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Ofcom Report: The Change in UK Network Use

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The Network use in the UK is increasing as Brits are spending more time online than ever before, according to Ofcom’s annual Communications Market Report

British consumers are spending more time on the internet network than ever before, so much so that many are actively seeking a so-called “digital detox” from their online lives, according to communications market regulator Ofcom.

In its latest Communications Market Report – an annual survey of British communications and media usage and attitudes – Ofcom reported that 15 million people in the UK have sought time offline to do other things, such as spending time with friends and family, or holidaymaking.

Most of these people found taking a break from the digital world to be a rewarding experience, although some respondents to Ofcom’s survey reported feeling lost and cut-off, or worried that they were missing out.

“The internet has revolutionised our lives for the better, but our love affair with the web is not always plain surfing,” said Ofcom director of market intelligence, Jane Rumble. “Millions of us are taking a fresh look at the role of technology in our lives and going on a digital detox to get a better tech-life balance.”

The 2016 report highlighted the importance of connectivity to the increasingly digitised world. According to Ofcom, 9.2 million broadband connections are now superfast – in the regulator’s view this means capable of delivering speeds of over 30Mbp. This was up from 7.1 million two years ago.

As a result of this growth in superfast connections, total telecoms revenues grew for the first time since 2011, up 0.5% to £37.5bn between 2014 and 2015, as average household spend increased due to the higher costs associated with most superfast packages.

Superfast connections

Rumble said the regulator estimated that nine in 10 premises now had access to a superfast broadband connection, up from 83% last year, which tallies with other assessments of availability.

“We are aiming for 95% by the end of 2017, so availability is growing,” she said. “I think the core questions are now related to those people who aren’t able to get superfast broadband and that is absolutely a priority for Ofcom.”

Rumble also reaffirmed Ofcom’s commitment to the 10Mbps universal service obligation, currently on its way to becoming law. She said the regulator considered a 10Mbps connection adequate for activities such as streaming video on demand (VoD), an activity that has seen a boom in popularity in the UK in the past 12 months at the expense of live television.

Ofcom will release more concrete statistics on broadband take-up in September 2016.

4G popularity still soaring

Meanwhile, 4G connections accounted for 46% of all mobile connections, up from 28% in 2014. Ofcom said 98% of UK premises were now covered by at least one 4G network, and 71% were covered by all four.

Data use is also soaring, with 89% of 16 to 24-year-olds and 25 to 34-year-olds, 77% of 35 to 54-year-olds, 50% of 55 to 64-year-olds, and 21% of over-65s using web and data services on their devices.

The report said 71% of UK adults now owned a smartphone, up from 66% this time last year, which remains the most popular device for getting online.

Ofcom said the popularity of smartphones was giving rise to a number of new social impacts, such as an increase in people bumping into each other on the street because they were absorbed in their phone, and 40% of respondents said they had been “smart-snubbed” by a friend or relative.

The report also revealed a surge in the use of instant messaging, with the proportion of adults using over-the-top services such as WhatsApp at least once a week rising from 28% in 2014 to 43% in 2016, higher among the so-called millennial age group. Photo messaging services such as Snapchat are now used by 21% of adults weekly, up from 14% in 2014.

This growth came largely at the expense of email and, notably, text messaging, which presents a revenue stream problem for mobile operators.

Rumble acknowledged this trend and said Ofcom had seen mobile revenues remain flat over the past year, which suggested operators were responding to this to some degree.

“I think with any business, as behaviors change and shift, we would expect to see different businesses adapt to those shifts in behavior,” she said.

– Alex Scroxton

Ofcom and BT Rivalry: Plans for Openreach Independence

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BT Group’s plans to give Openreach greater independence share some common ground with Ofcom’s recommendations, but will this be enough to ease its rivals’ anti-competitive concerns?

Ofcom has waded in with its take on what BT must do to allow its infrastructure division, Openreach, to operate as an independent company and in a less anti-competitive way.

The communications regulator has published an eight-point plan, detailing what needs to change at Openreach to diminish BT’s hold over the organisation, and ensure a fairer deal for competitors that rely on its network to deliver services to their customers.

However, if these changes fail to deliver on these fronts, Ofcom said a formal split between BT Group and Openreach is still a possibility.

“BT retains influence over significant Openreach decisions,” said Ofcom, in a statement.

“BT has an incentive to make these decisions in the interests of its own retail businesses, rather than BT’s competitors, which can lead to competition problems.”

To rectify this, Ofcom is calling for Openreach to be established as a distinct, legal entity inside the wider BT Group, with its own branding and whose actions would be overseen by an independent board of directors, with no prior affiliations to its parent company.

The CEO of Openreach would be appointed by this board, and be held to account by them, with no input from BT Group.

The company should own the network it operates, which – in turn – would better position it to make investment decisions involving Openreach assets, Ofcom said.

Furthermore, Openreach should have the freedom to develop its own strategy and annual operating plans, based on the budget handed to it by BT Group.

“This model would provide Openreach with the greatest degree of independence from BT Group that is possible without incurring the costs and disruption – to industry and consumers – associated with separating the companies entirely,” the Ofcom statement said.

“It is designed to ensure that Openreach acts more independently from BT Group, and takes decisions for the good of the wider telecoms industry and its customers.”

“If it cannot achieve this, Ofcom will reconsider whether BT and Openreach should be split into two entirely separate companies, under different ownership,” it added.

Ofcom said it is seeking feedback on its proposals, and has invited interested parties to have their say until 4 October 2016.

Meanwhile, BT has published details of its own plans to shake-up the corporate governance of Openreach. These cover many of the areas outlined by Ofcom’s proposals, including establishing an independent board of directors and allowing the organisation to operate with a greater degree of autonomy.

Gavin Patterson, chief executive of BT Group, said the organisation is doing all it can to respond to industry concerns about how Openreach operates.

“These changes will make Opereach more independent and transparent than it is today, something both Ofcom and industry have requested,” said Patterson.

“Our proposals can form the basis for a fair and sustainable regulatory settlement and they can also enable Ofcom to bring its review to a speedier conclusion.”

Calls for Openreach independence grow

Ofcom’s proposals follow on from the publication of the Culture, Media and Sport Committee’s report into Openreach on 19 July 2016, which called for the subsidiary to be given greater autonomy when it comes to making spending and strategy decisions.

Matthew Howett, telecoms, media and technology analyst at market watcher Ovum, said the operating model being put forward by BT and Ofcom could be implemented in months, allowing all parties to focus on ensuring the UK has the broadband capacity it needs for the years ahead.

However, while Ofcom and BT might be broadly in agreeance with how Openreach should operate in future, Howett conceded the telco’s competitors may not be so enamoured with their proposals.

“For some, only full structural separation will be enough and it is important to note that Ofcom have kept this option on the table should its proposed model not deliver,” he said.

“Given the enormous costs and uncertainties, coupled with the weight of evidence, for Ofcom to proceed with structural separation now would be a disproportionate response, even if practically delivered.”

– Caroline Donelly

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