Research Round-up March 2023
Full fibre broadband and bundled TV services take-up; Q4 22 UK retail ISP and network operators market statistics; Global fixed broadband subscribers forecast to 2030; Ultrafast UK sector updates; ISP news; government and Ofcom updates
Point Topic’s key publications of the month:
UK Fixed Broadband and Bundled TV Services – Who’s Winning and Losing
Global fixed broadband subscribers will grow by 18% to reach 1.6 billion by 2030
UK Fixed Broadband and Bundled TV Services – Who’s Winning and Losing[1]
Introduction
The UK has been experiencing unprecedented levels of competition in the fixed, especially gigabit-capable marketplace in the past 18 months. Consumers have never had it so good in terms of access to faster connectivity and curated online video content, but with network suppliers investing billions in full fibre network rollouts and TV content deals, are they seeing a return on their investment?
In a saturated telecoms market coupled with the cost of living crisis and inflation impacting most consumers real wages, Point Topic looks at which suppliers are successfully navigating the challenging market conditions and those who will be looking at combatting churn rates.
Key findings
Having access to gigabit-capable broadband services, especially using FTTP technology, does not equate to consumer take-up.
Over one third (35.5%) of respondents surveyed were unsure as to whether their broadband connections are based on full fibre technology indicating a market that has yet to fully get to grips with the technology or the terminology.
For those consumers subscribing to an ultrafast service, Virgin Media O2’s gigabit-capable DOCSIS 3.1 services nearly dominated in all regions with BT a close second; however smaller operators are seeing their fair share of subscribers.
Bundled pay-TV and FTTP/gigabit-capable DOCSIS 3.1 services subscriptions are not seeing any significant take-up in all regions, but where it is available, Sky’s FTTP and pay-TV take-up has nearly reached parity (Figure 1).
Affordability will continue to be a catalyst for uptake in ultrafast services, but providers face challenging market conditions to see a return on their FTTP network investments.
Some consumers seeing add-on TV services as non-essential and feeling the wallet crunch as most ISPs announce their significant annual price increases.
*BT Group includes BT, EE and Plusnet figures
**Virgin Media O2’s gigabit-capable connectivity is delivered through DOCSIS 3.1 and FTTH/P technologies
†Others include figures for TalkTalk, Vodafone, Hyperoptic, KCOM, Shell Energy Broadband and ‘Other’
With an unprecedented amount of TV/video content, subscription video on demand (SVOD) and free ad-supported TV channel streaming services available are British consumers swayed by having an all-in-one broadband and TV service subscription? Or are take-up habits swayed by the affordability factor? The short answer is that although consumers are being increasingly budget-conscious with their monthly spends, there is still a market for bespoke TV and broadband bundled services. Just under a third (30.6%) of our 2,033 survey respondents stated that they were likely to change providers if another ISP offered all or most of the TV/video content they watched.
However, providers wishing to generate greater consumer monthly ARPUs to see a return on their investments cannot be overly reliant on subscribers taking a curated TV and full fibre broadband package. ISPs will need to restrategise their service offerings and marketing campaigns.
UK Q4 2022 Retail ISP and Network Operators Market Analysis
Broadband net adds less than impressive but FTTP gaining ground
The past two quarters of the year marked a definite slowdown within the fixed line sector as Covid pandemic gains firmly abated along with the cost of living crisis seeing a shift from fixed services to mobile broadband only. Despite the sector’s healthier uptake in numbers across the board, with around 85k net broadband additions at the close of Q4 2022, compared to the previous quarter’s 13k, the market remains challenging with little signs of significant turnarounds on the horizon.
FTTP network rollout has steadily continued throughout the quarter with Openreach covering 9.572m premises and Virgin Media O2’s (VMO2’s) Project Lightning drawing to a close with around 3.2m premises passed. Wholesale broadband lines increased by around 100k totalling 29.14m. A wholesale market shake-up looms as the new fibre joint venture, Nexfibre, between Telefónica, Liberty Global and InfraVia Capital is launched with 24k Project Lightning premises being transferred to the network.
Key headlines:
For the third consecutive quarter, BT’s consumer division reports losses (estimated -79k); its churn rate remained around 1.1% meaning it’s likely offering out-of-contract subscribers similarly priced tariffs with an eye on retention; Openreach reported a loss (-10k) due to the market slowdown.
Total Q4 2022 FTTH/P/B, FTTC, cable, FWA/satellite and DSL wholesale connections stood at an estimated 29.14m, up from 28.51m y-o-y; with retail consumer and business connections reaching an estimated 29.11m during Q4 2022, up from 28.77m at the close of Q4 2021.
FTTP locations covered by Openreach’s network 2 years ago sees 50% of its broadband base now on FTTP.
VMO2 sees broadband net adds reaching just under 23k up from 19k bringing its broadband customer base to 5.653m.
Sky UK with an estimated 6.215m broadband subscribers and bolstered by its pay-TV subscribers, remains the dominant player in its European operations.
Out of the AltNet ISPs metrics we tracked there were an estimated 45k broadband net additions compared to 32k in the previous quarter.
Overall AltNet operators’ FTTx (pre-dominantly FTTH/P/B) ISPs subscriber numbers are slowly on the rise; we estimate the total number to be around 2.54m at the close of Q4 2022.
Wholesale connections remain static in challenging conditions
At the close of Q4 2022, we estimate wholesale connections to have reached 29.14m. Similar to the retail sector, growth has begun to plateau and as reported above Openreach for the third consecutive quarter reported a loss of connections. Increase in net broadband connections grew by a 0.4% q-o-q and 2.2% y-o-y. Despite the increase in FTTP network coverage by major and independent suppliers this small level of growth is indicative that the market is reaching saturation point along with AltNet suppliers not gaining as much traction as expected within their footprints.
As expected, DSL lines are on the wane and dipped to 2.83m during the quarter down from 2.95m during the previous quarter. FTTC connections decreased to 15.97m compared to 16.19m in Q3 and 16.39m the previous year. FTTP ultrafast (100 Mbps+) lines are progressing and have risen to around 4.20m up from 3.79m in Q3 and 2.40m at the close of Q4 2021 (Figure 1 below).
Full details of the quarterly analysis along with the metrics spreadsheet can be accessed with a UK Plus subscription.
Global fixed broadband subscribers will grow by 18% to reach 1.6 billion by 2030
We have updated our forecasts of fixed broadband take-up for 96 markets to the end of 2030. The forecasts are based on our quarterly broadband take-up data up to Q2 2022 and include both residential and business connections.
Key headlines:
Globally, we forecast that by the end of 2030 there will be more than 1.595bn fixed broadband subscribers; a slight increase from 1.55bn we predicted in our forecast in October 2021.
Between mid-2022 and end-2030, global fixed broadband subscribers will grow by 18%.
Regionally, the advanced, mature economies of Western Europe and North America will see the slowest growth, at 7% and 9% respectively; fixed broadband take-up in the Middle East & Africa and in Latin America will grow at significant rates (53% and 33% respectively).
In terms of the absolute figures, South and East Asia will continue to have by far the highest number of fixed broadband subscribers by the end of 2030, at 730m.
China will remain the largest market in the region, with growth slowing significantly, given already high household penetration.
We predict a modest growth between 2022 and 2030 in China (4.6%), given that the country’s fixed broadband market is already highly saturated - it has reached the half billion subscriber milestone in Q2 2021.
The overall picture suggests that countries located in the Global South will generally see higher growth in fixed broadband take-up by the end of the decade.
The complete dataset of the fixed broadband take-up forecast to 2030 by country and region is available to subscribers of our Global Broadband Statistics service.
BDUK Project Gigabit Update
On 21 March, BDUK announced that it had awarded CityFibre the Lot 5 £69m procurement contract to cover 45k premises in Cambridgeshire and adjacent areas. CityFibre will also be investing an additional £53m in the project – bringing the total to £122m investment – and will see CityFibre now extend its rollout to an additional 170k homes across the county. The first connections in the area are due to go live in 2024 as detailed planning was already underway.
As part of its private investment, CityFibre has committed an additional £300k local stimulus package to create local jobs and provide training/apprenticeships in engineering and construction. The package will also provide free connectivity to 50 local charities and social enterprises along with resources for local residents in need of digital skills training.
On 24 March, BDUK published the outcome of its September 2022 National Rolling Open Market Review (NROMR). The review identified 2,866,478 White premises - premises with no gigabit network infrastructure and none is likely to be developed within 3 years – meaning these areas will most likely be receiving Project Gigabit intervention in the future.
A further 6,914,149 premises have been identified as Under Review. Which indicates premises where suppliers have reported current or planned commercial broadband coverage, but where claimed current gigabit coverage has not been verified, or, in respect of planned build, where evaluators are confident that gigabit infrastructure will be delivered, but some risks to delivery remain, or there are some gaps in evidence. The future outcome of the review will designate it as a white or grey premises, the latter indicating future coverage by one gigabit broadband provider.
Other key telecoms sector news items from the month can be found below.
BT Group News
1 March – Openreach announced extension of NGA2003/23 FTTP Advanced Pilot 1.2 and 1.8 Gbps programme to 30 June 2023. 8 March – Openreach announced it passed 55k premises in Oxfordshire. 9 March – BT and Digital 3&4 (D3&4) announced that ITV and Channel 4’s terrestrial Freeview channels have moved to cloud-based processing, in a major step forward for the television industry. 14 March – Openreach's £240m ultrafast broadband build reaches 800k homes across Scotland. 17 March – Openreach published its response to Ofcom’s Equinox 2 consultation extension. 22 March – Openreach announced a major milestone as it reached the 10m premises passed mark with its full fibre network. 28 March – BT will become a channel partner for Amazon Web Services (AWS) Marketplace and will collaborate on IoT industry solutions, new cloud networking propositions and new 5G edge computing services for its UK business customers in a deal that targets a $500m revenue opportunity for BT over the next 5 years.
Virgin Media O2 (VMO2) News
1 March – Virgin Media O2 expands Cost-of-Living support for benefit claimants making it easier and faster to sign up for a social broadband tariff. 10 March – VMO2 announced it now provides FTTP Gig 1 broadband to 1.3 million Scottish homes following continued network expansion works. 17 March – Virgin Media O2 brings its 5G services to the London Underground in connectivity boost for commuters. 23 March – VMO2 announced it has connected more than 6,400 additional homes in East Grinstead, West Sussex to its gigabit capable network. 28 March – Virgin Media O2 and Dazn announced a distribution deal which will see a selection of Dazn’s boxing and combat sports available to Virgin TV customers as PPV.
CityFibre (CF) News
Throughout March – CF reported that it had completed primary builds in Binley Woods, Solihull, and March. The provider also announced future rollout locations in Loughborough and Newark. 17 March – CF responds to Ofcom’s extension of Openreach’s Equinox 2 review. 21 March – BDUK Project Gigabit awarded CF £69m contract will subsidise a £122m rollout of CityFibre’s wholesale full fibre platform to up to 45k rural homes and business in Cambridgeshire. The remaining £53m will be funded by an additional private investment from CityFibre.
Independent Operators (AltNets) News
1 March – Glaswegian-based newcomer Brillband announced it had secured £475k investment boost from banks in Australia and Norway; Brillband plans on expanding its FTTP network throughout the UK, however it currently resells services over CityFibre’s Scottish networks. 1 March – Grain Connect secured additional funding through a £110m bank facility, with an initial tranche of £40m from Nord L/B. German Landesbank Nord/LB. To complement Nord/LB’s debt financing, £21m of additional equity is being invested by existing shareholders, Equitix, Albion Capital and Pinnacle Group. 8 March – According to media reports, Zzoomm is reportedly seeking to acquire rural broadband provider Trooli. 9 March – Grayshott Gigabit announced it is leveraging the Calix Revenue EDGE solution to reduce operational costs of its 10 Gbps network and to reduce costumer support response times. 10 March – Swish Fibre announced it will further extend its FTTP network to new build homes through its newly signed agreements with Kebbell Homes and Elivia Homes sites. 11 March – Brsk announced it has passed 150k premises and also signed up its 1,000th customer in Manchester a few weeks later. 13 March – Zzoomm announced they signed up their 10,000th customer. 17 March – Netomnia announced it had secured a further £230m in funding to further support its rollout, which has already passed 410k premises. 22 March – County Broadband commenced FTTP rollout to 9 Suffolk villages. 26 March – Voneus acquired Welsh-based provider Beacons Telecom who were reportedly on track to deliver 15k FTTP network coverage to rural locations by the end of 2022. 27 March – Giganet launched FTTP services for 800 premises in Tadley, Hampshire. 29 March – According to Sky News, Ovo Energy is eyeing up takeover of Shell Energy’s Retail Unit, which would include its c.450k broadband subscribers. 29 March – Fibrus announced it has passed 250k premises across Northern Ireland and Cumbria. 29 March – Octaplus has acquiredLegend Fibre’s subscriber base as part of a ‘healthy acquisition’. Octaplus resells broadband services via CityFibre, MS3, and Full Fibre’s networks.
Other News
1 March – The Engineering and Physical Sciences Research Council (EPSRC), which forms part of UK Research and Innovation (UKRI) secured £6m in funding to help promote research and development in 6G technologies, cloud computing and faster Internet access. 8 March – Ofcom launched Consultation: Improving broadband information for customers, which aims to provide guidelines for providers using the term ‘fibre’ when referring to FTTC and FTTP products. 9 March – Vodafone extends 4G mobile coverage to 57 rural locations via the Shared Rural Network (SRN) programme. 13 March – Ofcom announced it will open up 26 GHz and 40 GHz bands for faster 5G usage. 21 March – The Local Government Association published its Digital switch readiness survey 2022 results. 23 March – The Scottish Government announced that 447,170 premises will require intervention to get access to gigabit capable broadband. 25 March – Kent-based Ferns Group signs Openreach Network Services Agreement (worth over £50m) in Bristol, Wiltshire and Dorset.
If you are a subscriber to UK Plus, sign-in here to access our UK Plus content where you can view our updated Q1 2023 profiles of the UK’s leading internet service providers, as well as our annual overview of the country’s broadband market.
Please get in touch if you would like to find out more about UK Plus or these particular publications.
[1]The results contained within this report are taken from Point Topic’s Q4 2022 YouGov-commissioned survey on video, ISPs, broadband speeds and fibre to the home (FTTH) connectivity. An overview of the findings of our Q4 2022 survey can be found in The UK’s TV, Streaming and Broadband Market: cost of living crisis challenging bundled synergies. The Q4 2022 report served as an update on the UK pay-TV and broadband sector previously carried out in March 2022, with the findings being published on 9 May 2022 in The UK’s television market past, present and future.