the ludicrous $ / bit charged on SMS, which is higher than it costs NASA to communicate with most spaceships. That's an anomaly that has caused almost as much damage as it's provided profits. If the operators had moved to more sensible data plans about 3 years ago, they could have avoided the ramping expectations now set by 50%+ broadband penetration. If anything, they've been lucky that the WiFi industry has been so clueless in pricing and hasn't further saturated the market.

"particularly if customers are able to use VoIP directly from their PCs"

This is nonsense - almost all use of PC-based VoIP is incremental, not substitutional. Or else it substitutes for fixed-line PSTN services or calling cards. You can't receive calls on a PC with a dongle, so you don't use it the same way you'd use a phone.

Mind you, I disagree with you Romi as well.

"the dongle business is just going to be a lucrative but very temporary market that will come to a sudden end fueled by handsets with better data capabilities and inclusive mobile data plans"

Yes, some people will use the Skypephone or an iPhone or a Nokia as a "tethered modem" for a PC. You'll see JoikuSpot on a few things too. But these will only appeal to a small % of users in my view, as will notebooks with built-in 3G (in the medium term at least, the problems might be fixed 4-5 years out).

The thing about dongles is that they are easy to sell, easy to use, easy to configure, easy to replace, easy to test, easy to support, easy to manufacture. They work pretty much out of the box for the majority of users, and are simple enough that the Saturday boy in Carphone Warehouse can sell them.

Conversely, using a phone as a tether/modem makes it awkward to make calls simultaneously, is awkward when roaming (the best voice roaming operator might not be the best for data as well), often the USB cable doesn't power the phone as well, plus there's all sorts of wierdness if the phone flips to GSM mid-call. You're also beholden to the internal architecture of the host phone, which almost certainly won't have the latest, fastest chipset or be optimised for high-speed data throughput.

Martin Sauter has a good post on this too.

The bottom line is that most normal users don't like connecting two gadgets together. It's difficult enough to train them to use Bluetooth headsets. USB sticks are easy - everyone uses memory sticks.

It might be inelegant, but having 2 or 3 devices is usually easier than having 1. And you get to choose your tariffs accordingly.