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This report is the fourth in a series of broadband benchmark reports produced for the Welsh Assembly Government's Broadband Wales Unit.  This edition covers the broadband market in Wales, the UK and the rest of the world; with data based - where available - on the state-of-play up to the end of December 2005.

 

 

Datamonitor anticipate that over the next 18 months 60% of European households will have broadband connections after which the level of demand will slow.  To reach 60% household penetration (approximately 15.6 million broadband connections) in the UK would require a near doubling of broadband connections by mid 2008. 

 

The dominant broadband technology across Europe remains DSL with take-up highest in France, Norway and Holland where prices have been under the greatest pressure.

 

Results from the ORC market survey, commissioned by the Welsh Assembly Government, indicate that 32% of households in Wales currently have a broadband connection (at speeds over 512kbps).

 

This equates to 15% of the population in Wales having a broadband connection in October 2005 (when the ORC undertook 5,500 telephone interviews) which is comparable with 15% of the UK population having a broadband September 2005 (when market data was captured).

 

The ORC survey results show some regional variation in broadband take-up which may be accounted for by the time taken for mass market broadband to become widely available in parts of Wales. The regional variance may also be linked to the socio-demographic profiles of each Local Authority area (including age, employment, and income).

 

The cost of broadband in Wales is higher than for customers in London and the South East, where increasing bandwidth is on offer.  In Wales the lowest priced broadband service costs £4/month more than for customers in London and the South East, and higher bandwidth services (i.e. up to 24Mbps) are not currently available. 

 

Figures released by the eCommerce Innovation Centre indicate that 67% of Welsh small to medium sized enterprises (SMEs) currently have internet access with an additional 5% planning to obtain internet access in the next 12 months.  Out of those with internet access, 58% have a broadband connection which equates to 38% of all Welsh SMEs having broadband access. As would be expected, the dominant broadband technology is DSL, with 42% of broadband enabled SMEs using a DSL connection.  The report is based on a telephone survey completed in August 2005 with a sample of 2500 respondents.

 

 

Coverage in Wales

 

 

Analysis carried out by BBWO has demonstrated that Wales and Scotland experienced a slower rollout of ADSL when comparing percentage of population covered each year since 2001.  However, at the end of 2005 Wales was on a par with the rest of the UK with 99% ADSL availability.

 

BT announced in November 2005 that the three of the five exchanges in Cardiff included in the BT "Max" trial had been upgraded (Llanishen, Llandaff and Radyr), and that the remaining two (Cardiff Central and Roath) were upgraded in December 2005.  BT is expected to launch the 8Mbps service nationally in spring 2006.

 

The 35 exchange areas deemed commercially unviable are anticipated to be enabled by summer 2006 once the Regional Innovative Broadband Support (RIBS) procurement process has been completed. 

 

No further announcements have been made by BT regarding a restart of SDSL roll-out in the UK, so estimated coverage remains as reported in Q3 2005, below the UK average at approximately 25% of households in Wales.

 

Availability of Local Loop Unbundled (LLU) Broadband

 

If the major suppliers were to opt to roll-out services to the 1000 UK exchanges serving the highest population, it is anticipated that up to 45% of households and businesses in Wales would be able to access an unbundled service from one of 42 local telephone exchanges. This compares with 65-70% of sites able to access an unbundled service in the UK as a whole.

 

 

 

Coverage in UK

 

DSL Broadband Coverage

 

ADSL Broadband (Asymmetric)

BT Wholesale state that broadband is available at exchanges serving more than 99% of all UK homes and businesses and that more than 99.8% of end users connected to an enabled exchange can receive broadband services.

 

In December 2005, the Scottish Executive announced that every community in Scotland now has access to affordable broadband services as a result of the £24m Scottish Executive and BT project.  378 "commercially unviable" exchanges have now been enabled, leaving only one exchange awaiting upgrade.

 

The remaining not-spots still without broadband access are expected to be provided with access by Spring 2006 i.e. some areas within the Connected Communities project in the Western Isles which are being supplied with a largely wireless network, and a few communities representing 0.3% of the total covered by the project. 

 

In instances where distance from the exchange prevents broadband access the Scottish Executive has been identifying these clusters which have a demand for broadband with a view to reviewing solutions subject to budgetary constraints.

 

The Department for Enterprise, Trade and Industry in Northern Ireland has also announced 100% broadband availability for households and businesses in Northern Ireland, through a combination of enabling exchanges and wireless technologies. This high level of coverage is the result of a £10million EU match funded government programme. BT was awarded the contract in March 2003.

 

No further announcements have been made by BT regarding a restart of SDSL roll-out in the UK, so estimated coverage remains as for Q3 2005 at just below 50% of UK households.

 

Figures from the Office of the Telecoms Adjudicator (OTA) indicate that the number of unbundled lines in December 2005 was in excess of 210,000 (approximately 2.1% of the total number of broadband lines[1]) with the current run rate of lines provisioned being in excess of 5000 per week (an increase from 4000 per week in September with the commencement of bulk migration in December).  The OTA have expressed confidence in achieving the target of over 1 million unbundled lines during 2006.

 

 

Regional variation in availability of LLU services is shown in figure 2 indicating that London, Leeds, Liverpool, Manchester, Bristol and Birmingham are the key beneficiaries of LLU.

 

 

Out of the eleven ISPs with the highest number of subscribers, six have announced their intentions for further LLU.  In December 2005, Carphone Warehouse purchased OneTel from Centrica, and announced that it aimed to become "the number one alternative residential telecoms provider in the UK market".  The company has also announced bold plans with regard to LLU, stating the intention to unbundle 1000 exchanges over the next three years.  Industry estimates indicate that the company had about 140,000 broadband subscribers in Q3 2005, making it the eighth largest ISP in terms of size.

 

Be and UKOnline launched 24Mbps and 22Mbps services in a limited number of exchanges in 2005. Be intends to extend services to 22 cities and has committed to unbundling 750 exchanges by mid 2006. Homechoice, Bulldog, BISCuit, and PlusNet also announced plans to launch 24Mbps services during 2006.

 

 

Cable companies NTL and Telewest have not announced any plans to extend their network coverage, with latest quarterly reports concentrating on increased service provision and speeds.  It is therefore anticipated that combined coverage remains as indicated by Ofcom in June 2005 at 48% of UK homes.  This amounts to approximately 11.5 million households.

 

Satellite Broadband Coverage

 

Satellite broadband services are available to over 99% of sites in the UK.

 

Satellite broadband provider Aramiska shut down services in January 2006, providing only a few hours notice to customers.  This has impacted on up to 200 rural communities in the UK including businesses and community broadband projects. It is speculated that as many as 250,000 people have been affected by a shut-down of broadband services, although this estimate is thought to be high.  Communication Broadband Network provides a list of alternative satellite service providers offering suitable services for rural communities (www.cbncan.co.uk).

 

Wireless Broadband Coverage

 

 

 

A Gartner survey has shown that although there are more than 60,000 wireless hotspots worldwide only 17% of British and 25% US business travellers use them.

 

 

Whilst figure 3 places the UK is in second place for the countries listed in terms of total broadband coverage (availability), reviewing comparative take-up figures for these countries during Q3 2005, leaves the UK in 11^th place, behind France but ahead of Austria.  This is anticipated to change once figures for Q4 2005 become available, following speculation that the UK will have overtaken France.

 

Research carried out by BBWO indicates that within Wales there is a limited range of competitively priced broadband products in both the business and consumer market and availability of high speed networks is restricted to a small number of regions.  

 

Whilst businesses and consumers in Wales pay the same average price for broadband as the other UK regions, the best deals are not currently available in Wales, largely as a result of slower LLU roll-out in Wales than England and the London area in particular.  For example, UK Online offer the UK's cheapest 1Mbps service available at £9.99/month, in areas where they can access Easynet's unbundled network, but their 1Mbps service costs £19.99/month in Wales where the Easynet LLU network is not available.

 

	Consumer	Business
	Minimum	Maximum	Minimum	Maximum
	£	Speed	£	Speed	£	Speed	£	Speed
London	9.99	1MB	24.00	24MB	13.61	2MB	19.99	24MB
South East	9.99	1MB	14.99	8MB	13.61	2MB	19.99	24MB
Welsh Cities	13.99	512k	15.50	8MB	13.61	2MB	38.50	8MB
Welsh Towns	13.99	512k	14.99	2MB	13.61	2MB	13.61	2MB
Welsh Villages	13.99	512k	14.99	2MB	13.61	2MB	13.61	2MB

 

The highest speed available in the consumer market (i.e. 24Mbps) is not available in Wales to either business or household customers, and is only available to a limited number of exchanges in the UK.  It is expected that coverage of high-speed networks will increase in Wales throughout 2006.  NTL are currently increasing their highest speed for consumers from 3MB to 10MB whilst LLU networks are rapidly expanding and introducing ADSL2+ services (i.e. with a top bandwidth of 24Mb).  Due to the nature of ADSL, bandwidth deteriorates with distance of the premises from the exchange.  This, coupled with the lower density population in Wales, is likely to influence the attractiveness of Welsh locations for LLU suppliers.

 

Bulldog are offering 8Mbps services where they have implemented LLU in Cardiff and Wrexham, and BT have announced their roll-out of BT "Max" 8Mbps services in spring 2006 with 5 exchanges in the Cardiff area already upgraded during the trial phase.  Whilst prices for the BT service have not yet been announced, Bulldog are now offering their 8Mbps service for £19.50/month[3] – a competitive price, especially when compared to the cheapest available in Wales at £13.99/month for a 512kbps connection speed (e.g. Toucan "ToucanSurf"  512kbps broadband).

 

In the business market, the lowest priced broadband (speed up to 2MB) is available across all ADSL-enabled exchanges.  There is reduced availability of higher speed, SDSL and low-contention ratio broadband in Welsh towns and villages. 

 

Until now there has been a focus on price and speed for broadband connections, with customers selecting providers based on these criteria.  It is anticipated that ISPs will increasingly offer "value added" services such as connected wireless networking, Voice over IP (VOIP), increased security options, or impose usage caps on the lowest cost / highest speed broadband packages.

 

 

 

Penetration of Broadband in Wales

 

Results from the ORC survey commissioned by WAG indicate that 32% of Welsh households have a broadband internet connection (of 512kbps or above).  This equates to 15% of the population in Wales. 

 

BT Wholesale figures for DSL connectivity for October 2005 show that 23% of households in Wales have a DSL broadband connection.  Information regarding take-up of cable broadband is not available specifically for Wales, but an estimate of cable penetration in Wales based on UK figures indicates approximately 9% of households have a cable broadband connection. This would total to suggest an optimistic penetration figure of 32%. 

 

The Netherlands continues to lead Europe in terms of broadband take-up with over 54% of households having a broadband connection in Q3 2005[4].  UK figures for Q3 2005 show take-up to be 34% of households, and current analyst estimates for Q4 2005 suggest continued growth at 38%.  Contrasting the ORC survey figure for Q4 2005 Wales at 32% of households places Wales well behind the UK, and even further behind The Netherlands which is also likely to have experienced further growth to Q4 2005.

 

 

In the absence of reliable Q4 figures for the EU at this stage, a comparison of Q3 figures for the European countries and Q4 figures for Wales enables a quick illustration of Wales's position in terms of broadband take-up.  Whilst Wales remains some way behind broadband leader The Netherlands, it is some way ahead of Austria, Germany and Portugal.  It is anticipated that all the countries illustrated will experience growth within the next quarter which may affect Wales' relative position.

 

 

In December 2005 25% of homes and businesses in Wales able to access an ADSL enabled exchange had a broadband connection.  This compares to a figure of 26% for the UK as a whole and shows a 10% increase in broadband take-up by households and businesses in Wales since December 2004.  Figures released by BT Wholesale show that the growth of ADSL broadband in Wales since 2004 is matching the

 

 

 

 

 

Penetration of Broadband in UK

 

The UK remains in sixth position in the world in terms of the total number of broadband lines.  Despite experiencing faster growth in number of lines added than both France and Germany throughout 2005, the UK remains behind France.  However, analyst firm Point Topic estimate that the UK will have overtaken France for the first time on New Years Day with 9.8 million lines compared to 9.7 million respectively.

 

 

Figures from the Office of National Statistics (ONS) indicate that broadband connections continue to account for an increasing proportion of internet subscriptions. Dial up connections have declined by 20% since January 2005.  Figures supplied by ONS are subject to regular review and revision to optimise accuracy, and hence do not correlate exactly to those shown in previous benchmark reports.

 

The merger of NTL and Telewest in October 2005 created the second largest communications company after BSkyB, and a rival to BT as the UK's second largest residential telephone company.  In terms of broadband suppliers, figures from September 2005 show the combined cable companies hold 28% of the total UK broadband market, with BT Retail retaining a 24% share, placing the combined cable companies ahead of BT Retail.

 

 

BT Wholesale indicates that in December 2005, 26% of UK homes and businesses able to access an ADSL enabled exchange had a broadband connection.  This equates to 6.7 million ADSL broadband connections representing an increase of just over a million connections on the June figure released by Ofcom of 5.6 million connections and of 2.9% on the September BT Wholesale figure.

 

 

Both NTL and Telewest announced their third quarter results in November; with NTL stating they have 1.72 million broadband subscribers and Telewest standing at 920,000 subscribers.  This suggests that there are 2.6m cable broadband subscribers in the UK – a higher figure than those published by both Analysys Research and Point Topic for the same period.

 

 

Market share figures for satellite and wireless broadband services have fallen slightly from Q2, suggesting that take-up has not increased as fast as alternative broadband technologies, which would suggest that take-up remains at approximately 9,000 connections in the UK as reported for Q3 2005.

 

 

BT Retail holds a 33% xDSL market share in the UK which is low in comparison to other European incumbents.  This equates to a 24% share of the total broadband market (i.e. including cable and other broadband technologies), which has remained stable throughout 2005.  Other countries with a low incumbent market share include Germany (43.6%), Greece (45.2%) and France (47.5%).  By comparison, The Netherlands incumbent holds 57.6% of the market.

 

 

 

Whilst the UK is placed second (after the Netherlands) out of the countries shown with over 99% broadband coverage, comparative take-up figures for Q3 2005 place the UK in 11^th place.  Once Q4 figures have been collated it is anticipated that the UK will move to 10^th place, ahead of France.

 

 

 

 

 

France opened up the market to LLU in 2003 and has seen a rapid rise in unbundling which could be repeated in the UK on a wider scale.  Point Topic suggest that whilst the OTA target of a million unbundled lines by the end of 2006 appears extremely high in comparison to current levels (under 200,000 lines) it should be fairly easy to achieve as result of bulk migration which has now started.

 

 

Results from the annual eCommerce survey carried out by the eCommerce Innovation Centre indicate that 38% of small to medium sized enterprises (SMEs) in Wales use a broadband internet connection. 

 

 

Regional groupings: 1.        Flintshire, Wrexham, Powys 2.        Monmouthshire, Newport 3.        Cardiff, Vale of Glamorgan 4.        Swansea, Bridgend, Neath Port Talbot 5.        Rhondda Cynnon Taf, Merthyr Tydfil, Caerphilly, Blaenau Gwent, Torfaen 6.        Pembrokeshire, Carmarthenshire, Ceredigion 7.        Anglesey, Gwynedd, Conwy, Denbighshire

 

Welsh SMEs indicated that they are more likely to have a broadband internet connection than dial-up, reflecting the trend in the UK as a whole (see figure 6 on page 14).  The relatively higher penetration of wireless broadband over cable broadband for SMEs in Wales may be due NTL's market focus being residential rather than business customers. 

 

 

Of those businesses still accessing the internet via dial-up, the majority are micro-sized, with 9 or fewer employees.  Respondents from the agriculture and hotel and restaurant industry sectors were more likely to rely on a dial-up internet connection (over 55% of respondents with an internet connection used dial-up in these sectors)

 

 

Respondents in the Professional Services sector were most likely to have a broadband internet connection, and showed the greatest use of wireless broadband technologies.

 

The report indicates that SMEs with broadband internet access are more likely to be more advanced in their use of eCommerce.  Whilst these differences are not very large, eCIC suggest this could reflect new adopters who have not yet taken advantage of the capabilities of broadband for their business.  SMEs using broadband are more likely to accept and make on-line payments compared to those with dial-up access.

 

 

 

SMEs in Wales with broadband internet access were slightly more likely to report business benefits had been achieved through eCommerce activities than those accessing the internet using dial-up.  Similarly, those reporting no benefits had been achieved were more likely to be dial-up users.  In general however, the report shows very little difference between the eCommerce benefits experienced by SMEs accessing the internet using broadband compared to dial-up, most of the variations being within the margin of statistical error. 

 

It is surprising that the eCommerce benefits have not been greater for broadband users than for those using dial-up internet connections, particularly in the case of increased turnover, profit and international trade, but one possible explanation may be the lack of sophistication in internet use – i.e. nearly half of SME respondents with an internet connection indicated that they did not have a web site and used the internet only for eMail and web access.  Similarly, some SME respondents may not have been using a broadband connection for a sufficient time to detect changes in eCommerce benefits achieved.

 

 

It will be interesting to monitor the impact of TV and Video-on-demand on broadband take-up following announcements from both Telewest and Sky introducing new services in December 2005. 

 

Telewest claim to be the UK's biggest TV on-demand service provider following completion of the nationwide launch of their "Teleport" service.  In December the company also launched a commercial pilot "TVDrive" - a high definition television service including an 80Gb personal video recorder to over 400 customers.  Within the pilot Telewest are offering high definition programmes from BBC Worldwide will be offering a selection of movies.  Telewest plan to launch the service nationally (within its franchise area) early in 2006, and customers are encouraged to register their interest on the website.  The package will cost £10 per month for customers taking the most expensive digital TV package, or £15 per month otherwise with free installation and hardware.

 

In December, Sky launched their "Sky by Broadband" service, which offers Sky Digital subscribers free access to view Sky Movies and Sports via download to PC.  The service uses secure peer-to-peer technology from Kontiki, and Microsoft Digital Rights Management software to delete content after 30 days, and prevent unauthorised viewing.  Services have also been made available through 3G for mobile phone users. 

 

 

Analyst firm Point Topic suggest that that the worldwide IPTV market has increased by approximately 40% during the first half of 2005; however this is from a low base of 1 million subscribers in January to 1.5 million subscribers in June.  Countries seeing the fastest growth are Hong Kong, China, France, Spain, Canada and the USA, and total IPTV penetration is estimated to be about 1.5% of the worldwide population.

 

 

Only the French IPTV market is considered to be mature at this stage, with subscriber numbers gradually rising.  IPTV services in the USA and UK are limited to a niche market at this stage, and services are still being trialled in China which explains the relatively low IPTV take-up.  IPTV services have not yet been launched in Korea and Germany, which are anticipated to be future key markets.  Analysts suggest that IPTV is less attractive where pay-TV alternatives already exist such as cable or satellite, and in the case of Korea, regulators are thought to have slowed IPTV developments. 

 

The UK IPTV market is set to develop in 2006, following BT's announcement regarding deals being made with BBC Worldwide, Paramount and Warner Music Group which will enable BT customers to access video-on-demand, music and television programming and interactive communications services via television.  Services are to be made available to BT customers nationwide from autumn 2006 without the need for a subscription fee, using the Phillips set-top-box with Microsoft software.  Commercial trials are due to start in spring / summer 2006. 

 

Cable company NTL have indicated that whilst IPTV remains an interesting proposition for the future, their existing broadcasting platform is currently sufficient.  The NTL network consists of both coax and DSL cabling to their customer base over which IPTV or HDTV could be broadcast and is under technical evaluation.  However, they anticipate that their video-on-demand service will be available to 600,000 by the end of December.

 

In Wales, Abercynon based firm Inuk is to launch an IPTV service in spring 2006 to reach over 3 million UK students using the Janet education and research network.  Students will be able to access Freeview channels using Inuk's technology platform via the internet with a laptop or television. 

 

With compression, IPTV requires a constant bandwidth of 1.5Mbps.  If one channel is viewed whilst another is recorded, this requirement doubles.  This will increase further with additional applications such as VOIP.  Hence there will be a need for increased bandwidth once IPTV becomes widely available which will increase further with the introduction of HDTV services requiring bandwidth of between 6 and 9Mbps per channel.

 

 

BT have announced plans to launch the BT Movio service (formerly BT Livetime) during Summer 2006 following completion of a four month trial with 1000 participants in the M25 area.  This will be the first wholesale converged triple play service supporting phone calls, internet and TV to launch in the UK.  Initially, the service will only be available to Virgin Mobile customers, with TV channels not yet finalised, but likely to number up to 15 and to include E4, ITV2 and Sky News.  Results from the trial indicated that users were prepared to pay up to £8 per month, and spent an average of 1 hour a week viewing television and 95 minutes listening to digital radio over their mobile phones.  Full details of the launch are expected to be made in February 2006.

 

 

 

 

The 8Mbps BT "Max" service currently undergoing trials in areas of the UK will be the platform for "next-generation high speed services" according to BT Wholesale.  These services could include ADSL2+ and VDSL2; although it is claimed that BT will not roll-out an ADSL2+ network before BT21CN.

 

 

The latest survey figures indicate that Wales remains behind the UK in terms of broadband take-up with 32% of households having a broadband connection compared to 34% of households in the UK as a whole (comparative figures from September 2005).  When considered in terms of population, Wales has now achieved parity with the UK with 15% of the population having a broadband internet connection in both Wales and the UK as a whole.  Availability is also now on a par with the rest of the UK with the exception of higher bandwidth and SDSL services.  The remaining 35 exchanges considered "commercially unviable" are due to be upgraded by summer 2006, once the procurement process is completed; however, whilst this will improve availability as a whole for Wales, it is likely to have a very marginal effect in terms of take-up. 

 

The introduction of IPTV services by BT and BSkyB is widely anticipated to increase demand for broadband as services are made available by PC as well as TV, and with Wales being ahead of the rest of the UK in terms of digital TV take-up perhaps this will provide the "killer application" which will enable Wales to overtake the UK.

 

In terms of business broadband penetration, the eCIC eCommerce State of the Nation report states that 38% of small businesses have a broadband connection, and those businesses are reporting they undertake more eCommerce activity and achieve greater benefits from eCommerce than their counterparts using dial-up internet access.  With the highest bandwidth services widely available to businesses in Wales currently 2Mbps, businesses in Wales are at a disadvantage to their counterparts in English cities able to access services up to 24Mbps, however, it is anticipated that the BT roll-out of 8Mbps services in spring 2006 will, to a degree, level the playing field.

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