International Communications Market Report 2012

Transcription

1 International Communications Market Report 2012 Research Document Publication date: 13 December 2012

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3 Contents Introduction 1 Key Points 4 Key summary metrics 11 1 The UK in context 13 2 Comparative international pricing 91 3 Television and audio-visual Radio and audio Internet and web-based content Telecoms and networks Post 279 Appendix A Consumer research methodology 299 Appendix B Comparative international pricing methodology 303 Glossary and Table of Figures 327

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5 Introduction Purpose of this report This is the seventh year that Ofcom has published comparative international data on the communications sector. The aim of the report is to benchmark the UK communications sector against a range of comparator countries in order to assess how the UK is performing in an international context. The report compares the availability, take-up and use of services in the UK and 16 comparator countries - France, Germany, Italy, the US, Canada, Japan, Australia, Spain, the Netherlands, Sweden, Ireland, Poland, Brazil, Russia, India and China, although we focus on a smaller subset of comparator countries for some of our analysis. We are publishing this report as part of our commitment to continuously research markets and to remain at the forefront of consumer, industry and technological understanding, as we outlined in our 2012/13 Annual Plan 1. This report complements other research published by Ofcom and forms part of the Communications Market Report series, which includes the UK Communications Market Report and specific reports for Northern Ireland, Scotland and Wales (all published in July 2012). 2 This report is intended to be used in a number of ways: to benchmark the UK s communications sector, to learn from market and regulatory developments in other countries, and to provide the context for Ofcom s regulatory initiatives. It also contributes to the richness of the information we draw upon, better enabling us to understand how our actions and priorities can influence outcomes for citizens and consumers, and for communications markets generally. 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 market position for the purposes of the Communications Act 2003, the Competition Act 1998 or other relevant legislation. Data and methodologies This report draws on a combination of consumer research data commissioned by Ofcom, data already held by Ofcom, and data sourced from desk or custom research or from third parties, as well as discussions with industry bodies, operators, regulators and commentators. Consultancy firm IDATE provided data that are drawn on mainly for the TV and audio-visual and Telecoms and Networks chapters. IDATE has attempted to verify sources and provide market estimates where data are incomplete. Telecoms pricing consultancy Teligen built a bespoke model to enable our analysis of comparative international pricing, and populated it with specifically-sourced tariff data (collected in July 2012). Among others, we would like to thank the following for their contributions to the data presented in this report: Analysys Mason, comscore, IMRG, Eurostat, Eurodata TV Worldwide, The European Commission, Forrester Research, IDATE, Kantar Media, Mediamétrie, The Nielsen Company, PricewaterhouseCoopers, The Reuters Institute, Teligen, US Census Bureau, the World Advertising Research Centre and Zenith Optimedia

6 The consumer research undertaken by Ofcom for this report was conducted online with 9,152 consumers in nine countries: the UK, Germany, France, Italy, Spain, the US, Japan, China and Australia. Because the research was undertaken online, samples, and therefore results, may differ from other consumer research conducted by Ofcom, including that published in the Communications Market Report 2012, which included face-to-face and telephone interviews. Further information on our online market research methodology is presented in Appendix A, and a perspective on the results of our market research in China can be found in the UK in Context chapter. Comparisons between data in this report and in its predecessors will not always be possible, due to changes in definitions and re-statements over time, the methods of collecting data and the availability of new data sources. For reasons of sampling and definitions, some UK data published in this report may not be directly comparable with data published in other Ofcom reports, such as the UK Communications Market Report. We have highlighted incomparability in a number of key instances in this report. This report is wide in scope, and because of the reliance on third-party data we cannot always fully guarantee the accuracy of data. We have carried out comprehensive checks as far as is reasonably possible and have acted to ensure that the data in this report are comprehensive and the most accurate currently available. Data in this report generally cover the calendar year, although other data notably from Ofcom s consumer research are more recent. We show trends using a five-year historical time series wherever possible. All currency conversions use the average market exchange rate across, as provided by the International Monetary Fund (IMF). 3 We have opted to convert data from every year at this fixed rate, so that currency fluctuations do not obscure market trends. The exception to this methodology is in the international price benchmarking analysis, where we have used purchasing power parity-adjusted exchange rates (more detail can be found in Appendix B). All figures in this report are nominal unless otherwise stated. Comments and feedback on this report are very much encouraged and welcomed at market.intelligence@ofcom.org.uk. Structure of the report The report is divided into six chapters: The UK in context (page 13) provides a broad overview by looking at comparative international communications markets from an industry and a consumer perspective, with an overview of the main regulatory developments in the past year. We also present findings from our new consumer research, focusing on the ways in which consumers are changing the way they communicate and consumers preferred methods of communicating with different groups of people; how consumers followed the recent Olympic and Paralympic Games, and an international perspective on news consumption. Comparative international pricing (page 91) compares the typical prices people pay across our main comparator countries, for a range of different baskets of communications services

7 Television and audio-visual (page 127) considers developments in broadcast and audio-visual services, and includes analysis of the industries and consumer experience among our comparator countries. This section also examines patterns of digital television take-up, including the adoption of high-definition television services, digital video recorders, 3DTV and internet-connected televisions; as well as consumption of TV online. Radio and audio (page 165) compares and summarises key data, including revenue figures, for the radio and audio markets across the UK and our comparator countries. We also include some of the findings from our consumer research on the take-up of digital radio sets and the use of audio services online and via mobile devices. Internet and web-based content (page 183) examines the impact of the internet across our key comparator countries. This section takes a high-level look at aspects of internet use, in terms of platforms and devices, as well as content and consumption. Telecoms and networks (page 213) examines the major trends in the telecommunications markets from an industry and operator perspective in our comparator countries. We also consider the availability and use of telecoms services in the 17 comparator countries. We provide an overview of the industry as a whole, and individual markets in more depth, including analysis of fixed voice, mobile voice and data services, and fixed-broadband services. Post (page 279) considers key data for the postal services markets in the UK and our comparator countries, including trends in addressed mail volume and revenue. We also examine consumer trends in sending and receiving mail, and consumers perceived reliance on post as a method of communicating. We also include a list of key points for each of the chapters, which serve as a summary of the main findings. 3

8 Key Points Key points: the UK in context Global communications sector revenues the total of the telecoms, TV, post and radio sectors - grew in by 3.7%, reaching 1,322bn. Telecoms sectors generated the largest absolute rise in revenues in, up by 31bn to 936bn. In terms of percentage growth, television revenues grew fastest among the communications industries, by 6.6% in to 258bn. Global advertising expenditure grew by 3.8% in to 298bn, the highest total spend since While expenditure on internet advertising grew at a compound annual rate of 16.0% between 2007 and, to 48bn, the compound annual growth rate of newspaper advertising was -6.9% falling to 60bn, while for magazines it was -6.8%, falling to 28bn. In the television and radio sectors, subscriptions generated the largest and fastest-growing proportion of total revenues in. Television subscription revenues grew by 10.5% in to 133bn and at a compound annual rate of 9.0% between 2007 and. Radio subscription revenues grew by 12.5% in to 2bn and at a compound annual rate of 8.5% between 2007 and. The number of fixed-line voice connections remains relatively resilient in the UK, with more fixed-line voice connections per 100 people than in the other markets covered. Although this number fell between 2006 and in all of the countries which we surveyed, the fall in the UK was among the smallest. Tablet take-up is highest in Spain and Australia (it is 24% in both). Italy and the US have the next-highest claimed ownership (23% and 20%) while in the UK take-up is 19%. In nearly all comparator countries, consumers say they have reduced face-toface communication and fixed telephone calls with friends and family. In all eight countries, use of post declined. In contrast, preferences for online communications increased, particularly in the UK and Italy, which showed large increases in the use of and social networking. In every comparator country, a higher proportion of respondents watched the London 2012 Olympic and Paralympic Games at least weekly on scheduled television than by using any other medium. The UK contained the highest proportion of respondents who watched the Games on scheduled TV at least once a week (89%). In every comparator country except Italy, the most-cited reasons for watching the Games on scheduled TV were its convenience or quality. There are significant differences between comparator countries in the type of platform consumers use to find news on an at least weekly basis. Weekly news consumption on the internet among people who access any online news is highest in the US (86% of respondents), while in Germany the most common way of consuming news at least weekly is on TV (87%). 4

9 Key points: comparative international pricing Prices in the UK compared favourably to those in the other five countries covered by our price benchmarking work. All five of the lowest weighted average single-service basket prices and four of the five lowest possible basket prices were found in the UK. 4 Low basket prices in the UK were largely due to mobile prices being the lowest among our six countries. The UK also benefits from comparatively low fixed voice, fixed broadband and mobile broadband prices. France also performed well, having the lowest best-offer including multi-play price for our connected family household, and the second lowest weighted average prices for all five households. The connected family best-offer price in France was significantly cheaper than in the UK as a result of the availability of a lowcost quad-play bundle of fixed voice, fixed broadband, mobile and pay-tv services. There is some evidence that UK communications service prices are increasing, in nominal terms at least. In the year to July 2012 the weighted average cost of four of our five baskets increased in the UK in nominal terms, while in France (where weighted average prices were next lowest) the cost of all five fell. In the UK, the main driver behind increasing weighted average basket prices was increases in mobile prices. The weighted average cost of more than half of the mobile connections increased in the year to July 2012 in the UK, with these increases ranging from 5% to 31% in nominal terms. Consumers in most of our comparator countries were able to make cost savings by purchasing fixed broadband services as part of a bundle. The potential savings available by bundling the services required by the three baskets which included a fixed broadband connection ranged from 5% to 40%. HD premium pay-tv services were the main area where the UK did not perform well. This was partly due to Sky bundling a large number of channels in its premium pay-tv package and charging its satellite TV customers an additional 10 a month to let them access premium channels in HD. In the UK, the difference between the weighted average and the best offer pricing of the single services for our five baskets was among the lowest across our six countries. Best offer prices in the UK were, on average, 19% lower than the weighted average for our five baskets - only in Spain was this figure lower, at 18%. 4 Weighted average basket price refers to the sum of the weighted average single service price of each service included in the basket, these averages being calculated as the average of the lowest price tariffs offered by the three largest operators which provide the service in each country, weighted by the market share of each service provider. 5

10 Key points: TV and audio-visual Global TV revenues increased in, by 6.7% year on year, to 258bn. Global subscription revenues show little sign of slowing down and increased for the fourth consecutive year, from 95bn in 2007 to 133bn in a compound annual growth rate of 9%. The global recovery in net advertising revenues seen in 2010 has been sustained in, with revenues increasing by 3.5% (or 3bn) to 105bn year on year. The combined revenues of Europe and Canada had the lowest year-on-year growth of all the regions in our analysis, increasing 2.0% in to 58bn. In contrast, the BRIC countries joint revenues rose by 14% (or 4bn) to 34bn. The UK experienced moderate growth in television revenues in, increasing by 2.7% or 0.3bn. By the end of, the vast majority of homes had digital television in the UK, France and Spain. In the UK, 99% of TV homes had access to digital TV at the end of, a figure surpassed only by Spain where, following the completion of switchover, access to DTV stands at 100%. Digital switchover in the UK was completed in In France, penetration of digital TV stood at 97% in. In the UK, satellite TV (including Freesat) was the largest platform (44% of TV homes) while terrestrial TV was the main platform in 38% of TV homes. Digital satellite was also the most popular platform in Germany, Ireland, Poland and Brazil. While digital satellite may not be the top technology choice in many countries, it is often the second most popular platform, taking second place in ten of the 17 countries in our report. Value-added services such as digital video recorders and high definition TV continue to grow in the UK. Of the nine countries surveyed, the UK recorded the greatest uptake in DVRs (39%) in, followed by the US (32%) and Australia (29%). The UK also has one of the highest proportions of TV homes with high definition at 41%, higher than France (18%), Germany (28%) and Japan (31%), but behind the US (49%). People in the UK and France have the highest ownership of connected TVs among the countries included in our research. In both the UK and France, 15% of respondents claimed to have a television that connects to the internet. UK consumers are most likely to access TV content over the internet, compared to other countries in our research. Almost a quarter (23%) of UK internet users claimed to do this every week driven by the popularity in the UK of internet TV catch-up services from the free-to-air broadcasters, such as BBC iplayer, 4oD and ITV Player. The US ranked second, where 17% of internet users claim to access TV content over the web on a weekly basis. The UK has the third highest level of scheduled linear TV viewing, of the comparator countries, at four hours per person per day. Despite the increase in online TV, scheduled linear television remains popular, with minutes of viewing per person increasing among most comparator countries. Only Italy (253 minutes per person per day) and the US (293 minutes) watch more television than the UK. 6

11 Key points: radio and audio Broadcast radio revenues among the 17 comparator countries analysed in this report reached 25.4bn in, up by 1.6% year on year. The largest absolute increase was experienced by operators in the US, where revenues rose by 115m, followed by the Chinese market which grew by 89m. UK radio revenue rose 39m in. Among the countries that we surveyed, digital radio take-up is highest in the UK. Thirty-one per cent of consumers in the UK own and personally use a digital radio set, compared to 16% in Italy and 12% in Spain. Radio revenue worldwide rose slightly (1.7%) in and now stands at 29.5bn. Of the total, advertising accounted for 68% ( 20.0bn), public funding for just over a quarter (26% or 7.7bn), and subscriber revenue contributed the remaining 6% ( 1.8bn). The fastest-growing markets are the BRIC countries. India saw the highest rate of growth at 24.7%, followed by Brazil (12.2%), Russia (11.7%) and China (10.0%). Since 2007, the value of the radio market in India has almost doubled. Radio markets in Sweden, the US and Germany generate the greatest revenues per head of population. The radio market in Sweden generated the highest revenues per head of population, of all our comparator countries ( 38.30). The US was in second place, generating of revenue per head of population. In the UK, the comparable figure was Our consumer research found that radio listening is a popular activity among internet users in the countries which we surveyed, with the exception of Japan and China. The research found that 69% of UK adults who are connected to the internet claim to listen to radio on a weekly basis, on a par with Australia but slightly behind the other European countries surveyed. Across all of the countries surveyed, consumers are still more likely to listen to the radio on a regular basis than consume audio content on a portable media player or hi-fi. As a news source, radio is used most for news about a region or locality. It is most popular among people in Germany, where 10% claimed it as their main source for local/regional news, and ranks second in Australia, where 7% made the same claim. In the UK, the comparable figure is 4%. Using the MP3 function was the most popular audio purpose which mobile phones were used for in. In China, over half (53%) of online respondents used their phone for this purpose, followed by 32% of consumers in Spain. Almost three in ten (28%) people in the UK used their phone to listen to MP3s. 7

12 Key points: internet and web-based content Spend on laptop and desktop internet advertising is highest in the UK. The UK had the greatest spend per head of 76 on wired internet advertising in, followed by Australia with 73 and both the US and Sweden with spend per head of 63. US mobile internet advertising spend grew 2.5-fold, to level with Japan. In the largest market for mobile internet advertising was Japan, with revenue totalling just more than 1bn. US spend was marginally lower, growing from 400m to 955m. UK internet users access the web on their laptop more than those in any other country. Fifty-one per cent of internet users in the UK use their laptop computer to access the internet. In contrast, France had the largest proportion of internet users (51%) who access the internet most frequently on their desktop computer, while the UK had the least (37%). Twelve per cent of UK internet users claim to access the internet most through smartphones, tablets and other connected devices. 16.4% of internet traffic is generated from these devices in the UK, more than in any other of our European comparator countries. Ireland had the second highest proportion (11.5%), while and Poland had the lowest (2.2%). Australians spend more than 6.5 hours online on a laptop or desktop computer each week. This is an hour more than internet users in the UK, where desktop and laptop online time is declining, and three hours more than in Italy, where online time is lowest, but increasing. The most searched-for term on the web is facebook. In all of our comparator countries except Japan, Russia and China, facebook was the most searched-for term on Google in the year to August 2012, up from ten countries in the year to August. However, Facebook was not without influence in Japan, where facebook was the fastest-rising search term in the year to August Consumers in the UK spent more than 1000 per person on internet shopping in, more than in any other of our comparator nations. In, the value per head of business-to-consumer e-commerce was 1083 in the UK, up by 14% from 950 in Australia and Sweden had the greatest values after the UK, growing 26% to 842 and 12% to 747 respectively. More than one in five smartphone owners in the UK and Germany have accessed online shopping websites using their mobile handset. Among the five largest European economies, the UK had the highest proportion (23.1%) of smartphone users visiting retailers websites on the mobile web, closely followed by Germany (22.6%). One in six smartphone owners in the UK access news on their handset almost every day. Among smartphone owners in the five largest European economies, those in the UK access news through websites or apps on their handset more frequently than any other nation. 8

13 Key points: telecoms and networks The UK consumed the most mobile data per connection. 424MB of data was downloaded per mobile connection in : more than in any of the other comparator countries. The UK is one of the leaders in text messaging among our comparator countries. The average person sent 199 SMS messages per month in, up 17% compared with Young women are leading the increase, which is fuelled by consumers apparently switching from voice to SMS for convenience and ease. Fixed voice revenues fell in all our comparator countries in. Across all 17 comparator countries, fixed voice revenues fell by an average of 7.3% in, a slight increase on the 7.1% average in Fixed voice revenues fell by 5.2% in the UK during the year, a higher rate that the 3.3% average in the five years to. Fixed voice call volumes fell in all of the comparator countries for which figures were available in, except France. Growth in the fixed voice market in France was largely a result of high take-up of managed VoIP services. In the UK, fixed voice call volumes fell by 10.0% in, the fourth largest decline among our comparator countries. Five per cent of UK broadband connections were superfast at the end of. The proportion of connections classed as being superfast (i.e. with a headline speed of 30Mbit/s or more) ranged from 0% (to the nearest percentage point) in Ireland to 22% in the Netherlands at the end of. Poland and the UK had the lowest fixed broadband revenue per person in. The Netherlands had the highest number of fixed broadband connections per 100 households in. The number of fixed broadband connections per 100 households ranged from just six in India to 92 in the Netherlands among our 17 comparator countries in. In the UK there were 77 fixed broadband connections per 100 households at the end of the year. Mobile voice call volumes fell by 1.1% in the UK between 2010 and ; from 125 billion minutes to 124 billion; the first annual fall. Japan was the only other country to witness a decline in, with mobile voice volumes falling from 147 billion minutes to 145 billion. In the UK, 36% of respondents who owned internet-capable devices used smartphones to access the internet in 2012, second in Europe only to Spain, where 43% did so. Respondents were least likely to use smartphones to go online in France (where 27% did so) and Germany (30%). Australia saw the fastest growth in mobile broadband penetration between 2008 and, rising by 18.6 connections per 100 people to In Spain there was almost no growth in mobile broadband connections between 2010 and, the figure remained at 7.2 connections per 100 people. Mobile broadband primarily includes dongle connections and excludes smartphones and other mobile handsets. 9

14 Key points: post Across all of our comparator countries as a whole, mail revenue fell by 1.5% in, ranging from a 16.1% contraction in Poland to 9.4% growth in Brazil. Revenues grew in only four of 17 of the countries analysed in our report; the UK (3.1%), Brazil (9.4%), Russia (8.8%) and India (6.6%). Across our 17 comparator countries, mail volume has fallen by 18% since Taken as a whole, volumes have fallen from 355 billion to 288 billion items. The UK, Italy and Spain have seen the largest declines, with mail volumes in each falling by 25% from 2006 to. More consumers in the UK claim to receive large parcels than in the other countries which we surveyed. Thirty-four per cent of UK consumers claimed to have received a large parcel in the past month, higher than in any other country surveyed. Forty-six per cent of UK consumers claimed to have received a small parcel, second only to France (53%). As well as having the highest proportion of consumers receiving parcels, the value of e-commerce per head of population in in the UK is higher than in any of the other countries surveyed. For sending a standard-sized letter, the UK is among the cheapest in Europe. But for sending small letters, the UK and Japan are the most expensive countries; this is 63p in Japan and 60p in the UK. Our consumer research shows that consumers in China send the highest average number of items each month (8.3). Consumers in Spain and the US sent the next-highest average number of items (6.7 and 6.2 respectively). The comparable figure for the UK was 5.2. Consumers in the US and France are more likely to pay bills by post than any other country surveyed. In the US, 58% of consumers claimed that they had sent payment through the post in the past month. In France, 47% of consumers said they had done this. The comparable figure for the UK was 22%. More consumers in the UK send greetings cards, invitations and postcards than in other countries. Thirty-seven per cent of respondents in the UK claimed to have sent this type of mail in the past month. Australia ranked second (34%), with the fewest consumers claiming to send this type of mail in France (17%). Consumers in France receive twice as much mail as those in the UK. The average number of items received in a week by consumers in France was 14.9, higher than in any other country surveyed. Those in the US claimed to receive 9.6 items in a week. The comparable figure for the UK was 7.1. Seventy-four per cent of consumers in France consider themselves very reliant or fairly reliant on post as a way of communicating, higher than in any other country. In the UK, 51% of consumers considered themselves to be reliant on post. The lowest perceived reliance on post was in Japan, where only 14% of respondents considered themselves reliant. 10

15 Key summary metrics UK FRA GER ITA USA CAN JPN AUS ESP NED SWE IRL POL BRA RUS IND CHN TV revenue industry ( bn) TV and audio-visual Change in revenue (%, YOY) Revenue per capita ( ) Largest TV platform Dsat DTT Dsat DTT DCab DCab DCab DTT DTT DCab ACab DSat DSat DSat ACab ACab DCab Largest TV platform (% of homes) 44% 30% 35% 43% 40% 53% 27% 49% 69% 47% 33% 53% 45% 45% 34% 58% 28% TV viewing (mins/day)² n/a DTV take-up (%) Pay TV take-up (%) Total industry revenue ( bn) Radio and audio Internet Change in revenue (%, YOY) Revenue per capita ( ) % income from public licence fee n/a n/a 65.3 n/a n/a n/a n/a n/a n/a Online universe (m) n/a n/a n/a n/a n/a n/a n/a n/a n/a Fixed broadband connections per 100 HH Internet access via a mobile phone(%) n/a n/a n/a n/a n/a n/a n/a n/a 70 Telecoms service revenues ( bn) Telecoms and networks Telecoms revenues per capita ( ) Fixed lines per 100 population Monthly outbound fixed-line minutes per capita Mobile connections per 100 population Monthly outbound mobile minutes per capita Fixed broadband connections per 100 population Mobile broadband connections per 100 population Domestic addressed mail revenues ( bn) Post Mail revenues per capita ( ) Domestic mail volumes (billion items) Standard domestic stamp price (p)

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17 International Communications Market Report The UK in context 13

18 Contents 1.1 The UK communications industry in context Introduction Putting the global communications industry into context Communications sector revenues The UK consumer in context Introduction Take-up and use of services and media activities Changing nature of communications Key points Introduction Preferred methods of communication with friends and family Frequency of using communication methods with friends and family Communicating by sending greetings Communicating with businesses and government Summary of consumers changing communications use Four dimensions of change How consumers followed the London 2012 Olympic and Paralympic Games Key points Introduction Following the London 2012 Olympics and Paralympics News consumption: the international context Introduction Digital news consumption a comparative study Platforms used as a main source of news A perspective on China Introduction China as a country and a communications market Our research methodology in China Our research results in China International regulatory context and models Introduction Key developments in the European regulatory and legislative framework Helping communications markets work for consumers Promoting effective and sustainable competition Providing appropriate assurances to audiences on standards Promoting the efficient use of public assets Contributing to, and implementing, public policy defined by Parliament 87 14

19 1.1 The UK communications industry in context Introduction This chapter of the report provides a broad overview that places the UK communications sector in a global context. The UK communications industry in context (Section 1.1): We compare the size of the UK communications sector to that in other countries and look at relevant topline revenues across our comparator countries. The UK consumer in context (Section 1.2): We compare take-up and use of different services and devices at a broad level across comparator countries Changing nature of communications (Section 1.3): We examine consumers preferences for different communications services for communicating with different groups of people and look at which communications services consumers are using more, and which they are using less, than two years ago. How consumers followed the London 2012 Olympic and Paralympic Games (Section 1.4): We summarise key findings from new research into how people used communications services and devices to follow the Games in eight comparator countries. News consumption: the international context (Section 1.5): We look into digital news consumption, and summarise the key findings from the Reuters Institute Digital News Report, and present the findings of Ofcom s own consumer research which looks at which media platform consumers use as their main source for different types of news. A perspective on China (Section 1.6): This perspective considers the ICMR 2012 market research data on the communications market in China, bringing together our thinking on some of the reasons for differences in the data between China and other countries, and providing comparisons between China, the UK and the US. International regulatory context and models (Section 1.7): We highlight recent international developments in communications regulation to provide regulatory context to some of the topics in the report Putting the UK communications industry in context In this section we discuss the revenue and expenditure of the communications sectors in the UK and globally. Given the complexity and scale of the communications industries, there are many potential definitions of the communications sector. These could, for example, include consumer electronics, network equipment, music, the film industry, online, software, games, newspapers, magazine and books, in addition to telecoms and broadcasting. We focus primarily on the telecoms, television, radio and postal industries, to reflect Ofcom s regulatory remit. 15

20 Key points The communications sector s total global revenues in were 1,322bn, growing by 3.7% (incorporating the telecoms, television, postal and radio sectors). Telecoms industries saw the largest absolute rise in revenues in, which grew by 31bn to 936bn. In terms of percentage growth, television revenues grew fastest among the communications industries, by 6.6% in to 258bn. US telecoms revenues were 186bn in, larger than the revenues of the entire communications sector in any other comparator country. Japan was the secondlargest communications market by revenues, generating 138bn in, while China was third largest at 86bn. Communications revenues in the UK were 47bn in. Global advertising expenditure grew by 3.8% in to 298bn, the highest total spend since While expenditure on internet advertising grew at a compound annual rate of 16.0% between 2007 and to 48bn, that on newspaper advertising was -6.9%, falling to 60bn, while for magazines it was -6.8%, falling to 28bn. In the television and radio sectors, subscriptions generated the largest and fastestgrowing proportion of total revenues in. Television subscription revenues grew by 10.5% in to 133bn and at a compound annual rate of 9.0% between 2007 and. Radio subscription revenues grew by 12.5% in to 2bn and at a compound annual rate of 8.5% between 2007 and Communications sector revenues The communications sector generated 1,322bn in revenues in, an increase of 3.7% since 2010 Between 2007 and, global communications industries revenues grew at a compound annual growth rate (CAGR) of 2.9%. Television, and particularly telecoms, revenues drove this growth. Between 2007 and, the CAGR of telecoms revenues was 2.9% and in the industry generated 936bn worldwide, 100bn more than in Nominally, television revenues grew faster during this period, at a CAGR of 5.2%, amounting to 47bn more in than in In, television revenues grew by 6.6% and telecoms revenues by 3.5%; in both cases a higher rate than each industry s compound annual growth over the previous four years. We have taken postal revenues in our 17 comparator countries into account for the first time in assessing total global communications revenues. Post contributed 98bn to total global revenues of 1,322bn in. The radio industry, the revenues of which were smallest among these industries in every year between 2007 and, grew by 1.7% in. However, both radio and postal revenues declined between 2007 and. In the countries for which we have data, postal revenues grew at a compound annual rate of -0.9% between 2007 and and -1.0% in. The compound annual growth rate of radio revenues between 2007 and was -1.2%. 16

21 Figure 1.1 Global communications revenues Revenue ( bn) 1, ,180bn 1,226bn 1,234bn 1,275bn 1,322bn 98 1, , CAGR Yearon-year growth -1.2% 1.7% -0.9% -1.0% Radio Post % 6.6% Television % 3.5% Telecoms Source: Ofcom analysis based on data from PricewaterhouseCoopers Global Entertainment and Media Outlook for television and radio revenues. Broadcaster returns to Ofcom for UK radio revenues. UPU postal statistics database, regulatory reports and postal operators annual reports for postal revenues. IDATE / industry data / Ofcom for telecoms revenues, which refer to retail revenues. Interpretation and manipulation of data are solely Ofcom's responsibility. Ofcom has used IMF average exchange rates in converting from local currency to GBP. Note: Postal revenues are for our 17 comparator countries only. US telecoms revenues were 186bn, larger than the total communications revenues of any other country In, as in 2010, the three largest communications markets in the world by revenues were the US (where revenues totalled 331bn), Japan ( 138bn) and China ( 86bn). Revenues from US telecoms alone ( 186bn) were larger than the combined industries revenues in any other country. The US also commanded the largest revenues among our comparator countries in television ( 100bn), post ( 33bn) and radio ( 12bn). Total UK communications sector revenues were 47bn in, second only to Germany ( 58bn) and France ( 49bn) among our European comparator countries. The UK s telecoms revenues ( 27bn) were lower than those in Germany and France ( 36bn and 31bn respectively). However, the UK television sector s revenues ( 11bn) and radio sector ( 6.7bn) were both larger than those in France ( 10bn and 6.5bn respectively). 17

22 Figure 1.2 Communications sector revenues: Telecoms Television Post Radio Total USA JPN CHN UK FRA GER ITA CAN AUS ESP NED SWE IRL POL BRA RUS IND Revenue ( bn) bn bn bn bn bn bn bn bn bn bn 1 47bn bn bn Source: Ofcom analysis based on data from PricewaterhouseCoopers Global Entertainment and Media Outlook for radio revenues. Broadcaster returns to Ofcom for UK radio revenues. UPU postal statistics database, regulatory reports and postal operators annual reports for postal revenues. IDATE / industry data / Ofcom for television and telecoms revenues (telecoms revenues refer to retail revenues). Interpretation and manipulation of data are solely Ofcom's responsibility. Ofcom has used IMF average exchange rates in converting from local currency to GBP. In, communications sector revenues per head were highest in absolute terms in Australia, at 1,135 In, the highest communications sector revenues per head among our comparator countries in absolute terms were in Australia ( 1,135), Japan ( 1,083) and the US ( 1,078). We have also adjusted absolute revenues per capita to take account of comparative price levels (CPL) between the UK and our other comparator countries. When adjusted for CPL, communications sector spending was highest in the US ( 1,369), Japan ( 917) and Canada ( 859). In the UK, communications revenues per head were 741. In, the UK generated the lowest per-capita telecoms revenues among our European comparator countries ( 436) when adjusted for CPL, with the exceptions of Poland ( 249), Ireland ( 418) and Italy ( 433). In the UK, the weighted average prices of best-value standalone fixed-line and mobile services were cheapest among five European comparator countries (Figure 2.2 and Figure 2.5). By contrast, UK television per-capita revenues ( 180) were highest among the European comparators when adjusted for CPL. Income from subscription fees is the main impetus behind growing UK television revenues per head (Figure 1.4). 5 54bn Revenue ( bn) 18

23 Revenues per head in the US for telecoms services ( 759), television ( 406), radio ( 46) and postal revenues ( 157) were all highest among our comparator countries when adjusted for CPL. Figure 1.3 Communications sector revenues per capita: UK FRA GER ITA USA CAN JPN AUS ESP NED SWE IRL POL BRA RUS IND CHN Telecoms Television Post Radio , , , ,000 1,200 1,400 Adjusted for comparative price level Telecoms Television Post Radio UK FRA GER ITA USA ,369 CAN JPN AUS ESP NED SWE IRL POL ,000 1,200 1,400 Source: Ofcom analysis based on data from PricewaterhouseCoopers Global Entertainment and Media Outlook for radio revenues. Broadcaster returns to Ofcom for UK radio revenues. UPU postal statistics database, regulatory reports and postal operators annual reports for postal revenues. IDATE / industry data / Ofcom for television and telecoms revenues (telecoms revenues refer to retail revenues). Interpretation and manipulation of data are solely Ofcom's responsibility. Ofcom has used IMF average exchange rates in converting from local currency to GBP and OECD August comparative price levels (CPL) to adjust for purchasing power parity (PPP). CPLs are ratios of PPP for consumption expenditure to exchange rates. They measure differences in price levels between countries by indicating the number of units of a common currency required to buy the same volume of products in each country. In, the fastest-growing element of television and radio revenues was subscriptions Figure 1.4 displays the proportions of television and radio industry revenues that came from subscriptions, advertising and public licence fees in. Of the 258bn that the television industry generated in, subscription revenues contributed the largest and fastestgrowing proportion of total revenues. Television subscription revenues grew at a CAGR of 9.0% to 133bn in the four years to, and grew by 10.5% in. Television advertising 19

24 revenues grew at a CAGR of 1.8% between 2007 and, while the rate for television licence fee revenues was 1.4% in the same period. Television licence fee revenues fell by 0.2% between 2010 and, and were flat for radio. In, the fastest-growing element of total radio revenues was radio subscriptions, which grew by 12.5% in. However, radio subscriptions still contribute a small proportion of total radio revenues: 2bn of 30bn. Radio advertising revenues grew at a compound annual rate of -2.7% to 20bn between 2007 and, although they increased by 1.5% in. Figure 1.4 Sources of global revenue for radio and television industries: 100% Telecoms Post 90% 80% 70% 60% 30bn 98bn 258bn Television Radio 2bn 8bn 20bn Radio subscription Radio advertising Radio public licence fee CAGR Yearon-year growth 8.5% 12.5% -2.7% 1.5% 1.3% 0.0% 50% 40% 30% 20% 10% 0% 936bn Total industry revenues 20bn 105bn 133bn Television subscription Television advertising Television public licence fee 9.0% 10.5% 1.8% 3.5% 1.4% -0.2% Source: Ofcom analysis based on data from PricewaterhouseCoopers Global Entertainment and Media Outlook for television and radio revenues. Broadcaster returns to Ofcom for UK radio revenues. UPU postal statistics database, regulatory reports and postal operators annual reports for postal revenues. IDATE / industry data / Ofcom for telecoms revenues, which refer to retail revenues. Interpretation and manipulation of data are solely Ofcom's responsibility. Ofcom has used IMF average exchange rates in converting from local currency to GBP. Note: Postal revenues are for our 17 comparator countries only. Net TV advertising revenues for Russia have been calculated by discounting 15% of TV advertising spending to remove agency fees and production costs. Global advertising expenditure grew to 298bn in, the highest total spend since 2007 In, global advertising expenditure grew by 3.8% ( 11bn) to 298bn. Expenditure on internet advertising grew fastest among the media depicted on Figure 1.5, at a compound annual rate of 16.0% in the four years to to 48bn. In the same period the compound annual growth rate of expenditure on newspaper advertising was -6.9% and on magazine advertising was -6.8%, suggesting that the growth of internet expenditure has been primarily at the expense of print advertising. 20

25 While radio revenues shrank at a compound annual growth rate of -2.9% between 2007 and, in they grew by 2.9%. Equally, expenditure on television advertising grew by 4.8% in, a higher rate than the compound annual average rate between 2007 and (2.5%). Figure 1.5 Global advertising expenditure, by medium Revenue ( bn) bn 297bn bn bn 287bn CAGR Yearon-year growth 16.0% 12.9% Internet % 2.5% Outdoor 4.0% 4.8% Cinema % 2.9% 2.5% 4.8% Radio Television -6.8% -0.6% Magazines % -1.8% Newspapers Source: ZenithOptimedia. Interpretation and manipulation of data are solely Ofcom's responsibility. Ofcom has used an exchange rate of $1.604 to the GBP, representing the IMF average for. 21

26 1.2 The UK consumer in context Introduction In this section we examine and compare take-up and use of communications devices and services. We focus primarily on the UK but also on the other countries where we carried out consumer research in October 2012 (France, Germany, Italy, the US, Japan, Australia, Spain and China). The key findings are: The number of fixed-line voice connections remains relatively resilient in the UK, with more fixed-line voice connections per 100 people than in the other markets covered. Although this number fell between 2006 and in all of the countries which we surveyed, the fall in the UK was among the smallest. The number of mobile connections per 100 people is high in the UK (130). Of the countries surveyed, only Italy, Germany and Australia have more mobile connections per 100 people. The number of broadband connections per 100 households among the countries which we surveyed is highest in France at 81, with the UK in second place. With 77 connections per 100 households, the UK is slightly ahead of the US, where three-quarters of households have fixed broadband. Spain has the highest proportion of digital television (DTV) homes per 100 TV households, with the UK in second place. The UK has the second highest proportion of DTV homes across the countries where we carried out our research, second only to Spain - where 100% of TV households have DTV. Smartphone ownership is high in the UK, at 58%. The UK leads in digital radio ownership (31%) and DVR ownership (39%). Tablet take-up among internet users is highest in Spain and Australia, both at 24%. Italy and the US have the next-highest claimed ownership (23% and 20%) with the UK in fifth place at 19%. Watching TV is the most popular communications activity in all the countries surveyed. Over 90% of all respondents in all the countries claimed to watch TV regularly. The UK and Spain have the highest proportion of consumers who claim to watch TV regularly (95%) Take-up and use of services and media activities Fixed-line voice remains relatively resilient in the UK, with the number of lines per 100 people higher than in the other markets covered In all the countries where we carried out our consumer research, the number of fixed-line connections per 100 people fell between 2006 and (Figure 1.6). The data compiled by IDATE and Ofcom from industry data shows that the fall in the UK (four connections per 100 people) was among the smallest in those nine countries. As a result, the number of connections per 100 people was higher in the UK than in the other countries. Second highest take-up was in Germany (52 lines per hundred people), closely followed by Australia (48) and the US (46). Take-up was lowest in China, where availability of fixed-line connections is low and mobile is the predominant form of telephony. France and Italy also have low take-up of fixed-line connections. In France, consumers are able to choose a 22