Fixed Line Providers - UK

As markets go, revolution has been the byword for the fixed-line sector as it has undergone major rescaping in the past few years. It finds itself competing for voice business in a deregulated yet declining market, where a deflationary spiral is driving call revenues downwards, and where mobile telephony is rapidly gaining ground and establishing itself as a default choice for increasing numbers of phone users.

Established players in the market have watched as an influx of new market entrants try to seize a slice of the declining fixed voice market with their bundled offerings. The telecoms customer is a winner in all this, as the cost of household voice and Internet services has dramatically reduced.

And as the majority of UK households now feature a broadband connection, the Internet is becoming the main communications gateway for the home. The household market has morphed from narrowband to broadband, and next-generation voice services are being developed over digital and wireless capability - the concept of the traditional residential fixed line is disappearing in a world of converging technologies.

The report defines fixed line as telecommunications lines that are not wire-free but connected to physical points.

Issues in the Market

Key issues:

Definition

Abbreviations

Market in Brief

Market liberalisation opens up the fixed-line sector

Lower revenues

Newcomers denting the dominance of BT

The encroachment from mobiles

Impact of the digital switchover

Losing voice against the mobile operators

Usage patterns between fixed line and mobiles determined by age

Fixed lines still offer distinct advantages over mobiles

New communications order creates further pressure for landlines

Internal Market Environment

Key points

Changing regulation creates market free-for-all

Easier for new market entrants

Wholesale line rental

How does BT compete?

Bundling

Low prices inspire more to switch

Broader Market Environment

Key points:

Personal disposable income up

Figure 1: Trends in personal disposable income and consumer expenditure, 2002-12

Household formation delivers further opportunity

Figure 2: Total number of UK households and one-person households, 1991-2012

Bigger market opportunities from population increase

Figure 3: Size of UK population, by age group, 2003-12

Competitive Context

Key points:

Mobile subscriber numbers continue to rise

Figure 4: Mobile phone subscribers, 2002-07

Mobile an increasingly attractive option

Fixed line no longer a gateway to the home

The Web spawns new forms of communications

Strengths and Weaknesses in the Market

Market Size and Forecast

Key points:

Numbers down across the board

Figure 5: Key metrics in the fixed-line sector, 2002-07

Price deflation a fact of life…

Figure 6: Average real monthly cost of residential telecoms, 2002-07

…but price of access remains constant

Call charge analysis

A continued path of decline

Figure 7: Fixed-line voice and access revenue, 2002-12

Figure 8: Breakdown of forecast of fixed call revenue, 2002-12

Factors used in the forecast

Segment and Brand Performance

Key points:

Fixed-line analysis

Figure 9: Numbers of lines taking BT and non-BT voice services, 2002-06

Full LLU services are now emerging

Cable remains constant

Call minutage

Figure 10: Share of voice communication, by type of provider, 2002-06

User shares by fixed-line provider

Figure 11: Penetration levels of fixed-line providers, October 2007

Among the online sample, about one in two adults have a landline with BT

Virgin is locked in a battle for the living room with Sky.

TalkTalk has an 8% share, making it the third-biggest provider in the market

Companies and Brands

Key points:

Major players

British Sky Broadcasting

BT Retail

Losing share

New services follow suit

Complacent about broadband speeds

Moving into entertainment

No dual-play packages, yet

VoIP

BT Wholesale

Regulatory pressures

Carphone Warehouse/TalkTalk

Mobile business

Fixed-line services

Broadband offers

Kingston Communications

Tiscali

Increasing UK reach

Available packages

Virgin Media

Returning to profit

Packages galore

Other providers

Brand Communication and Promotion

Key points:

About £1 per head of population

Figure 12: Fixed-line media expenditure, total expenditure and total BT, 2002/03-2006/07

BT is the biggest spender

Expenditure by media channel

Figure 13: Fixed line media expenditure, by channel, 2003-07

Tendency for directness

TV in decline

Press succumbs to online

Major advertising campaigns 2006/07

Figure 14: Fixed line media expenditure, by main campaign, Sept 2006 - August 2007

The old guard dominates…

…with newer players snapping at the heels

The Consumer - Major Brands and Profiles

Key points:

Deregulation opens up the market

Figure 15: Penetration levels of fixed-line providers, October 2007

Profiles of fixed-line providers

Figure 16: Penetration of fixed-line providers, by gender, age and socio-economic group, October 2007

Additional lifestyle and behavioural profiling of fixed-line providers

BT

Virgin Media

TalkTalk

The Consumer - Usage of Fixed Lines and Mobiles in the Home

Key points:

Loyalty begins at home

Figure 17: Attitudes towards fixed lines and mobile phones, October 2007

An increasingly lost market

Landline is the back-up for increasing numbers

Selectively using the landline

Poor mobile reception

Appendix

Figure 29: Profiles of fixed-line providers, by demographic analysis, October 2007

Figure 30: Penetration of fixed-line usage modes, by demographic analysis, October 2007

Figure 31: ‘My landline always offers a clearer connection than my mobile’, by demographic analysis, October 2007

Figure 32: ‘It’s cheaper to call from my landline’, by demographic analysis, October 2007

Figure 33: ‘It's cheaper to call from my mobile’, by demographic analysis, October 2007

Figure 34: ‘My landline is easier and more comfortable to use than my mobile’, by demographic analysis, October 2007

Figure 35: ‘I feel safer knowing I have a fixed line to the outside world’, by demographic analysis, October 2007

Figure 36: ‘It's easier to call from my mobile, because it's where I have my address book’, by demographic analysis, October 2007

Figure 37: ‘I only have a landline because my broadband provider required it’, by demographic analysis, October 2007

Figure 38: ‘I resent having to pay line rental for my landline’, by demographic analysis, October 2007