Introduction

This is Ofcom's sixth annual Communications Market Report, offering industry, stakeholders and consumers a reference tool to track the development of the UK communications sector. The report also provides an important context for the work that Ofcom undertakes in furthering the interests of consumers and citizens in the markets we regulate.

As well as providing data and analysis on the UK television, radio and telecoms markets, this report also focuses on relevant trends and developments in adjacent industries such as music and gaming. These sectors are increasingly important to our understanding of changing communications markets; consumers are dividing their time among a growing range of media types, platforms and devices. At the same time, companies are identifying ways in which new platforms and media can help bolster established revenue streams.

The UK communications industry continued to grow in 2008, albeit at a slower rate, driven by telecoms and television subscription revenue. It generated 51.8bn in 2008, up 0.2% year on year. Free-to-air advertiser-funded services such as television and radio saw their revenues fall as they felt the impact of an economic downturn. Early indicators suggest that advertising revenue has dropped further in 2009.

This year, we have commissioned our own research into how consumers' attitudes towards communications services have been affected by the downturn. Amid this economic uncertainty, the Government's Digital Britain report, published in June 2009, aimed to ensure the UK communications industry emerges from the recession as strong and internationally competitive. The European Commission has followed with its Digital Europe initiative.

But the progress of the communications industry has been substantial. At the end of March 2009, nine in ten homes had digital television; two-thirds of the nation had broadband; nearly a third had access to a DAB digital radio set; one in five radio listener hours in 2008 was through a digital platform and nearly a quarter of mobile subscriptions, or 17.9 million, were to 3G services. More than a quarter of homes had digital video recorders and in the report we provide a detailed analysis on consumer habits and usage of these devices.

And there is still evidence of an appetite for further innovation around products and pricing. Mobile phone operators have responded to the downturn with sub 10-per-month deals, while new content distribution models emerged in 2008/09 such as 'free' music services, online catch-up TV and micro blogging. Meanwhile, telecoms operators are rolling out super-fast broadband and greater numbers of consumers are buying communications services in 'bundles' from single suppliers. We explore these developments in detail in the report.

For the first time this year, we have also provided in this report insights into communications trends across the UK's nations, comparing and contrasting consumption patterns, device adoption and content production in England, Northern Ireland, Scotland and Wales.

We publish this report to support Ofcom's regulatory goal to research markets constantly and to remain at the forefront of technological understanding; it also fulfils the requirements on Ofcom under section 358 of the Communications Act 2003 to publish an annual factual and statistical report. It also addresses the requirement to undertake and make public our consumer research (as set out in Sections 14 and 15 of the same Act). We appreciate your feedback on all Communications Market reports. Please email your comments to Ofcom's Market Intelligence team on market.intelligence@ofcom.org.uk