Ofcom Fixed Telecoms Market Information Update

May 2004

Introduction

This update presents a summary of revenue, volume and market share trends from the residential and business fixed telecoms markets for 2003. The underlying data are the continuation of time-series information previously published by Oftel in its own Fixed Market Information Updates.

Ofcom is currently developing new regular external reporting processes for these and similar data. While it is likely that the majority of the data previously published by Oftel will continue to be made available the precise format is not yet clear. In the interests of ensuring continued access to users of the latest available information, however, Ofcom is publishing the underlying data in broadly its previous form.

Users should note that there have been some revisions to some of the earlier period data previously published by Oftel.

Executive summary

• Ofcom has conducted a thorough audit of data received from fixed line service providers regarding the size and growth in the market for fixed calls and access during 2003
• This audit has revealed that overall fixed telecoms volumes in the first half of 2003 were around 1 per cent higher than previously estimated by Oftel; overall voice volumes were around 2 per cent higher than previously estimated
• The revisions reflect data submitted by operators other than BT; BT figures are unchanged and the revisions have thus resulted in a reduction in earlier estimates of BT market share
• UK revenues from fixed telephony (PSTN and ISDN services) were (GBP) £12bn in 2003. This represents a 5 per cent fall from the corresponding 2002 figure of (GBP) £12.6bn
• The total number of fixed exchange lines fell to 34.6 million in December 2003 from 35.0 million in December 2002
• Overall switched traffic volumes fell by 1 per cent to 338 billion minutes reflecting both the continued decline in fixed voice traffic and a fall in dial-up Internet volumes as users migrate to broadband
• BT retained an overall revenue market share of over 71 per cent during the course of 2003
• However BT's revenue share fell 1.4 percentage points to 70.6 per cent between the last quarter of 2002 and the corresponding period in 2003
• BT's call revenue share fell from 65.0 per cent to 62.3 per cent over the same period
  

Revenues

During 2003 total UK revenues from fixed telephony (including PSTN and ISDN services) were (GBP) £12bn. This represents a 5 per cent fall from the 2002 figure of (GBP) £12.6bn. The decline reflects both volume shrinkage and price reduction.

Overall access revenues remained flat while call revenues fell by 8 per cent. The majority of this decline can be attributed to a fall in UK geographic call revenues which fell by 13 per cent. Revenues from calls to mobile fell by 3 per cent and revenues from other non-geographic calls fell by 4 per cent.

Overall revenues from business customers fell faster than those from residential customers (8 per cent against 3 per cent) reflecting the earlier migration from dial-up to broadband internet services and also greater take-up of lower priced indirect access call services.

Volumes

During 2003 the total number of fixed telephone lines fell by 1 per cent to 34.6 million, with the majority of this decrease being in the business market. The decrease is likely to reflect a reduction in the number of second lines used for internet access as a result of increased broadband penetration.

Overall switched traffic volumes fell by 1 per cent during 2003. This was due to a fall in geographic call volumes of 3 per cent and a slight reduction in dial-up internet traffic as users migrated to broadband. Volumes of calls from fixed lines to mobile phones grew by 4 per cent and international calls by 1per cent.

The decline in residential call volumes (1 per cent) was less than the decline in business call volumes (4 per cent).

Market share

BT's share of total retail revenues was broadly flat between 2002 and 2003.

This reflected a slight increase in its share of access revenues to 84 per cent and a decline in call revenue share of 0.6 percentage points to 63.5 per cent.

This decline reflects growth in the share of indirect access service provider call revenues as take-up of carrier pre-selection (CPS) services increased. The rise in the number of CPS subscribers to 2.6 million by the end of 2003 resulted in an overall market share for indirect access of 16.3 per cent a full percentage point higher than in 2002. Cable operators and other direct access operators saw revenue share decrease slightly over the year.

Annual figures hide more recent trends in market share which is increasingly being driven by the take-up of CPS. BT's overall call revenue share in the fourth quarter of 2003 was over two and half percentage points lower than in the corresponding quarter of 2002. This trend is most apparent in the business market where BT's share fell below 50 per cent in the last quarter of 2003.