Mapping broadband in the UK Q4 2013:

Transcription

1 Mapping broadband in the UK Q4 2013: Broadband take-up estimates for every UK postcode Prepared by: Oliver Johnson Date: 25 May 2014 Version: 1.1 Point Topic Ltd 73 Farringdon Road London EC1M 3JQ, UK Tel. +44 (0)

2 Contents 1. Introduction 3 2. The broadband market at the end of December Standard versus superfast lines Consumer versus business lines Standard broadband lines 6 3. Broadband take-up in the UK 8 4. Operator market share across the UK Conclusions 13 APPENDIX ONE: Measuring the availability of services across the UK 15 APPENDIX TWO: Ofcom take-up figures for UK counties 18 APPENDIX THREE: Calculating take-up in every UK postcode 20 APPENDIX FOUR: Digital deprivation in the UK 21 Page 2 of 21

3 1. Introduction Every six months, Point Topic estimates broadband take-up in every postcode in the UK. We look at the expected market share of every major operator for the consumer and business sectors. We estimate take-up of the different fixed broadband technologies, and include estimates of DSL lines sold through BT Wholesale and through LLU operators. We understand patterns in broadband take-up across the country. This allows us to identify areas where take-up is lower than we would expect, and where operators should expect to see significant headroom. This document describes our model of broadband take-up at the end of 2013/start of 2014 and displays some of the key outputs. If you have any questions, or if you would like to access our full database of broadband availability and take-up in every UK postcode, please get in touch. 0 Figure 1: Overall take-up and take-up of superfast broadband services in the UK by Lower Super Output Area, December Page 3 of 21

4 2. The broadband market at the end of December 2013 At the end of December 2013, Point Topic reported million broadband lines across the UK. This included million consumer lines and 1.88 million business lines. The full market statistics are published within Point Topic s UK Plus service and are available for subscribers to download. 2.1 Standard versus superfast lines At the end of December 2013, Point Topic estimated that 5.6 million UK broadband lines were superfast connections, offering download speeds of 25Mbps or above. This represents 24.6% of the total broadband customer base. Figure 2: Superfast broadband lines as a percentage of all UK broadband lines, 1 Jan 2014 The combined total of BT Retail and Virgin Media s superfast broadband lines stood at 5.1M at the end of Q Adding in an estimated 474,000 lines on the Openreach network resold by ISPs other than BT Retail, plus an estimated 34,500 FTTx lines provided by alternative network operators and Kingston upon Hull s incumbent operator KC, takes the grand superfast total over five and a half million and growing. Page 4 of 21

5 Figure 3: Superfast broadband lines market share, 31 December2013 Page 5 of 21

6 2.2 Consumer versus business lines Sourcing accurate numbers for the split of residential and business subscriber lines presents significant challenges, as operators rarely report these figures. At the end of December 2013, Point Topic estimated that 8.6% of the total broadband market served businesses. Business market share for major operators is shown below. Figure 4: Estimated consumer and business split for major operators, 31 December 2013 Broadband business lines are defined as broadband lines to business premises. Broadband lines to home-based businesses are included as consumer lines, not as business ones. 2.3 Standard broadband lines At the end of December 2013, Point Topic estimated that there were a total of million standard broadband lines in the UK. The number of standard broadband lines in the UK is decreasing as superfast subscriber numbers grow. Focusing on standard broadband lines, both business and consumer, Point Topic estimates that at the end of December 2013 BT Retail had over 28 %of the standard broadband market. Full market shares for the major operators are shown below. Page 6 of 21

7 Totals for Sky, TalkTalk, Virgin Media and other operators include both on-net and off-net services provided. Figure 5: Standard broadband retail market share, 31 December 2013 Page 7 of 21

8 3. Broadband take-up in the UK Point Topic provides its subscribers with full databases of broadband availability and take-up across the UK. In the year between December 2012 and December 2013, over 3.6 million superfast lines were added in the UK market. Over 53% of these net additions were allocated to Virgin Media, with the remainder allocated to BT and its resellers. There is a shift to more BT and reseller superfast lines as the marketing starts in earnest and the transition of Virgin Media s subscribers to higher bandwidth tiers is almost complete. Figure 6: Superfast lines by general source. Source Point Topic Resellers report a more difficult market for superfast broadband than either Virgin or BT. Those that are reselling BT lines ascribe a number of reasons to this low demand including - No ability to unbundle the line which means the ISP is able to offer a limited number of options to a consumer and is therefore unable to distinguish itself significantly from competition. - Low demand when the change in bandwidth isn t significant where consumers are used to receiving under 5Mbps then they are much keener to adopt a higher bandwidth tariff than those who were in the 10-20Mbps range. - Consumers don t understand the change there are not any killer applications that make superfast a necessity. At the moment it s nice to have and users who have experienced it are loathe to go back to lower speeds (work v home is a comparison often made) and lower upstream as well. Perhaps they don t understand the benefits but the argument that the industry doesn t understand the consumers (current) requirements could equally be made. Page 8 of 21

9 - Cost without a significant set of benefits the additional cost of a superfast (let alone 100Mbps or 1Gbps) tariff is a barrier for adoption. So a patchy picture is starting to emerge. Different suppliers face different challenges partly due to the nature of the industry and the products but also partly due to location. Adoption rates certainly differ across the UK as does the take-up of superfast itself. Figure 7: Change in superfast adoption (Local Authority) Q4 12 to Q4 13. Source Point Topic Page 9 of 21

10 Figure 8: Areas with most superfast headroom (by local authority) Q4 13. Source Point Topic Page 10 of 21

11 4. Operator market share across the UK Our maps allow us to evaluate the expected market share of operators within any UK postcode. In this section, we look at national and regional operator market shares. Figure 9: Retail market share for operators by country. Source Point Topic Figure 10: Retail market share for operators by region. Source Point Topic Page 11 of 21

12 The table below shows the shifts in operator market share between December 2012 and December It highlights the impact that superfast has had in the UK in the period. Those operators that have a strong set of bundle items, particularly with sport and other event TV, and are able to offer superfast bandwidth have prospered while those offering standard broadband or have less presence in TV have lost market share in general. There are some exceptions. Other operators that are offering FTTB or FTTH are doing well over their own footprint and while TalkTalk has lost market share over the year it has improved somewhat in the last two quarters. Figure 11: Changes in retail market share for operators by region, December 2012 to December Source Point Topic The impact of superfast in London is of particular note. Mostly led by BT take-up has been stronger here than other regions. The message seems to be if there is a strong bundle with high bandwidths and crucially at a price point that is acceptable then a consumer will adopt a superfast service. Page 12 of 21

13 5. Conclusion Growth today Broadband take-up in the UK continues to expand. Now in more than 80% of UK homes and with a quarter of them rated as next generation, even though some fall short of the EC definition of 30Mbps downstream, there has been considerable progress for superfast and BT in particular in the last six months of In part the continued growth is due to the general demand for broadband, increasingly influenced by the continued expansion of next generation coverage, along with the publicity associated with each stage. Growth from particular groups historically categorised as non-adopters has also made a contribution towards the end of Many of the hard to reach customers that were being left behind are starting to get online. Having identified a number of barriers and brought forward projects to target those users who are too poor, lack the skills or the confidence or otherwise face barriers to adoption we are seeing the first signs of some success. Tablets for example have proven to be very useful for older users and the percentage of people over 75 using the internet continues to increase. There is local variation as we can see in Figure 1. We expect to see more geographically uniform growth in NGA subscriptions over the next two years as much of the coverage project is completed and demand is driven by relatively similar local conditions. Growth tomorrow Next generation access in conjunction with a highly rated bundle certainly has an impact on demand, as we can see from BT and Sky in particular. While Virgin continues to run a strong defence they have to contend with competition across more of their footprint and closer to the bandwidths they can offer than ever before. The providers that have invested heavily in their bundles and content are the ones who appear to be winning at the moment. Whether that challenge will be enough in the medium to long term to allow a return on investment for the content particularly sport remains to be seen. The first rule is to have customers though and BT in London for example (see Fig.11) is making major strides in the premium consumer market in the UK. What can we learn from the data? Overall the UK has increased coverage and has increased demand and take-up. While we may have passed peak broadband in terms of a growing footprint and subscribers, the UK appears at the moment to have solutions to many of the remaining issues like universal access and support for those who have difficulty getting online. There is still the execution and completion of a number of projects and some of them will be relative failures no doubt but many of the solutions are available at least. The ISP market is at the moment in relatively rude health but there are indications from the take-up picture that BT may be increasing its dominance at the expense of competition. Page 13 of 21

14 While much of their recent success can be credited to their strategy, service and marketing the lack of unbundling for vectored or FTTx activated cabinets may well be having an impact. Sky in particular reference this as an issue for them today and going forward. Without a satisfactory resolution this lack of unbundling could reduce competition in the UK market. If we wish to maintain a competitive market with a number of healthy players we should be examining what routes are available (see the German regulator on unbundling vectored cabinets for example) to reinvigorate superfast and ultimately ultrafast competition and unbundling. Page 14 of 21

15 APPENDIX ONE: Measuring the availability of services across the UK Our objective now is to estimate a more detailed map of broadband take-up within the UK, including operator splits and estimates for consumer and business lines. Of course, broadband take-up is influenced by the availability of services within an area. To produce our detailed maps of broadband take-up across the UK, we consider the availability of services within every postcode in the UK. Operator subscriber lines are then only allocated to areas where services are available. BT exchange locations To map the availability of broadband across the UK, it is essential to have an understanding of the locations and boundaries of BT s exchanges. Whilst the location of exchanges is published, BT is yet to provide a publically available source of data for the boundaries of exchanges across the UK. Point Topic has therefore modelled the likely boundary of exchanges. Our estimates have been shown to be 87% accurate, with the greatest inaccuracy lying on the boundaries of exchanges and with the greatest accuracy in rural areas. Our approach assumes that: An imaginary line connecting any two neighbouring exchanges will be bisected at a right angle by an exchange boundary. The exchange boundary will be exactly midway between the two exchanges. Figure 12: Voronoi tessellation is used to estimate the KCOM and BT exchange boundaries We use the same approach to estimate the boundaries of KCOM Group exchanges within the UK. In this way, every postcode in the UK is allocated to a BT or KCOM exchange. Page 15 of 21

16 LLU presence within exchanges Data is available to say which exchanges have been unbundled for LLU operators. Operators release data on which exchanges have been unbundled by the LLU operators. We can use this data to calculate the number of premises passed by operators within the UK. We use this approach to calculate the on-net presence of Sky, TalkTalk, O2, Entanet, NowNet and Zen Internet (the latter three operators are grouped together within a category Other ). Off-net lines sold by each of these operators are then assumed to fall outside of their LLU footprint. Note that Orange (now providing broadband services through EE) subscribers are distributed across the whole of the BT exchange footprint. Virgin Media coverage area Point Topic s Broadband Layer also includes an estimate for the Virgin Media coverage area. From published data, we know the overall franchise area for Virgin Media and the total number of UK premises passed by their deployment. Our first model for the Virgin Media deployment area looks at the most likely distribution of these homes within the franchise area, based on a commercial deployment model which selects the most revenue dense areas within the franchise area. This first model is then refined with actual speed test data supplied by Point Topic s partner, Thinkbroadband, and from Ofcom. This data is used to re-calibrate our commercial deployment model and estimate the likely coverage area of Virgin Media s cable services. This model has been shown to be 90% accurate when compared to unpublished sources for their actual deployment. Figure 13: Modelling the Virgin Media coverage area Page 16 of 21

17 BT fibre enabled exchanges BT publishes its fibre enabled exchanges on its website. Using our exchange boundaries, we can therefore estimate the coverage area of BT s fibre services. We also include FTTx services offered by Sky, TalkTalk and other operators through the Openreach fibre network. Alternative network FTTx coverage Through our UK Plus service, Point Topic has established strong contacts with smaller providers of FTTx services. Using this research, we are also able to map the coverage of these operators within the UK. Page 17 of 21

18 APPENDIX TWO: Ofcom take-up figures for UK counties In October 2013, Ofcom published its analysis of the UK broadband market in June 2013 The UK Communications Infrastructure Report. Ofcom reported take-up of standard and superfast broadband in every county within the UK. The fixed broadband take-up data was based on the total number of LLU/DSL lines and Virgin Docsis lines. It does not include business lines that have bought a dedicated business service, but it does include any business that uses a service on a DSL line. In the year from June 2012 to June 2013, we estimate that consumer take-up of broadband services has increased from 74% to 75%. The maps below show a comparison of the take-up reported for each of the UK s counties. Figure 14: Ofcom total broadband take-up including superfast by UK county, comparison of June 2012 take-up and June 2013 take-up Page 18 of 21

19 Country HH takeup June 2012 June 2013 Shift Superfast HH takeup HH takeup Superfast HH takeup HH takeup Superfast HH takeup England 73% 7% 76% 16% 3% 9% Northern Ireland 64% 11% 68% 22% 4% 11% Scotland 67% 5% 72% 12% 5% 7% Wales 66% 4% 70% 9% 4% 5% UK 72% 7% 75% 16% 4% 9% Figure 15:Changes in total and superfast take-up reported by country, June 2012 to June This input has been incorporated into the analysis and we will continue to monitor and analyse the outputs from Ofcom although there are some questions over the base data that the stated take-up percentages are calculated over. Page 19 of 21

20 APPENDIX THREE: Calculating take-up in every UK postcode We now have the following inputs for our model of broadband take-up in every UK postcode: From the Ofcom published datasets, we know the take-up of standard and superfast broadband services across the counties in the UK. From Point Topic s own research programmes, we know the total consumer and business subscriber numbers for all major and smaller operators within the UK and their coverage areas. From our surveys, we understand the likely take-up of broadband by different types of households and businesses within the UK. From our research, we know which operators are active in which exchange and which exchanges have been enabled for FTTx services. We also have an estimate of Virgin Media s coverage layer. An overview of how we calculate broadband availability by postcode is provided in Appendix One. We use these inputs to estimate the number of consumer and business subscribers for each operator in every UK exchange. The process for estimating operator market share in each exchange is as follows: 1. Calculate the number of premises passed by each operator within an exchange. Virgin Media will not of course pass all premises within an exchange. 2. Estimate the expected number of broadband lines within the coverage area of each operator within the county. This is based on the likelihood that the premises passed will take-up broadband services. 3. Model One distribute total operator lines for the UK by exchange according to the likely take-up within the coverage area of each operator. 4. Model Two adjust the distribution of operator lines so that the total number of subscribers for each operator is as close as possible to the estimated county figures for UK take-up. We use this methodology to estimate the numbers of consumer and business, standard and superfast lines for every operator in every UK exchange. Operator subscriber lines are then distributed across every postcode within an exchange, based on the expected take-up of broadband within the coverage area for that operator. Page 20 of 21

21 APPENDIX FOUR: Digital deprivation in the UK Now the UK is moving towards 95% per cent fixed superfast coverage before the end of the decade attention has been shifting to those for whom the physical availability of a network is not the only barrier to adoption. Broadband digital deprivation is a looming challenge for the UK. The focus on broadband coverage has, quite properly, dominated the conversation for the last few years. Now though the actual takeup of a service is of as much concern when it comes to getting the UK online. New research published by Point Topic has identified seven primary predictors of low adoption: Age the older an individual the less likely they are to have a broadband connection at home; Income higher income means higher adoption rates; Disability the ONS has provided data indicating that half the non-adopting population are registered disabled; Housing those in social housing also show low broadband adoption rates; Availability having better and more numerous broadband options drives higher broadband penetration. Point Topic s Broadband Infrastructure Index, which measures the quality and availability of broadband services in an area, provides the input for this component; Children the presence of children in a household drives up broadband adoption; Education the higher the educational attainment the higher the rate of broadband adoption. Point Topic has developed a Broadband Digital Deprivation Index (BDDI) to highlight those areas most at risk from internet/broadband non-adoption. The map below shows the risk associated with each local authority in the UK. The Broadband Digital Deprivation Index gives us a view of the factors affecting broadband adoption and where their impact is expected to be felt. This is an important step in being able to address those particular aspects. The full report is available now to Point Topic s UK Plus subscribers. A dataset of the Index in every LSOA area for England is available to UK Broadband Geography subscribers. Page 21 of 21