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• Summary
• Analysis: 3 million homeworkers
• Company results overview: June 2005
• News

In Summary

Welcome to issue 12 of UKBBMM.

This edition brings the second installment of our analysis of Point Topic's Broadband User Survey (BBUS) carried out in June and July, this time the focus is on the home worker segment. Here the evidence points to a significant opportunity for broadband providers in the form of a market group of more than 3 million workers, with both a greater demand for internet and computer services but also perhaps a greater appreciation of the uses and benefits of individual products. The survey reveals three categories of home workers – Freelancers (no employees); Teleworkers (employees of companies with other premises) and Home SMEs, who run a business from home and employ others. Another finding of interest was that the larger ISPs are losing out to their smaller rivals, as the smaller providers had 5% more of the home working market than they did of the internet market as a whole, whereas all the large players came out with similar shares of the home worker group as that of the market as whole.

The season of company results means we can assess the state of broadband subscriber growth for the second quarter (June 2005). Growth has slowed but is still strong is the message from most companies. BT Wholesale connections have grown 12% in the quarter to the end of June, and 90,000 lines are now unbundled according to the OTA. Carphone Warehouse showed the highest growth of 24% in the quarter. We have included a preliminary table of reported results but fuller data from Point Topic will appear next month. Also, this month the Office of National Statistics have published their latest report on 'Internet connnectivity' showing broadband's growing share of internet connections, and dial-up's decline – according to their ISP survey.

The question of speed is never far from the headlines and if the first half of the year was devoted to 2Mb announcements, with some 8Mb offerings, NTL and Telewest have now set a different standard. Both companies announced plans to begin rolling out 10Mb services, with NTL aiming for 10Mb as 'standard' and Telewest retaining it for its higher end products. Both companies point out that once established the higher speeds will be available equally to all cable customers, in contrast to ADSL where loop lengths come into play (something Point Topic will analysing in the near future). One interesting difference emerged in the two companies' presentations of the new speed plans. NTL believes its research shows that customers appreciate, and are not confused by, download caps. Telewest, however, says its research shows the opposite. Who's right?

The report from the OTA, contained comments on 'process & system problems' in the LLU provisioning process. The references were not unfamiliar to those who have followed Cable & Wireless/Bulldog's complaints about BT's provisioning operation. For the moment though all parties appear to be working to keep the process on track as bulk migration begins in the autumn. Bulldog itself could face scrutiny from Ofcom, which has been passed a group of complaints about the ISP's service. Next month should bring news of how the regulator will react. Wanadoo are reported to be setting their own LLU trial in Leeds, though not wishing to frighten the customers concerned, some 500 of them, no formal announcements have been made. Another report suggests BT Wholesale, having just dropped prices for SDSL products by 30% are to put their SDSL roll out programme on hold. Onetel has signed up to use Easynet's wholesale LLU product. And Alison Ritchie, BT's chief broadband officer, has decided to leave BT at the end of September, after a 24 year career at BT. Analysts have paid tribute to her role in 'championing' broadband since her appointment in 2002.

Analysis: 3 million home workers – a high value segment for UK ISPs

The market for products aimed at those working from home constitutes a significant opportunity for broadband services, Point Topic's first Broadband User Survey confirms. According to the BBUS results there are some 4.3 million households, 18% of all homes in the UK, with someone working from home. 70% or 3.1 million of these use the internet as a working tool. The figures show a total of 5.4 million individuals working from home, 70% of them, 3.8 million individuals using the internet at home.

The Point Topic survey found the majority of home workers were self-employed, more likely to be male with professional or managerial occupations and be based in a London suburb or prosperous town. The highest use of home working was in London and the south east. Looking in more detail the BBUS results demonstrate that home workers fall into three broad categories: Freelancers, who are self employed with no employees. These make up 50% (1.9m) of all home working individuals and are distinguished from the second main group: Teleworkers, who make up 42% (1.6m) of home workers. Teleworkers are employees of enterprises with separate premises; finally the third, much smaller group of 0.3 million (8%) which are Home SMEs, running a business from home with employees.

The typical profile of the homeworker that emerges from the survey is of a family person, usually male (more than twice as many males use the internet for work at home as females) between 25 and 54 years old, and with a professional, managerial or technical occupation. Typically they have more than one computer at home and have been using the internet at home for four years, with broadband for two years. The survey suggests that the home worker is a more knowledgeable, security conscious, high spending and demanding customer than the non-home worker.

In geographical terms the highest take-up of home working in the UK is in the South-East, the South-West, London and the East of England. Home working was 30% higher than the UK average in these regions. Take-up is lowest in Wales, the North-West and Yorkshire, with only 55% of the UK average in these regions as a whole. Analysis by 'Supergroup' – groups of local authorities which have similar characteristics – shows how the proportion of households involved in home working rises to 28% in the 'London Suburbs' supergroup, with 'Prospering UK' and 'London Centre' categories showing 24% and 23% respectively. These groups were also more likely to use the internet for work than their non-home working counterparts in the same supergroup area.

For ISPs, and broadband providers in particular, the survey shows both the challenges and opportunities that the home working market represents. Home workers spend almost 8 hours per week on average using the internet for work, with 58% using it for between 3 and 20 hours each week. Freelancers and SMEs were most likely to have broadband. Their activities are mostly desk research and business transactions. The other large category, teleworkers, use the internet for remote access to their employers' networks, suggesting a market of 750,000 homes which need VPN services. The survey also indicated some video use by freelancers and teleworkers, and VoIP by the teleworker group.

Home workers spend more on security measures, with £30 the average spend per year, compared to £19 for non-home workers and the home workers expressed much stronger concern about a range of internet security problems than non-home workers. Those working from home have more computer equipment, are more likely to know the broadband speed they have, and have families which spend up to 30% more time on the internet than non-home working families.

Nevertheless, the survey also shows home workers to be more demanding consumers. Home workers are twice as likely than non-home workers to churn because they are unhappy with the price, service or overall performance of their ISP. Some 10% of home workers plan to switch ISPs in six months, against 5% of non-home workers. And while the major ISPs all have similar shares of the home worker segment as they do of the whole internet market, the smaller ISPs make up 15% of the home worker market against 10% of the market as a whole giving them a major advantage in this area over their larger rivals.

The survey was carried out by Recom Research for Point Topic’s BroadBand User Service between 6 June and 7 July. A total of 2017 face-to-face interviews were carried out based on a quota sample covering the whole UK.

June 2005 Company Results Overview

Broadband is now firmly established as something of a rallying point in results reporting. With 'traditional' revenues under pressure 'strong broadband growth' (NTL) or 'strong growth in new wave revenue' (BT) are increasingly emphasized. The signs from the most recently reported results suggest that growth, at just under 10%, though still strong, is not as fast as the previous quarter (see UK BB Market Monitor Edition 6), and this may be partly due to seasonal house moving which some operators offer as an excuse for increased churn, and slower growth.

BT's Wholesale reported 5.6 million broadband end users at the end of June 2005, suggesting a DSL growth rate of 12% for the quarter. NTL's growth for the quarter was somewhat below this level at 7.75%, with some 1.56 million broadband subscribers (1.41 million on-net) at June 2005. With some 78% of the market (at Q1 05) now having reported, the quarterly increase in broadband subscribers stands at 9.58% for end June 2005. This quarter saw a slight shift in emphasis towards revenue generation, as opposed to simple customer acquisition. Both cable operators increasingly see broadband as a key component in attracting customers for other 'dual' and 'triple' play products.

On 5 August the Office of the Telecoms Adjudicator published its latest update. 90,000 lines are now unbundled and the report had this to say about the OTA current forecasts for unbundling, 'This shows accelerated interest in LLU investment and deployment with unbundled lines significantly in excess of the OTA’s original forecast of 1.5 Million predicted by end 2006, with the number of POPs and Exchanges also significantly increased.' (see http://www.offta.org.uk/otaupdate20050805.htm )

BT Retail and Telewest March 2005 figures differ from Point Topic's Q1 ISP spreadsheet since other figures were broken out from the headline figures

BT

BT Retail connections stood at 1,940,000 at the end of June, representing an 11% increase from March. The company says BT Retail’s new wave revenue 'increased by 52 per cent compared to last year and accounted for 14 per cent of BT Retail’s total revenue in the quarter'. Broadband revenue grew by 55% to £161 million. Broadband net additions of 188,000 resulted in a 28 per cent share of the broadband DSL additions in the quarter, according to BT's results. The company also said it had upgraded some 355,000 business and consumer subscribers to 2 Mb in the quarter.

http://www.btplc.com/News/Articles/Showarticle.cfm?ArticleID=11155f11-5d4e-4d98-91f9-d90911a3224d

NTL

NTL saw what it describes as 'strong growth in broadband revenue generating units (RGUs) which increased by 460,800, or 42.1 per cent (314,400 on-net, or 28.7 per cent) compared to the same period last year.' For the quarter, growth was 111,800 (83,700 on-net) broadband RGUs, with a total, as mentioned above, of 1.56 million (1.41 million on-net) at the end of June 2005.

During its conference call to analysts, NTL emphasized its aim to shift as many of its customers to 'dual' or 'triple' products, and reduce the acquisition of customers who turn out to be non-payers. NTL appear to be confident that more and more will take additional services. The company says its NTL 'On Demand' VoD product is now available to 375,000 customers.

Just prior to releasing its June results NTL published its new broadband strategy built around the new '10Mb as standard' headline (see also News in Brief below). In a repsonse to questions in its conference call to analysts about whether broadband users really understood or appreciated big increase in speeds, CEO Simon Duffy said they had found that when they increased speeds in the past they were surprised by the increase in usage that resulted, 'If we build it, they will come,' said Duffy. The company is expecting usage to go up as a result of the planned increased speed offers to 10Mb. He said they expect CAPEX for the new speed upgrades to be in the 'low tens of millions'. Mr Duffy also commented on the issue of download caps, saying that their research indicated that people understood caps, and understood that 'it's not a free lunch'.

http://www.NTL.com/locales/gb/en/investors/qreports/2005-2.pdf

Telewest

Telewest reported 66,000 net additions to its broadband subscrber base, taking its headline June 2005 total to 852,000 – which amounts to 8.5% growth on its March figure of 786,000.

'Growth was slower than in the previous quarter,' Telewest said, attributing this in part to seasonal factors such as house moving. Revenue per customer was affected by increase in low end subscribers, 'Growth continued to be strongest in our lowest broadband tier. This impacted the mix of broadband subscribers and broadband ARPU, which fell £0.50 to £19.39 as compared to the previous quarter. Broadband continued to be successful in attracting new customers to Telewest – 49% of broadband installations in the quarter were for customers who were not existing customers.'

The company said that 71% of all broadband internet subscribers subscribed to the full “triple play” and 93% subscribed to at least one other product. In September 2005, Telewest will increase broadband speeds. The 512Kb tier speed will be increased to 2Mb. The 1Mb tier speed will be increased to 4Mb. The currently existing 2Mb and 4Mb tier speeds will be increased to 10Mb. There will be no charges to customers, it says.

http://media.corporate-ir.net/media_files/irol/76/76808/EarningsReleaseQ2052.pdf

Wanadoo

France Telecom also reported rapid growth in broadband take-up in its various markets. For the UK 'Home' segment as broadband DSL services now called, the company reported 769,000 subscribers at end June – up 143% year on year from 316,000. The UK represented the third largest market for FT's broadband services, after France and Poland.

http://www.francetelecom.com/en/financials/investors/news/CP_infos/att00033889/cp050728-ukft.pdf

Tiscali

Tiscali's results contained the following statement about its overall European broadband operations: 'ADSL customers grew by approximately 180,000 units in the quarter, bringing total ADSL customers to approximately 1.38 million (+15% on 31 March ‘05), of which over 250,000 unbundled.'

http://investors.tiscali.com/tiscali/uploads/press/Tiscali_Silverpoint_EN.pdf

PlusNet

For comment and links to PlusNet results see Edition 11

Kingston

Kingston's most recent trading update reported 83,000 subscribers at the end of June 2005. The company said, 'Broadband growth has continued during the quarter with the broadband customer base nearly doubling to 83,000 over the twelve months to June. We have launched new broadband pricing packages designed to drive further growth and announced new inclusive call tariff packages for our residential telephone service in East Yorkshire to enhance competitiveness and rebalance our revenues.'

http://www.kcom.com/news/articles/news_22_07_05_1.shtml

Carphone Warehouse

Carphone Warehouse saw very strong growth in its broadband base this quarter, up to 24% quarter on quarter up to 62,000. Commenting on its broadband plans CW said, 'Broadband is strategically important to both TalkTalk and Opal, and as the likely longer term regulatory environment becomes clearer as the year progresses, we will evolve our strategy towards more rapid customer recruitment and the most effective means of broadband service delivery.'

http://www.cpwplc.com/cpw/media/press/2005/2005-07-28/

News

NTL and Telewest set out 10Mb moves

In mid-August NTL and Telewest both separately announced that 10Mb would become their standard broadband speeds. NTL believes that speed increases will increase user activity and are already trialling 20Mb. The company expects the roll out to be complete by the end of 2006. NTL says it is going to give customers greater ability to track their usage, and flexibility to upgrade speeds. 3Mb customers will be the first to get the higher speeds. There will also be products at different speeds with unlimited usage.

Telewest will retain entry-level tariffs at 2Mb while upgrading its current 2 and 4Mb services to the 10Mb level. Telewest will keep its 'no caps' policy, saying research it has done shows that customers are confused by usage limitations. Upgrades will be begin in September.

Full announcements:

http://www.NTL.com/mediacentre/press/display.asp?id=797

http://ir.telewest.co.uk/phoenix.zhtml?c=76808&p=irol-newsArticle&t=Regular&id=742232&

Office of National Statistics: 'Broadband – 52.4% of internet connections in June'

The ONS report on Internet Connectivity reports from its ISP survey that, 'Broadband connections continued to increase their market share and made up 52.4 per cent of all subscriptions in June 2005, up from 50.7 per cent in May 2005. There was a year on year increase of 73.7 per cent, with a monthly increase of 3.1 per cent in June 2005.'

http://www.statistics.gov.uk/pdfdir/intc0805.pdf

C&W bid for Energis

On 16 August Cable & Wireless announced its bid for Energis at an initial cost of £594 million, pushing forward its goal of becoming the main alternative to BT. 'Through our investments in broadband and local loop unbundling and our planned rollout of a next generation network, we will address the growing IP demands of our combined customer base and re-position Cable & Wireless as the alternative to the UK incumbent,' the company said in its announcement.

Press release:

http://www.cw.com/docs/about_us/investor_relations/energis_pressrelease.pdf

Ofcom and OTA watching LLU provisioning and Bulldog complaints

According to The Register news site Ofcom is reviewing customer complaints about Cable & Wireless ISP Bulldog this month. It remains to be seen how the regulator will respond. Earlier this month in the July 2005 report from the Office of the Telecom Adjudicator reference was made to ' process & system problems ' in smooth LLU provisioning, which is not dissimilar to how Cable & Wireless had described their experience of BT's provisioning for Bulldog customers. The language used is certainly similar to the comments we reported in Edition 11. It would appear, however, that the regulator and the companies involved are trying to keep a lid on tensions to ensure LLU provisioning can be made to work as demand increases in the autumn.

From the OTA's July report:

'However, operational problems persist. The Right First Time End User KPI continues to be negatively impacted due in part to a significant increase in the volume of orders entering the systems and a backlog that had to be cleared. BT has identified process & system problems and work is in hand to further improve the quality of the provision process and restore the previous excellent performance. Those LLUOs impacted are also reviewing their processes to ensure they are robust. OTA is helping analyse the data to remove any anomalies.'

As we commented in Edition 11 Bulldog has not made any formal complaint about BT's provisioning, but continues to 'work with' BT and the regulatory bodies on the issue.

http://www.theregister.co.uk/2005/08/11/bulldog_probe/

http://www.offta.org.uk/otaupdate20050805.htm

Onetel signs up with Easynet

On 1 August Easynet's LLU wholesale business signed a 3 year deal for broadband services to Centrica's Onetel. Onetel's press release said, 'The services will be available to Onetel at a significant discount to BT Wholesale broadband services and enable them to offer 8Mb broadband to customers within LLU areas. It will also allow access to even faster speeds of up to 24Mbps when Easynet's trials of ADSL2+ are complete later this year.'

http://www.onetel.co.uk/index.php?node=press&id=84

Wanadoo to trial LLU in Leeds

According to ADSL Guide and reports on The Register Wanadoo is to begin moving 500 users to its own LLU service in Leeds for month long trial. Wanadoo appears to be playing it down, describing the trial as a 'network upgrade' to the customers concerned on the basis that users are not interested in how the service is delivered.

http://www.adslguide.org.uk/newsarchive.asp?item=2328

http://www.theregister.co.uk/2005/08/02/wanadoo_llu/

BT Wholesale reduces price for SDSL, and halts roll out for now

According to ADSL Guide BT Wholesale will halt further roll out of SDSL. According to the report 93 exchanges that were to be enabled will now not be. 792 exchanges already have symmetric service support. The news comes just over a fortnight after BT Wholesale announced it would be reducing the price of its SDSL products by 30%, in an effort to 'stimulate the market for symmetric broadband services.'

The price reduction will apply to both connection and rental charges for BT Datastream Symmetric and BT IPstream Symmetric products. The standard connection charge for BT IPstream and Datastream Symmetric will fall from £450 to £315, while the annual rental charges for the usage and capacity based options for IPstream products will fall from £1,380 to £966. The new pricing is effective from 1st November, 2005.

Original release:

http://www.btplc.com/News/Articles/Showarticle.cfm?ArticleID=5f93364d-8379-450f-a848-4833b60ca0d9

http://www.adslguide.org.uk/newsarchive.asp?item=2346

Good progress on 'e-Enablement' for local government, says Minister

The government has just published its fourth report on 'Delivering e-Government Benefits'. Local councils, which are being measured on a series of e-enablement targets predict that they will be 98% e-enabled by the target date of December 2005. According to the report, 'While some interactions (providing information, collecting revenue) are strongly e-enabled, councils are still facing challenges around the e-enablement of regulatory activities.'

http://www.localegov.gov.uk/images/IEG4%20Status%20Report_294.pdf

Alison Ritchie to depart BT in September

Alison Ritchie, BT's chief broadband officer, has decided to leave BT at the end of September, BT announced on 16 August. She and her husband will be taking time off to travel, the announcement said. Industry comment has been full of praise for her role in promoting broadband at the industry's very early stages. Alison Ritchie said, “My last role was all about championing broadband both within BT and outside the company and I’m proud that the broadband market is now so well established. This means that my specific role has now come to a natural end, and so I’ve decided it’s time to do something different.”

Full press release:

http://www.btplc.com/News/Articles/Showarticle.cfm?ArticleID=6fcedd72-6718-4ddd-8e96-4310cc80418a

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