UK Fixed Broadband and Bundled TV Services – Who’s Winning and Losing

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 especially with the consumer price index (CPI) increase on the horizon at the close of the quarter.

The results contained within this report are taken from Point Topic’s Q4 2022 YouGov-commissioned survey[1] on video, ISPs, broadband speeds and fibre to the home (FTTH) connectivity.[2]

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[3], with the findings being published on 9 May 2022 in The UK’s television market past, present and future.

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 (Figure 1)

• 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

• 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

Figure 1: ‘Perceived’ FTTP broadband subscriptions[4]

Gigabit-capable connectivity take-up

According to thinkbroadband’s latest figures (26 February 2023), 47.9% of the UK has full fibre (FTTB/H/P) coverage.[5] With 74% of the country[6] having access to gigabit-capable broadband services we asked our Q4 22 survey participants, ‘For the following question, by 'full-fibre to the home (FTTH)' we mean broadband technology which uses fibre connections directly into the home, offering higher speeds. Is your MAIN home broadband service full-fibre to the home (FTTH) technology?’

We then analysed the responses by government regions to get an overall picture of regional take-up (Figure 2).

Figure 2: Take-up of FTTP broadband subscription services by government region

The results demonstrate that although rollout of FTTP networks has been happening at a frenzied rate, take-up of the service is below 50% in all of the regions. Furthermore, in nearly all of the government regions those who do not know whether their broadband connection is delivered via an FTTP or gigabit-capable DOCSIS 3.1 product remains nearly on par or higher than those subscribing to an ultrafast product.

The Midlands seemed to be the most unaware of their connectivity type with 41.4% of respondents in the West Midlands not knowing compared to 35.8% believing they were on full fibre service and 22.6% stating they were not. In the East Midlands 38.8% of respondents did not know if their connection was FTTP compared to 31.9% that did and 29.5% that knew they were not.

Worth noting is that the Midlands are heavily served by BT and resellers of Openreach’s full fibre network such as Sky and TalkTalk and are also covered by Virgin Media O2’s (VMO2’s) DOCSIS 3.1 network, which although not technically full fibre does deliver gigabit-capable speeds.

The North East saw the highest level of full fibre subscriptions with 42.3% believing they were on an FTTP product, 24.4% not and 33.1% unsure. This was followed by Wales with 40% (26.3% not and 33.6% not knowing). London and Scotland were next, both with 38.7% stating they were subscribed to full fibre broadband. Scotland also had the lowest proportion of participants (31%) stating they did not know what type of connection they were on with 36.4% of Londoners being unsure.

Worth noting is that a sizeable number of respondents did not know if their broadband connection was full fibre indicating that ISPs still have some way to go in demystifying and effectively selling FTTP services.

Ultrafast take-up, which ISPs are winning

For those respondents who subscribe to a ‘perceived’ FTTP service we asked which ISP supplied their broadband package. Again, by looking at this by government region, as expected the larger players who have invested heavily in network rollouts and upgrades, e.g. BT/Openreach and VMO2 are seeing the biggest take-up in subscribers.

Figure 3 below provides a breakdown by count of FTTP take-up by ISP in each government region. Using weighted data from 725 respondents that do subscribe to a ‘perceived’ FTTP service, the chart below underscores that operators still have some way to go in gaining significant traction. Moreover, these figures also suggest that further marketing and clarification of FTTP technology would be beneficial.

Therefore, care should be taken reviewing or using these outputs. Internet service providers’ themselves use the word ‘fibre’ ambiguously, with numerous websites referring to superfast FTTC and ultrafast FTTH services as fibre. It makes sense that the standard consumer would be none the wiser as to technological connectivity when it comes to viewing most broadband services.

Figure 3: Count of regional FTTP subscriptions by ISP[8]

*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 Vodafone, Hyperoptic, KCOM, Shell Energy Broadband and ‘Other’

VMO2 is the dominant player in terms of gigabit-capable subscriptions in all regions except Yorkshire and the Humber, East of England, the South East, and Wales. However, its actual FTTP footprint is only around a third of Openreach’s 9.6m premises passed. BT’s ultrafast services adoption rate has been steadily picking up pace with VMO2 over the past several quarters with around 29% of subscribers taking a >300 Mbps service where available compared to VMO2’s declining rate which reached around 35% at the close of 2022.

Worth noting is that smaller players are making some inroads in the uptake of ultrafast FTTP services, particularly in London and South East. Although one should bear in mind that some of the ISPs included in the ‘Others’ category, e.g. Vodafone and Shell Energy Broadband, are resellers of Openreach’s full fibre network connectivity services. Vodafone also has a national reselling agreement with CityFibre whose network has recently passed two million premises.

Bundled ultrafast broadband and TV services still a tough sell for most ISPs

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.

When comparing the regional data derived from respondents who subscribed to an FTTP service compared to those who have coupled it with a TV service bundle (Figure 4) the results are varied and less than impressive.

Again, we have reported the count of subscribers to these particular services as opposed to a percentage in order to better represent the degree of uptake by respondents within a region.

Figure 4: Regional FTTP and TV services take-up compared to standalone FTTP take-up by ISP[9]

*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’

BT Group’s (including EE and Plusnet) FTTP uptake was higher than VMO2’s services in Yorkshire and the Humber, the East of England, the South East, and Wales. However, for either supplier subscriptions to a bundled gigabit-capable broadband and TV service are not proportionate to their standalone FTTP subscriptions. As expected, Virgin is outperforming BT in terms of pay-TV services subscriptions, but only just in Yorkshire and the Humber, the South East and Wales. The only regions where BT Group outperformed VMO2 in terms of ultrafast uptake was in the East and South East of England.

Virgin Media O2’s gigabit-capable DOCSIS 3.1 broadband service saw the highest uptake in the North West, the South West, the North East, London, and Scotland. However, its premium TV services didn’t perform as impressively in those regions where less than half of respondents signed up to an ultrafast TV bundle. Again, Scotland and London were the exceptions where uptake was just over half taking a bundled ultrafast service.

Unsurprisingly, London where the average annual salary is higher than the rest of the UK, saw the highest proportion of VMO2’s ultrafast broadband and TV bundled services (23 out of 41).

Sky has dominated the UK’s pay-TV services market for years, traditionally using satellite dish technology. In 2020, Sky launched FTTP broadband services using Openreach’s network, followed by the launch in October 2021 of its IPTV Sky Glass HDTV and streaming service which no longer required subscribers to install a satellite dish. Despite Sky’s lacklustre performance in terms of FTTP uptake across the regions, its bundled service uptake showed much more parity compared to the other major providers.

Cost of living crisis impacting take-up and churn of pay-TV services

According to Ofcom’s Pricing trends for communications services in the UK report published on 1 December 2022, the average price of a pay-TV service as part of a bundled package fell by 13% per month in the year to September 2022 (Figure 5).[10]

Figure 5: Average monthly list price of pay-TV as part of a triple-play bundle, in real terms

However, when looking at Ofcom’s Affordability of Communications Services update also published on 1 December, around 32% (9.1 million UK households) are experiencing difficulties in paying for communications services.[11] Figure 6 below outlines the proportion of Ofcom’s communications affordability survey respondents that have experienced monthly affordability issues with their pay-TV[12] or subscription video on demand (SVOD) packages.

Figure 6: Ofcom’s proportion of consumers who have experienced pay-TV services affordability issues, June 2020 – October 2022, Source: Ofcom’s Affordability of communications services September 2022 report, October 2022 update.

In October 2022, 15% of Ofcom’s respondents said they experienced difficulties affording their pay-TV packages with 14% stating that additional SVOD costs were problematic. This is up from 11% and 9% respectively, when we published our last broadband and pay-TV/video survey results report in April 2022. Therefore, in the current climate consumers are likely to cancel their pay-TV subscription services due to the extra cost being seen as non-essential monthly spend.

When looking at the top providers’ monthly costs for a medium-level FTTP 500 Mbps broadband subscription along with a pay-TV service (Figure 7) the average price is £56.50 per month, which could be perceived as a considerable spend for the average household.

Figure 7: Monthly pricing of ultrafast FTTP 500 Mbps broadband and pay-TV bundles by ISP

*Virgin Media O2’s gigabit-capable connectivity is delivered through DOCSIS 3.1 and FTTH/P technologies

We asked survey participants, Have you/your household changed your MAIN broadband service provider in the last 6 months? (i.e. since April 2022) and distilled the responses down to those who are currently subscribed to a bundled broadband and pay-TV service (Figure 8). Just under 10% (9.4%) of respondents did change providers since April, with the majority staying with their current supplier. However, it is worth noting that some respondents may have either been in mid-contract and unable to change without incurring a charge or may have changed providers before April 2022 when the CPI-linked price increases were announced in December 2021.

Figure 8: Bundled broadband and pay-TV subscribers changing providers since April 2022[13]

At the start of this year, the major providers announced their annual price increases with the change in pricing due to come into effect from 31 March 2023. In some cases, price increases may be as high as 14.4% (BT, EE, and Plusnet) whereas the average is around 14% for TalkTalk, Virgin Media O2, and Shell Energy Broadband. This news will not be welcome by many consumers who are already feeling the strain on their monthly budgets and we will likely see further losses of pay-TV services for many providers.

We will be running our quarterly broadband and pay-TV services survey again in early March 2023 and will report our findings on full fibre take-up, pay-TV performance and churn rates in early April.

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[1] All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2033 adults. Fieldwork was undertaken between 8th - 9th November 2022. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). [2] We define full fibre networks and connectivity as being fixed broadband connections using fibre optic technology directly to the home (FTTH), premises (FTTP) or building (FTTB). For brevity, we will be using FTTP and ‘ full fibre’ interchangeably to denote FTTP/H/B variants. [3] All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2233 adults. Fieldwork was undertaken between 9th - 10th March 2022. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). [4] Results are weighted and based on 1970 responses. The corresponding table (1) of survey results outlining take-up of FTTP broadband subscription services by government region can be found in Appendix 1 of the full report. [5] thinkbroadband, UK Broadband Coverage & Speedtest Result Maps, 26 February 2023. [6] Ibid [7] Results are weighted and based on 1970 responses. The corresponding table (2) of survey results outlining take-up of FTTP broadband subscription services by government region can be found in Appendix 1. [8] Results are weighted and based on 725 responses. The corresponding table (3) of survey results outlining take-up of regional FTTP broadband subscription services by ISP can be found in Appendix 1. [9] Results are weighted and based on 725 responses for standalone FTTP services and 270 responses for FTTP and TV bundled services. The corresponding table (1) of survey results outlining take-up of regional FTTP broadband subscription services by ISP can be found in Appendix 2. [10] Ofcom, Pricing trends for communications services in the UK, 1 December 2022, p.56. [11] Ofcom, Affordability of Communications: September 2022 update, Introduction section on webpage, 1 December 2022. [12] Ofcom’s definition of pay-TV is “a TV service with additional channels you pay to receive (e.g. Sky, BT TV, Virgin Media, EE TV, Talk Talk TV, etc.)”. [13] Results are weighted and based on 570 responses. The corresponding table (1) of survey results outlining take-up of regional FTTP broadband subscription services by ISP can be found in Appendix 3.