Ofcom’s sixth annual Communications Market Report

1
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

2
The information set out in this report does not represent any proposal or conclusion by
Ofcom in respect of the current or future definition of markets and/or the assessment of
licence applications or significant market power or dominant market position or in respect of
any other regulatory process for the purposes of the Communications Act 2003, the Wireless
Telegraphy Act 2006, the Broadcasting Acts 1990 and 1996, the Competition Act 1998 or
other relevant legislation.

3
Contents
Introduction 1
Key Points 4
1 The market in context 11
1.1 Introduction and structure 13
1.2 Key market trends 14
1.3 Communications markets and the recession 23
1.4 Consumers embrace DVRs 39
1.5 The nations’ communications markets 54
2 Television 65
2.1 Key market developments in television 67
2.2 The television industry 81
2.3 The television viewer 119
3 Radio 147
3.1 Key market developments in radio 149
3.2 The radio industry 159
3.3 The radio listener 181
4 Telecoms 195
4.1 Key market developments in telecoms 197
4.2 The telecoms industry 221
4.3 The telecoms user 241
5 Converging Markets 261
5.1 Converging communications markets 263
5.2 Content 265
5.3 Distribution and devices 299
6 Annexes 315
Glossary 317
Table of Figures 326

4
Key Points
Key points: the market in context
Key market trends
 Availability of key communications services remained largely unchanged in 2008. Of
the key communications services that are tracked by Ofcom, only the availability of
local loop unbundling (LLU) services increased in the year (by four percentage
points, to 84% of households) (page 15).
 Communications industry revenue (based on elements monitored by Ofcom)
increased by 0.2% to £51.8bn in 2008, with television (in particular pay-TV
subscriptions) the main driver of growth. Telecoms revenue remained flat, while radio
revenues fell in 2008 (page 17).
 Household spend on communications services fell again in 2008. In real terms, UK
households’ average spend on communications was £93.69 a month, down £4.39 on
2007. Spend on communications services accounted for 4.63% of total monthly
household outgoings, down from 4.8% a year earlier (page 17).
 Consumer satisfaction with communications services increased in the year to Q1
2009, up to 89% compared to 86% in Q1 2008. Mobile telephony again scored
highest out of the five communications services included in our research, with 94% of
consumers either ‘satisfied’ or ‘very satisfied’ with their mobile service (page 19).
 Ofcom research shows that at the end of Q1 2009, 46% of UK homes bought
communications services in ‘bundles’, up by seven percentage points since Q1 2008.
The majority of these bundles were either fixed voice and broadband ‘double play’
(44%) or fixed voice, broadband and multichannel TV ‘triple play’ (34%) (page 20).
Communications markets and the recession
 Communications spend appears relatively robust when compared to alternative
claims on disposable income. Meals/nights out and holidays are the expenditure
categories most likely to be cut from consumers’ disposable income; only spend on
toiletries and groceries appears more secure than that on communications products
(page 26).
 However, consumers seem to see opportunities to save on their communications
spending – for example, by bundling services or by deferring mobile handset
purchases. Some consumers are also more likely now to shop around for
communications services (page 26).
 Advertising expenditure is generally cyclical, and this is borne out in the latest
revenue data from broadcasters. Radio industry revenue contracted year on year,
and while overall television revenue rose, the commercial PSBs attracted less
advertising revenue this year than last (page 35).
 While it is less clear that the telecoms industries have been affected by the economic
downturn, mobile and broadband operators are affected by the competitive pressures
of markets approaching saturation, and the increasing use of mobile phones rather
than fixed-line phones is putting pressure on fixed-line operators (page 37).

5
Consumers’ use of digital video recorders (DVR)
 More than a quarter of consumers (27%) claimed to use a DVR at the end of Q1
2009, equivalent to 7 million homes, according to Ofcom research. This rose to
nearly a third of consumers (31%) in multichannel television homes. These figures
are a little lower than those from operator and sales data, which suggest that nearly 9
million DVRs had been sold in the UK at the end of Q1 2009 (page 41).
 Fifteen per cent of viewing across the five main PSB channels in 2008 was for
recorded programmes, according to data from BARB, the television industry’s
audience measurement organisation. In Sky+ homes this rose to 19%. Adults aged
16-34 are the group most likely to watch programmes recorded on a DVR; 19% of
viewing among this age group was on a recorded basis in 2008, which compared to
the lowest figure of 11%, for viewers aged 55 and over (page 42).
 Forty-two per cent of consumers said that they watched a greater variety of
programmes since owning a DVR, although a third (33%) disagreed with this. Eighty
per cent of consumers believe that they watch more programmes that they enjoy
because of their DVR (page 51).
 DVRs are becoming increasingly advanced, offering viewers search functionality and
‘push’ video-on-demand, where programmes are downloaded to the hard disk drive,
for example. Hard drives are also increasing in size. Some offer up to 250 hours of
recording, up markedly from the 40 hours available on early generations of devices
(page 53).
The nations’ communications markets
 Personal use of mobiles was more prevalent than use of fixed lines in every UK
nation for the first time in 2009. Broadband was the fastest growing communications
platform, with double digit take-up increases in England, Wales and Northern Ireland
(page 57).
 UK consumers showed a renewed interest in ‘bundling’ services during 2008/09.
Forty-six per cent of homes took two or more services from the same supplier.
People in England were most likely to take a bundle, but growth was fastest in Wales
and Northern Ireland (page 59).
 During 2008, spend per head on networked television production was highest in
England during 2008 at £35.51; investment on TV hours for a nation was highest in
Northern Ireland (£16.05), while expenditure on non-English language output was
greatest in Wales at £24.38 (page 60).
 People in Scotland watched more TV than anywhere else in 2008 (4.2
hours/day/head versus UK average of 3.8). PSB TV output was most popular with
viewers in Wales (62% share of viewing) and least popular in London (57%). Levels
of radio listening across the four nations were similar at around 3.2 hours per listener
per day. The popularity of the BBC’s radio services varied by nation – from 46% of
listener hours in Scotland to 63% in Wales (page 61).

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Key points: television
 Total television industry revenue grew by 1.3% to reach £11.2bn in 2008. This was
largely driven by subscription revenue, which increased by 5.7% in 2008 to reach
£4.32bn. Pay-TV providers increased subscriber numbers while products like
multiroom and high-definition television also gained in popularity (pages 69 and 82).
 Total TV net advertising revenue was £3.47bn in 2008, down 3% year on year, as the
gains in multichannel revenue, up 9.3% to nearly £1.3bn, helped to offset the
reductions on the mainstream channels (page 69).
 Net advertising revenue for ITV1, GMTV1, Channel 4 and Five decreased 8% year
on year to £2.1bn. The four main commercial PSBs undertook several cost-cutting
measures as they felt the impact of the recession and the wider structural challenges
facing free-to-air broadcasting (page 84).
 Broadcasters’ total spend on television output passed the £5bn mark, fuelled mostly
by increased investment in Sport and Film channels (driven by higher costs for rights
acquisitions) and BBC One (page 88).
 The five main PSB channels broadcast 33,165 hours of first-run originated
programming in 2008, down by 3% on 2007 and by 5.6% (1,845 hours) since 2003.
The five PSB channels also invested less in first-run originations. In 2008 prices, they
spent £2.6bn in 2008, down by 2.9% year on year (page 90).
 UK television channels broadcast nearly 2.5 million hours of programming in 2008.
Of these, almost 1.5 million hours were broadcast by the PSB channels and key
multichannel genres, of which 9% (133k hours) were first-run originations (page 89).
 The five main PSB channels (BBC One, BBC Two, ITV1, Channel 4 and Five)
attracted a viewing share of 60.8% in all homes during 2008, down by 2.7 percentage
points year on year (page 130).
 Digital television penetration in the UK reached 89.2% at the end of Q1 2009, an
increase of 2.1 percentage points year on year. This meant that around 22.8 million
homes received digital television on their main set at the end of March 2009 (pages
73 and 121).
 Digital switchover is now well under way and Exeter in the West Country became the
UK’s first ‘digital city’ in May 2009. Analogue switchover in the first region of the
Scottish Borders was completed in November 2008 (page 74).
 High-definition television gained traction over the past 12 months, as new HD
channels launched and more platforms developed their HD propositions. By the end
of the first quarter of 2009, 2.3 million homes (9%) had reception equipment capable
of accessing linear or on-demand HD content. Thirty-three per cent of UK homes
claimed to have HD-ready television sets at the end of 2008, according to our
research (page 76).
 A total of 77 television channel licences were issued by Ofcom in 2008, significantly
down from the 143 issued during 2007. Overseas licences formed an increasingly
large proportion of the new licences (page 79). There were 495 channels
broadcasting in the UK at the end of 2008, up from 470 a year earlier.

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Key points: radio
 Total UK radio industry funding stood at £1.15bn in 2008, down by 2.3% on 2007.
This followed a fall in commercial revenues of 3.3% to £505m and we estimate that
the BBC reduced its radio spend by 1.5% to £643m (accounting for a 56% share of
all radio income/spend) (page 160).
 By Q1 2009, digital radio platforms attracted just over a fifth of all radio listening
hours (20.1%), up from 17.8% in Q1 2008, according to RAJAR figures. The majority
(63%) of digital listening came via DAB, which accounted for 12.7% of all radio
listening. Digital television delivered a further 3.4% and the internet 2.2% (page 150).
 Radio audience reach was down by one percentage point in 2008 on five years
previously, at 89.5% of adults. Time spent listening to the radio was also down, by
5% in five years, and by 1.7% year on year. Total listening hours to all BBC Radio
stations were down by 0.5% during 2008 but still up modestly (0.2%) since 2003. By
contrast, all commercial radio listener hours were down both by 3.2% in the year and
11.4% over five years (page 181).
 Within this overall pattern of reductions, listening to national radio stations has risen,
while local radio listening hours have contracted. BBC network radio listening hours
have risen by 6.4% in five years and national commercial hours are up 16.9%,
although down on the past year. By comparison, local BBC station hours fell by
19.1% and local commercial by 18.3% (page 183).
 The decline in radio listening has been most notable among younger listeners, with
hours falling by 21% among 4-15 year olds between 2003 and 2008. The reduction in
hours grew progressively lower as the age of the audience increased. Among
younger adults (15-24), hours were down 12.0%; among 25-34s they were down
11.1%. Listening among older age groups was more stable; down by 1.7% among
listeners aged 55+, while hours were flat among 45-54 year olds (page 183).
 Cumulative sales of DAB digital radio sets passed 9 million by Q1 2009 (up from
almost 7 million in Q1 2008), following sales of around 2 million in the previous 12
months. RAJAR estimates that almost a third (32%) of UK adults owned a DAB set
by the end of Q1 2009, up by five percentage points on the previous year (page
151).
 A third of adults (33%) had listened to the radio online, according to the RAJAR
internet and audio services survey carried out in May 2009. This was up from 29% a
year previously and from 24% six months before that (page 151).
 In June 2009, the Government’s Digital Britain report was published, recommending
the digital migration of the majority of radio services in the UK, with a proposed target
of 2015. It specified an interim 2013 milestone of 50% of all radio listening to be
through a digital platform, and targets for national DAB coverage to be comparable to
FM and for car manufacturers to be installing DAB sets as standard (page 155).
 Twenty-one new community radio licences were awarded in the six months to June
2009, covering a number of regions in England including the Midlands, the North
West, the East and the South East. By July 2009, Ofcom had awarded a total of 205
community radio licences, with 141 stations already on air. Licences are still to be
awarded for community stations in Greater London and areas within the M25, within
the current second round of licensing (page 172).

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Key points: telecoms
 For the first time since Oftel started to collect market data in 1992/93, operator-reported
revenues from telecoms services did not increase in 2008. Total revenues were
unchanged at £39.5bn, with increasing retail revenues being offset by falling wholesale
revenues (page 222).
 Telecoms services accounted for 3.2% of total household expenditure in 2008, down
from 3.4% in 2007. Telecoms spend fell by 5.2% in real terms over the year, the largest
annual decline since spend on telecoms services began to fall in 2006 (page 242).
 Nearly two-thirds (65%) of UK households had a fixed-line broadband connection in Q1
2009, up from 58% a year previously (page 247).
 Mobile broadband has continued to grow, with take-up of pre-pay services contributing to
over a quarter of a million new connections in May 2009 alone. Around 12% of UK
households had a mobile broadband connection in Q1 2009; three-quarters of these also
had a fixed-line broadband connection, indicating that for many mobile broadband is a
complement to, rather than a substitute for, a fixed-line service (page 208).
 Eleven per cent of households had a mobile connection but no fixed-line connection in
Q1 2009 (unchanged from a year previously). However, 22% of households in socio-
economic group DE are mobile-only (page 248).
 Mobile use continues to grow. The number of monthly outbound minutes per mobile
connection increased by 6%, to 123 minutes, while the number of text messages
increased by 29% to an average of 99 messages per month from each mobile
connection (page 253).
 For the first time, the number of pre-pay (pay-as-you-go) mobile connections fell during
2008. This was driven by the availability of low-cost contracts, including SIM-only tariffs
which accounted for nearly a quarter of new contract sales in the first five months of
2009. Thirty-two per cent of mobile contracts sold in Q1 2009 were for tariffs of less than
£20 per month, compared to 23% in Q1 2008 and just 5% in Q1 2007 (page 233).
 24-month mobile contracts emerged during 2008, accounting for 13% of new post-pay
connections in Q1 2009, compared to 2% a year previously. At the other end of the
scale, 24% of new contracts were for just one month in Q1 2009 (driven by the take-up
of SIM-only tariffs), up from 10% in Q1 2008 and less than 1% in Q1 2007 (page 217).
 More than 8 million people in the UK (16% of adults) accessed the internet on their
mobile phone in Q1 2009, up by 42% on a year previously. This growth has in part been
driven by the increasing use of smartphones, which accounted for 16% of all handset
sales in Q1 2009, and the increasing use of mobile applications (page 209).
 BT’s share of retail fixed voice calls to UK geographic numbers fell to under 50% for the
first time in 2008. Increasing use of wholesale line rental (WLR) and local loop
unbundling (LLU) services contributed to the erosion of BT’s retail share (page 227).
 Overall satisfaction levels are high, with 90% or more of consumers satisfied with their
fixed-voice, fixed-broadband and mobile services. However, satisfaction with the speed
of fixed-line broadband connections has fallen from 90% in Q1 2006 to 81% in Q1 2009.
(page 256).

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Key points: converging markets
 Online catch-up TV began to enter the mainstream in 2008, largely thanks to the
growing popularity of the BBC iPlayer. Twenty-three per cent of households claim to
watch programmes online, rising to 33% among 15-24s. But 10% of people aged 65+
reported that someone in their household watched catch-up TV online (page 265).
 The BBC’s iPlayer served up 275 million online video streams (750,000 streams per
day) in 2008, and a further 100 million over Virgin Media’s network. Channel 4
delivered nearly 150 million streams during the same period. All major broadcasters
now have similar offerings (page 270).
 A quarter of the population admitted to the unauthorised sharing of music online
according to data from Entertainment Media Research, and 5% admitted to doing so
regularly. However, most unauthorised sharing is done by copying physical discs –
37% have let someone else copy a CD. Younger people seem less concerned about
obtaining content for free – 66% believe it is morally acceptable to do so (page 275).
 Social networking is growing more slowly than previously. Facebook cemented its
position as the most used site, growing by 73% since May 2008 to reach a monthly
unique audience of 19 million, compared to 5 million for MySpace and 4 million for
Bebo. But new services are still growing fast – Twitter now has 2.6 million unique
users, up from 150,000 in May 2009 (page 289).
 Social networking is also maturing - literally. Use grew fastest among 35-54s – up by
eight percentage points since Q1 2008 to 35%. Among 25-34 year olds use grew by
six percentage points to 46% but it actually fell slightly among 15-24s – by five
percentage points to 50% (page 289).
 The free ad-supported streaming service Spotify has made its mark in online music –
the average user now spends over two hours per month browsing and searching for
music through Spotify. This is ahead of established music applications with much
larger audiences such as iTunes (just under two hours) and Windows Media Player
(just under an hour) (page 282).
 Older consumers are increasingly adopting digital platforms. Since 2008 take-up of
mobile phones, digital TV, DAB radio and the internet grew by double digits among
consumers aged 65+. Seventy-seven per cent now have digital TV, 68% have a
mobile phone, 41% have the internet and 28% a DAB digital radio set (page 305).
 Only a minority of people use advanced functions on their mobile phone handsets.
Apart from text messaging (83%) and voicemail (56%), the only other function used
by the majority of mobile phone users was taking and storing photos (52%) (page
310).
 Internet advertising spend grew to reach £3.3bn in 2008. For the first time, in 2008
the internet accounted for over one in every five pounds (20%) of UK advertising
spend. The internet’s share has grown by 17 percentage points since 2003, with
nearly half this growth at the expense of newspapers (page 295).

11
The Communications Market
2009
1
1 The market in context

12
Contents

1.1 Introduction and structure 13
1.2 Key market trends 14
1.2.1 Introduction, structure and findings 14
1.2.2 Availability: little change as many services approach near-universal
coverage 14
1.2.3 Fixed broadband take-up rose by seven percentage points to 65% of
homes in 2008 16
1.2.4 Communications industry revenue grew by just 0.2% to £51.8bn 16
1.2.5 Average household spend on communications services falls 17
1.2.6 Consumers are spending growing amounts of time on the internet 18
1.2.7 Satisfaction with communications services remains high 18
1.2.8 More consumers are buying bundles 19
1.2.9 Attitudes to media consumption 20
1.3 Communications markets and the recession 23
1.3.1 Introduction, structure and key findings 23
1.3.2 Economic trends and consumer attitudes towards the downturn 24
1.3.3 Consumers’ response to the economic downturn 25
1.3.4 The recession and communications service providers 32
1.3.5 Advertising revenues fall while broadcasters implement cost control
measures 34
1.3.6 Telecoms players look to longer contracts as pre-pay subscriptions fall 36
1.4 Consumers embrace DVRs 39
1.4.1 Introduction, structure and key findings 39
1.4.2 More than a quarter of homes have a DVR 40
1.4.3 DVR use varies by age, platform and channel 42
1.4.4 Films and HD channels prove popular for recording 45
1.4.5 Drama series attract more recorded than live viewing in Sky+ homes 48
1.4.6 Three-quarters of viewers claim to fast-forward most adverts 49
1.4.7 DVRs users watch more television that they enjoy 51
1.4.8 DVRs are adding greater functionality and storage 51
1.4.9 Hard disks: bigger and cheaper 52
1.5 The nations’ communications markets 54
1.5.1 Introduction, structure and findings 54
1.5.2 The availability of communications services across the UK 55
1.5.3 Device and service take-up across the UK’s nations 56
1.5.4 Communications service bundling 58
1.5.5 Production of broadcast-based content across the UK 59
1.5.6 Consumption of broadcast services in the UK’s nations 60

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1.1 Introduction and structure
This section of the Communications Market Report 2009 summarises a range of
communications market developments over the last twelve months. It is organised into four
sections:
 Key market trends (page 14)
This section summarises developments in communications services availability and
take-up. It then sets out industry revenue trends and household spend on
communications services before concluding with consumer satisfaction metrics and
consumers’ propensity to bundle services together.
 Communications markets and the recession (Section 1.3, page 23)
The UK moved into recession in the final quarter of 2008, and its impact is being felt
by consumers and industry. In this context, we commissioned research to understand
the degree to which consumers’ attitudes towards communications services are
being influenced by the recession. We also explore how industry revenues have
fared over the last twelve months, and the steps that companies have taken to
control costs.
 Consumers’ use of digital video recorders (DVR) (Section 1.4 page 39)
The advent of the DVR- also known as a personal video recorder (PVR) or digital
television recorder (DTR) – has offered consumers greater convenience and control
over their television viewing than was available through analogue video cassette
recorders (VCR). Now in more than a quarter of UK homes, consumers have
embraced DVRs across a range of digital television platforms. Here we set out key
metrics on the take-up and use of DVR products and identify trends in consumer
attitudes towards DVR use.
 The nations’ communications markets (Section 1.5, page 54)
Ofcom has published four nations’ Communications Market Reports alongside this
report. As national or regional issues become more prominent in communications
policy development (for example, the future of public service broadcasting and the
Government’s proposed universal availability of 2Mbit/s broadband), so the
characteristics of service availability, take-up and consumption by nation grow in
importance. In this section we provide a short summary of the findings of CMR:
Nations reports1
.
1
See http://www.ofcom.org.uk/research/cm/cmrnr09/

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1.2 Key market trends
1.2.1 Introduction, structure and findings
Introduction
This section provides an overview of key trends in the UK communications market in the
year to the first quarter of 2009. We begin by looking at service availability and consumer
take-up. We then turn to industry revenue and consumer spending before concluding by
examining consumption of different communications services and consumers’ satisfaction
with those services.
Structure and findings
 The availability of most communications services has remained largely
unchanged year on year – but local loop unbundling is now available to 84% of
consumers, up by four percentage points year on year. Fixed broadband penetration
rose by seven percentage points year on year to 65%. Section 1.2.2 (page 14).
 Communications industry revenue grew by 0.2% £51.8bn. Television revenue
was up in 2008 by 1.3%; telecoms revenue was flat but radio contracted by 2.3%
over the year. Section 1.2.4 (page 16)
 Real household monthly spend on communications fell again in 2008, by 4.5%
to £93.69. Section 1.2.5 (page 17)
 UK consumers spent an average of 25 minutes per day using the internet in
May 2009, up from nine minutes in May 2004. Section 1.2.6 (page 18)
 Satisfaction levels rose for most communications services over 2008. For
broadband it was up by one percentage points to 90%; for fixed-line voice it rose by
four percentage points to 92% while satisfaction with mobile services satisfaction was
94% (flat year on year). Section 1.2.7 (page 18)
 The number of UK homes buying communications services as part of bundles
increased in 2008. Section 1.2.8 (page 19)
 Just over half of consumers (51%) claim that watching television is the media
activity that they would miss most. Section 1.2.9 (page 20)
1.2.2 Availability: little change as many services approach near-universal coverage
Coverage of key communications services remained largely unchanged in 2008 following
marked increases in the availability of 3G mobile and local loop unbundling (LLU) during
2007. Of the key communications services that are tracked by Ofcom (Figure 1.1), only LLU
availability rose during 2008.
For broadband, as availability reaches near-universal levels, the focus of service providers
has now shifted to the speed of the broadband connection. The industry is working on
offering consumers ‘super fast’ broadband, while the Government’s Digital Britain report
included the objective of delivering minimum broadband speeds of 2Mbit/s by 2012.

15
Key developments in availability include:
• moves to increase the speed of broadband connections. Super-fast broadband was
made available to some UK homes for the first time in 2008, as operators responded
to demand for higher-bandwidth products:
o Virgin Media deployed ‘up to’ 50Mbit/s fibre-based broadband. By July 2009,
50Mbit/s broadband was available to 12.5 million homes, up from 5 million at the
end of 2008. The company is also piloting speeds of 200Mbit/s.
o BT announced plans to make its super-fast broadband available to 40% of the
UK, around 10 million homes, by 2012, at a cost of £1.5bn2
and covering 1.5
million homes by the summer of 2010.
o Within this context, Ofcom has consulted with industry on how to promote
investment and competition in super-fast broadband.
o The Government’s Digital Britain report, published in June 2009, announced
proposals to add 50p per month to the cost of fixed telephone line rental to create
a fund for super-fast broadband. If implemented, the scheme would aim to see
super-fast broadband made available to 90% of UK homes by 2017.
• Local loop unbundling (LLU) availability increased by four percentage points to reach
84% of UK households. LLU allows competing telecoms providers to install their own
equipment in telephone exchanges, connect consumers to their own network and
then offer services such as fixed telephony, DSL broadband and IPTV to end-users.
Figure 1.1 Digital communications service availability, 2007 and 2008
UK-wide
Platform 2008 2007 Change England Scotland Wales N Ireland
Fixed line 100% 100% 0% 100% 100% 100% 100%
2G mobile1 98% - - 99% 89% 92% 92%
3G mobile2
87% - - 91% 67% 67% 43%
DSL3
99.6% 99.6% 0.0% - - - -
Cable broadband4
49% 49% 0% 53% 38% 24% 30%
LLU5
84% 80% 4% 87% 70% 76% 71%
IPTV6
39% 39% 0% - - - -
Digitalsatellite TV 98% 98% 0% - - - -
Digitalterrestrial TV7
73% 73% 0% 73% 82% 57% 58%
DAB digitalradio8
90% 90% 0% n/a n/a n/a n/a
Sources: Ofcom and:
1. Proportion of population living in postal districts where at least one operator reports at least 90%
2G area coverage. Sourced from GSM Association / Europa Technologies
2. Proportion of population living in postal districts where at least one operator reports at least 90%
3G area coverage. Sourced from GSM Association / Europa Technologies
3. Proportion of premises able to receive DSL services based on data reported by BT
4. Proportion of households passed by Virgin Media’s broadband-enabled network
5. Proportion of households connected to an LLU-enabled exchange
6. IPTV availability figure calculated on the assumption that Tiscali TV is now available in a number of
areas including London, Stevenage, Birmingham, Newcastle and Edinburgh
7. Availability of services from all six digital multiplexes
2
http://www.btplc.com/news/Articles/ShowArticle.cfm?ArticleID=EFD7B1FA-52ED-45BB-B530-
734FAC577E94

16
8. DAB digital radio coverage figure based on a BBC/Digital One estimate. Both the BBC and Digital
One built new transmission masts during 2006/07
1.2.3 Fixed broadband take-up rose by seven percentage points to 65% of homes
in 2008
Broadband take-up continued to grow in 2008. Ofcom research found that 65% of UK
households had a fixed broadband connection at the end of Q1 2009, an increase of seven
percentage points year on year. The total number of UK fixed broadband connections
increased by 10.7% to 17.3 million during 2008, up by 1.7 million on 2007. The number of
LLU DSL broadband connections increased by 47.6% to reach 5.5 million at the end of
2008.
Take-up of mobile broadband also grew substantially over the year. Around 3 million homes
had a mobile broadband connection (equivalent to 12% of the population) by the end of Q1
2009 and according to point-of-sale data from GfK there were over 250,000 mobile
broadband sales in May 2009 alone (compared to 139,000 in May 2008).
By contrast, digital television penetration on main sets reached 89.2% (22.8 million
households) in Q1 2009, up by 2.1% year on year – a comparatively small rate of growth
compared to earlier years. Take-up was as high as 95% of individuals in Derby and
Swansea, but as low as 71% in Glasgow and Derry/Londonderry.
Increasing numbers of consumers are acquiring digital video recorders (DVR), which are
now installed in 27% of UK homes. Moreover, the number of homes with access to high-
definition TV channels more than doubled in the year to Q1 2009 to reach 1.9 million, up
from 829,000 a year earlier.
Figure 1.2 Digital technology adoption, Q1 2008 and Q1 2009
Early
adopters
Early
majority
0
25
50
75
100
Proportionofindividuals
(%)
Innovators Late
majority
Late
adopters
Digital TV
89%
Mobile
89%
DAB digital
radio 32%
Fixed line
87%
DVR
27%
Fixed
broadband
65%
3G
22%
Games
console
47%Blu-ray /
HD DVD
11%
Q1 2008
Q1 2009
Mobile
broadband
12%
HDTV
channels
7%
Source: Ofcom research and operator data
Notes: All figures relate to Q1 2009; all figures are measured as a proportion of individuals except for
3G, which represents the proportion of mobile subscribers and DTV, which represents the proportion
of homes with a digital television reception device on the main set.
1.2.4 Communications industry revenue grew by just 0.2% to £51.8bn
The impact of the economic downturn was felt by companies across the communications
sectors in 2008. Overall revenues climbed by just 0.2% year on year to a little under £52bn.
A 2.3% fall in radio revenue of £0.1bn to £1.1bn was offset by rising TV revenue, which grew
by 1.3% to £11.2bn over the same period. Increased television revenue was largely driven

17
by subscriptions, up 5.7% in 2008 to reach £4.3bn, while net advertising revenue decreased
by 2.9% to £3.5bn.Telecoms revenue was flat in 2008 at £39.5bn (Figure 1.3).
Figure 1.3 Communications industry revenue
34.4 36.8 37.4 38.2 39.5 39.5
9.2
10.0 10.5 10.6 11.1 11.21.1
1.2 1.2 1.1 1.2 1.144.7
48.0 49.0 49.9 51.7 51.8
0
20
40
60
2003 2004 2005 2006 2007 2008
Revenue(£bn)
Total
Radio
TV
Telecoms
34.4 36.8 37.4 38.2 39.5 39.5
9.2
10.0 10.5 10.6 11.1 11.21.1
1.2 1.2 1.1 1.2 1.144.7
48.0 49.0 49.9 51.7 51.8
0
20
40
60
Revenue(£bn)
Total
Radio
TV
5 year
CAGR
3.0%
0.4%
2.8%
1 year
growth
0.2%
-2.3%
0.0%
4.1%1.3%
Source: Ofcom/operators
Note: Includes licence fee allocation for radio and TV
1.2.5 Average household spend on communications services falls
Over the year, consumers once again found their monthly household spend on
communications services falling. In real terms, UK household average spend was £93.69 a
month, down 4.7% or £4.39 on 2007, marking the largest annual fall since Ofcom began
tracking the market (Figure 1.4). All communications services saw decreases in monthly
household spend, but spend on internet subscriptions fell furthest in proportional terms,
down by 6.2% to £10.71, despite increasing take-up. Spend on fixed-line voice decreased by
5.3% to £22.263
.
Monthly spend on communications accounted for 4.63% of total household spend, down
from 4.79% in 2007 but up from 4.49% in 2003.
Figure 1.4 Average monthly household spend on communications services
31.34 29.11 26.64 24.90 23.49 22.26
29.13 33.51 34.88 33.66 33.98 32.04
7.25 9.22 10.69 11.53 11.37 10.71
25.71 26.35 26.97 26.57 26.64 26.24
2.37 2.35 2.34 2.20 2.60 2.44
£95.80 £100.54 £101.52 £98.85 £98.08 £93.69
4.49%
4.72% 4.75% 4.72% 4.79% 4.63%
0%
2%
4%
6%
0
50
100
150
2003 2004 2005 2006 2007 2008
As%oftotalspend
£permonth(2008prices)
Total comms
Radio
TV
Internet &
broadband
Mobile voice & text
As a %age of total
household spend
Source: Ofcom/operators
3
It should be noted that in order to reflect these changes in household spend in real terms they have
been inflation-adjusted, using the consumer price index (CPI) which increased 3.6% during 2008. The
number of UK households also increased by 1.2% during 2008. This explains why average spend per
household fell in 2008 even while there was a small increase in overall industry revenues.

18
1.2.6 Consumers are spending growing amounts of time on the internet
The shifting pattern of communications service consumption which we have highlighted in
previous years continued into 2008. Figure 1.5 shows the amount of time consumers spent
per day using communications services in 2003 and 2008. Radio listening experienced the
steepest decline in usage, down by 17 minutes year on year to 172 minutes in 2008; TV
television viewing levels actually rose modestly over by one minute to 225 minutes per day.
Mobile telephony and home internet use (including web and applications) both experienced
the largest increases in average daily use (15% and 22% respectively)
Figure 1.5 Average time per day spent using communications services
224
189
9 15 6
225
172
25
13 11
0
50
100
150
200
250
Television Radio Internet Fixed Mobile
Minutesperpersonperday
2003
2008
0
50
100
150
200
Minutesperpersonperda
5 year
CAGR
0.1% -1.9% 21.5% -3.4% 15.2%
Source: Ofcom / BARB / RAJAR / Neilsen Netratings (home use only)
Note: Daily figures were calculated from monthly data on the assumption that there are 30.4 days in
the average month; the exception was for internet consumption where the quoted figures relate to
May 2004 and May 2009, and 31 days were used; the internet consumption figures include the use of
online applications such as streaming media and only include use at home; mobile telephony figures
are estimated assuming that the average time taken to send and receive a text message is 35
seconds.
1.2.7 Satisfaction with communications services remains high
Consumer satisfaction with communications services remained high across all five
communications services in 2008:
• Mobile telephony scored highest out of the five communications services, with 94%
of consumers either ‘satisfied’ or ‘very satisfied’ with their service.
• Digital television experienced the most marked decline in satisfaction, down by five
percentage points to 85% of consumers being either ‘satisfied’ or ‘very satisfied’.
• Mobile broadband – included in our research for the first time – attracted the lowest
satisfaction rating of all the communications services that we surveyed (83%).

19
Figure 1.6 Overall satisfaction with communications services
Source: Ofcom research, Q1 2009
Note: Shows the proportion of users with each service, includes only those who expressed an
opinion.
1.2.8 More consumers are buying bundles
A wide range of suppliers now offer consumers services in ‘bundles’, in which two or more
products are supplied by the same provider. This often offers the advantage of a price
discount and the convenience of receiving a single bill for several services. Figure 1.7 shows
the bundled services available from major suppliers in the UK.
Figure 1.7 Bundled service offers from major suppliers
Source: Pure Pricing, June 2009
Note: Highlighted box denotes that the combination of services requires the purchase of additional
services.
Ofcom research shows that the number of households taking bundled services rose by
seven percentage points in the 12 months to Q1 2009 to reach 46%. The great majority of
these bundles were either fixed voice and broadband ‘double play’ (44%) or fixed voice,

20
broadband and multichannel TV ‘triple play’ (34%). Take-up of bundles was as high as 68%
of individuals in Bristol, to 62% in Newport, 56% in Edinburgh and 46% in Belfast.
Figure 1.8 Bundled services by consumer, by type
46%39%40%35%29%29% 31%
Note: A bundled service is defined as two or more services taken from a single provider, with or
without a price discount.
1.2.9 Attitudes to media consumption
Just over half of consumers (51%) claim that watching television is the media activity that
they would miss most, a similar figure to 2007. The number of people citing most other
media activities has declined slightly since 2007 or stayed the same. One notable exception
was use of the internet, which rose by three percentage points to 15%, a statistically
significant change, to become the second media activity that would be missed the most.
Mobile phone use fell four percentage points, also a statistically significant change, and is
now the third most-missed media activity.
Listening to the radio, and listening to music on both traditional and digital platforms among
16-24s has declined dramatically between 2005 and 2009 as the most-missed media
activity. Listening to music on a hi-fi/CD or tape player has fallen from 18% in 2005 to 0% in
2009 (a statistically significant change). This preference change has not been substituted by
music listening on a digital device, but instead by television watching, which is now the most
missed-media activity for this demographic. Listening to music on a hi-fi/CD or tape player
has also declined as the most-missed media activity among 25-34s. This age group also
express a statistically significant increase in missing console and computer gaming the most.

21
Figure 1.9 Which media activity would consumers miss the most
44%
52% 51%
22%
28%
39% 41%
47%
40%
8%
12%
15%
11%
21%
20%
11%
14%
19%
10%
13%
9%
28%
33%
24%
14%
18% 14%12%
8% 8%
7%
2%
0%
7%
4%
4%6%
5% 4%
1%
0%
2%
2%
2%
3%
13%
5% 3%
18%
6%
0%
14%
6%
2%
1% 1% 2%
1% 3% 4%
3% 1%
5%
2% 2% 2%
7% 6% 4%
3%
3% 4%
2% 1% 2% 2% 1% 3% 1% 3% 3%
0%
20%
40%
60%
80%
100%
2005
All adults
2007
All adults
2009
All adults
2005
16-24
2007
16-24
2009
16-24
2005
25-34
2007
25-34
2009
25-34
Watch videos/DVDs
Listen to a portable
music device/MP3
player
Play
console/computer
games
Listen to music on a
hi-fi/CD or tape
player
Read newspapers/
magazines
Listen to the radio
Use a mobile phone
Use the internet via
computer/laptop
Watch television
A2 – Which one of these would you miss doing the most?
Base: All adults aged 16+ (3244 in 2005, 2905 in 2007, 812 in 2009), adults aged 16-24 (530 in 2005,
413 in 2007, 106 in 2009), adults aged 25-34 (604 in 2005, 473 in 2007, 126 in 2009). Circles show
statistically significant change between 2007 and 2009.
Source: Ofcom research, fieldwork carried out by Saville Rossiter-Base in April to May 2009
Consumers’ age affects the types of activities that they use the internet for. Our research
looked at a selection of convergent activities that people can use the internet for (Figure 1.9).
It found that nearly all the activities were most popular among consumers aged 15-24,
however, listening to the radio online was only marginally more popular among 15-24s (21%)
than among those with internet at home generally (17%).
The only group in which more than half engaged in any of the mentioned activities (online
gaming, downloading content files and watching video) was 15-24 year olds. Overall, playing
games online and watching TV programmes online both rose over the past year, by an
average of three percentage points. Growth rates for both online viewing and downloading
content were more mixed, although both rose strongly among the 45-64 age group.
But some online activities became less popular in 2009. There was less reported content
downloading among younger age groups, and internet radio listening fell among all age
groups to reach an average of just 17% of all consumers, down three percentage points year
on year.

22
Figure 1.10 Proportion of households using the internet for listed activities
% of households who use the internetforthe following activities
38% 39%
19%
17%
31%
18%
53%
51%
30%
21%
51%
31%
42% 42%
19%
17%
32%
19%
31%
35%
16% 17%
25%
13%15%
9%
7%
10%
7% 5%
0%
10%
20%
30%
40%
50%
60%
Playing games
online/interactively
Downloading music
files, movies or
video clips
Watching TV
programmes
Listening to the
radio
Watching video
clips/webcasts
Uploading/ adding
content
All 15-24 25-44 45-64 65+
3 3 4 2 -2
Increasein activities since Q1 2008 (percentagepoints)
-1 -8 -5 4 0 3 4 3 3 0 -3 -3 -5 -1 -1 2 0 1 4 -4 1 9 1 2 -3
Base: All adults who have the internet at home (n= 3858)

23
1.3 Communications markets and the recession
1.3.1 Introduction, structure and key findings
Introduction
Since the last Communications Market Report was published in August 2008, the UK
economy has moved into recession4
.The effects of the economic downturn have been felt by
a range of UK’s communications industry operators – particularly in the free-to-view
broadcasting sector, as advertisers have trimmed their spend or while others have moved
resources into the internet. This is reflected in the annual operator data that Ofcom collects
from broadcasters.
This section explores the impact that the downturn is having, both on consumers and on
communications market operators.
Structure
 Section 1.3.2 (page 24) sets out the UK’s macro-economic trends during 2008/09,
including quarterly GDP growth, Bank of England base rates and levels of
unemployment. It also examines consumer attitudes towards the recession.
 Section 1.3.3 (page 25) details the findings of an omnibus survey we commissioned
into how consumers’ attitudes towards communications services are being influenced
by the economic downturn; and
 Section 1.3.4 (page 32) concludes by exploring how industry revenues have fared
over the last twelve months, and the steps that operators have taken to control costs.
Findings
The key findings of this section include:
 There is a wide spectrum of attitudes towards the recession: many people
appear to be unconcerned by its implications for them personally, but an equal
number are worried about its impact (page 25).
 Communications spend appears relatively robust when compared to alternative
claims on disposable income. Meals/nights out and holidays are the expenditure
categories most likely to be cut from consumers’ disposable income; only spend on
toiletries and groceries appears more secure than that on communications products
(page 26).
 Consumers see opportunities to save money… people seem to see opportunities
to save on their communications spending – for example, by bundling services (page
28) or by deferring mobile handset purchases (page 29). There is also evidence of
polarisation in the types of mobile contract customer – with a growing proportion
opting for month-long SIM-only contracts (page 37).
 …and some are more likely now to shop around for communications services.
Some consumers are more conscious of their communications spending now than
they were a year ago (page 30); some think that providers offer better deals now
4
http://www.statistics.gov.uk/elmr/02_09/downloads/ELMR_Feb09.pdf

24
(page 31); and the recession is motivating some to shop around more for the best
deal on communications services (page 32).
 Declining advertising revenue has had an impact on the broadcasting
industries. Advertising expenditure is known to be cyclical, and this is borne out in
the latest revenue data from broadcasters. Radio industry revenue contracted year
on year, and while overall television advertising revenue rose, the commercial PSBs
attracted less advertising revenue this year than last (page 34).
 Fixed-mobile substitution continues to have the greatest bearing on telecoms
industry revenue. While it is less clear that the telecoms industries have been
affected by the economic downturn, mobile and broadband operators are affected by
the competitive pressures of markets approaching saturation, and the increasing use
of mobile phones rather than fixed-line phones is putting pressure on fixed-line
operators (page 34).
1.3.2 Economic trends and consumer attitudes towards the downturn
In the last 12 months the UK economy has moved into recession. GDP declined in Q2 2008
and the economy has continued to contract since then. Concurrently, Bank of England base
rates have fallen, from an average of 5.4% in the first quarter of 2008 to an average of 1.1%
in Q1 2009, and to an all-time low of 0.5% on 5th March 2009. At the same time,
unemployment rose by nearly 40% from 1.6 million in Q1 2008 to 2.2 million in Q1 2009
(Figure 1.11).
Figure 1.11 UK GDP quarterly growth, Bank of England base rates and
unemployment
1.6m 1.7m
1.8m
2.0m
2.2m
5.4%
5.0% 5.0%
3.4%
1.1%
0m
0.5m
1m
1.5m
2m
2.5m
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009
0%
1%
2%
3%
4%
5%
6%
Unemployment
Quarterly average
base rates
0.8% -0.1% -0.7% -1.8% -2.4%
Quarter-on-quarter GDP growth (%)
Source: Office for National Statistics and The Bank of England
Our research suggests that consumer attitudes towards the downturn are evenly distributed
between those who have concerns about its impact on them personally, and those who have
few personal worries. A range of factors may explain why so many people appear
unconcerned – but historically low interest rates may have resulted in those in employment
who are also owner-occupiers discovering that they are better off now than they were a year
ago.
Thirteen per cent of people claimed that they were ‘extremely’ worried about the recession,
while a fifth claimed that they were ‘not at all’ worried. In between these extremes 40% rated
their attitude to the recession as a ‘4’ (where 5 represented ‘extremely worried’) while 42%
ranked it as a ‘2’ or ‘3’ (where 1 represented ‘not at all worried’).

25
Figure 1.12 Consumer attitudes towards the recession
On a scale of 1 to 5, where 5 is ‘extremely worried’ and 1 is ‘not at all worried’, how worried
are you about being personally affected by the recession?
16% (2)
40% (4)
20% - not at all worried
13% - extremely
worried
32% (3)
3% (Don't know)
5 - extremely
4
3
2
1 - not at all worried
Don't know
Source: Ofcom-commissioned research
Base: All respondents (n=2321)
1.3.3 Consumers’ response to the economic downturn
Spending on communications services appears relatively robust in the downturn
Consumers remain attached to their communications services, even in the face of more
challenging economic circumstances. When selecting three products or services that they
would cut first from their household budget, communications services were among the least
likely to be chosen. Less than a fifth of consumers selected their mobile phone in their top
three; that proportion fell to 16% for pay-TV, 10% for broadband and 10% for home phone
calls. Only spending on groceries and toiletries/cosmetics were less popular responses.
This suggests that subscriber-based income sources, on which the mobile operators, fixed-
line operators and pay-TV platform operators rely, may, for the moment at least, be well-
placed to withstand the current downturn.

26
Figure 1.13 Items where consumers are most likely to cut back their spending
Items mentioned as first, second or third choice (%)
3%
6%
10%
10%
16%
19%
20%
25%
29%
32%
41%
41%
47%
0% 10% 20% 30% 40% 50%
Personal care, toiletries, cosmetics
Household groceries
Home telephone calls
Broadband subscription
Television subscriptions
Spend on mobile phone
Newspapers and magazines
Clothing or footwear
Music, books, DVDs
Health club membership or sports
New furniture or home improvements
Holidays/weekends away
Night/meals out
Base: Those that have a landline, mobile phone, pay television and broadband (n=862)
Question: If you were forced to cut back on spending, which of the following items would you be most
likely to spend less on?
When forced to prioritise among communications services, consumers who had all four were
most likely to cut back spending on their mobile phone; 43% of people in our survey chose
their mobile, followed by spend on TV subscriptions (28%) then home phone calls (18%).
Broadband was mentioned least frequently (12%).
The identification of the mobile phone as first choice does not necessarily imply that it is the
service consumers would be most happy to do without – it may be connected with the
perception that their mobile service is the one where the scope for reduced spending is
greatest (e.g. by switching to a SIM-only or pay-as-you-go tariff).

27
Figure 1.14 The communications service where consumers would be most likely to
cut spend
Proportion of individuals selecting each communications service (%)
43% 43% 38% 41%
33%
28% 28%
30% 31%
25%
18% 18% 19% 14%
19%
12% 11% 12% 14%
22%
0%
20%
40%
60%
80%
100%
UK England Scotland Wales N Ireland*
Broadband
subscription
Home telephone
calls
Television
subscription
Spend on mobile
phone
Base: Those with all four communications services (n= 862 for UK, n= 632 for England, n=84 for
Scotland ; n=83 for Wales and n=63 for Northern Ireland).*Note small base size for Northern Ireland;
results should be treated as indicative only.
Question: Which ONE of the following would you be most likely to cut back spending on?
Communications service bundles looking more attractive to some consumers
Our research also examined changes in consumers’ attitudes towards three key decisions
connected with their use of communications services:
 whether to take communications services in a bundle;
 whether to keep their existing mobile handset (rather than trading up); and
 whether to keep (or subscribe to) pay-TV, as an alternative to going out.
The research findings suggest that discounted bundles might take on added significance for
some consumers in an economic downturn. Nearly half of people (47%) agreed that they
were more likely now than 12 months ago to consider purchasing communications services
in a bundle; only a quarter (26%) disagreed.
The margin between those agreeing and disagreeing was more pronounced among those
who took all four communications services; two-thirds said they would be more likely to take
discounted bundles. There was also a greater tendency to agree with this statement among
those who were worried about the recession. That said, there was also heightened interest
in discounted bundles among those who were not worried about the recession, so the
downturn might be just one of a number of factors motivating consumers to take bundles.

28
Figure 1.15 Consumers’ agreement/disagreement that they were more likely, in the
context of a recession, to take communications services in bundles
Proportion of respondents agreeing or disagreeing (%)
47
63
55
44
26
18
24
30
0%
20%
40%
60%
80%
Total sample Those with all four services Worried about the recession Not worried about the
recession
Agree Disagree
Base: Total sample (n = 2321), those with all 4 services (862), worried about being
personally affected by recession (689), not worried about being personally affected by
recession (841) Question: I am now going to read out a number of statements other people
have made about how the recession has changed their spend on TV, broadband, mobile
and home phone services. For each tell me how much you agree or disagree.
Mobile handset upgrades are vulnerable to spending cuts
Seven in ten people agreed that they would be more likely now than 12 months ago to defer
upgrading their mobile handset. Those on pay-as-you-go tariffs were slightly more likely
(72%) to put off purchasing a new handset than those on pay-monthly contracts (67%).
Since the majority of mobile phone contracts are for 18 months or longer, it is possible that
some of those in the sample would have no choice but to keep their current handset.
Moreover, with most mobile users now having camera phones with internet browsing
capabilities, it is possible that consumers may see less reason to change to a new model
now than they would have done a year ago.

29
Figure 1.16 Consumers’ propensity to renew their handset now, compared to 12
months ago
Proportion of respondents agreeing/disagreeing (%)
70 67
72
15 17
14
0%
20%
40%
60%
80%
All those with a mobile Those with a monthly contract Those on a pay-as-you-go tariff
Agree Disagree
Source: Ofcom-commissioned research. Base: those with mobile (1970), those on monthly contracts
(840), those on PAYG (1360). Question: I’m more likely to put off purchasing a new mobile phone and
will continue to use my existing handset.
These findings appear to be supported by the latest evidence on mobile handset sales.
Sales in Q4 2008 and Q1 2009 were down on the corresponding quarters a year ago (9.5
versus 9.1 and 7.4 versus 7.6), although sales in these two quarters were still higher than
they were two years ago. But there are complex market dynamics at play – for example, the
handset market has been boosted by the popularity of smart phones such as the Apple
iPhone.
Figure 1.17 UK sales of mobile handsets

4.2
6.4
8.8
6.6 6.3 6.5
8.6
6.1 6.3 6.9
9.5
7.6 7.6 7.9
9.1
7.4
4.4
0
2
4
6
8
10
Q1
2005
Q2 Q3 Q4 Q1
2006
Q2 Q3 Q4 Q1
2007
Q2 Q3 Q4 Q1
2008
Q2 Q3 Q4 Q1
2009
Handsetsales(millions
Source: GfK Retail and Technology Ltd. Based on factual point-of-sale information and representative
of only general market statistics. All other comments, opinions and references made are not those of
GfK.
Notes: (1) England, Scotland and Wales only (excludes Northern Ireland); (2) based on GfK’s
coverage of 94% of the market - data have been extrapolated to represent the whole of the UK; (3)
only represents sales through consumer channels (i.e. most business connections are excluded).
Our research also explored consumers’ views on pay television – specifically that it may
grow in importance during the recession as an alternative to nights out. Few of those who
currently had only free TV services said that they were more inclined to take pay-TV now
than they were a year ago. Even among those with basic-tier pay-TV, there were more
people who disagreed than who agreed. But among those with premium-tier TV, a higher
proportion of people agreed that they would be more likely to maintain their subscription than
they would have been 12 months ago.

30
Figure 1.18 Increased likelihood of consumers keeping/taking out a pay-TV
subscription now versus 12 months ago
15
37 35
39
52
36 38
34
0%
10%
20%
30%
40%
50%
60%
Those without pay TV Total pay TV Those with pay TV - basic
channels
Those with pay TV -
premium channels
Agree Disagree
Source: Ofcom research
Base: Those with pay TV (1188), those with premium channels (678), those with basic channels
(547), those without pay-TV n = 1133.
Question: I’m more likely to keep or take out a pay- TV subscription because I’m
going out less often and can make better use of it
Heightened cost consciousness among some, prompting people to shop around
Despite the apparent robustness of communications spending in the economic downturn,
consumers are more attuned to the cost of their communications services now than they
were 12 months ago. Nearly four in ten (37%) agreed that they were more conscious of
mobile spend; for fixed calls this figure fell to 27%, and to 25% for pay-TV. Just 15%
believed that they were more conscious of their spending on broadband.
Figure 1.19 Proportion of consumers becoming more conscious over the last 12
months of their spending on a variety of communications services
37
27
23
15
0%
10%
20%
30%
40%
Mobile Home telephone calls TV subscription Broadband subscription
Base: Those with each service, mobile (1970), home landline (1901), Pay-TV (1188), Broadband
(1398). Question: In the last 12 months, have you become more conscious about your spend on
any of the following services?

31
There was also recognition among some consumers that some communications service
providers are offering better deals now than they were a year ago – but that view did not
extend to all services. Around a quarter of our sample agreed with this statement for both
mobile and broadband providers (26% and 24% respectively). That figure fell substantially to
just 13% for fixed telephony and to 8% for pay-TV services. A quarter of consumers did not
recognise any communications services provider as offering better deals now than a year
ago.
Figure 1.20 Proportion of consumers agreeing that providers offer better deals now
than a year ago
26
24
13
8
25
0%
5%
10%
15%
20%
25%
30%
Mobile providers Broadband providers Home telephone
providers
Pay TV providers None of them
Base: Total sample 2321
Question: Which of the following providers, if any, do you think are offering better
deals than they were 12 months ago?
The combination of the downturn and consumers’ concern to secure value for money from
their communications services appears to extend most to mobile telephony products. Nearly
one-third of people (29%) said they would be more inclined to shop around for their mobile
phone services now than a year ago. They were least likely to say the same about their pay
television service (11%). But nearly four in ten people said that they are no more likely now
to shop around for any communications service product than they were 12 months ago.
Across the UK nations, consumers’ tendency to claim they would shop around was highest
in Scotland for mobile and broadband and in Northern Ireland for home telephone providers.

32
Figure 1.21 Consumers who are more likely to shop around for their
communications service now than a year ago
38
29
19
14
11
0%
5%
10%
15%
20%
25%
30%
35%
40%
No services Mobile phone Broadband Home telephone Pay television
Base: Total sample 2321
Question: Which of the following services, if any, are you more likely to shop around for than you were
12 months ago?
1.3.4 The recession and communications service providers
The media and telecoms sectors have both underperformed the FTSE 100 over the past
year, in a period where the FTSE 100 itself was on a broadly downward trend until the end of
2008, with some signs of stabilisation since then.
Over this period the FTSE fell by 20%, prompted by a range of company closures including
the demise of Lehman Brothers in September 2008.
Until December 2008, both the telecoms and media market indices fell concurrently,
although investors marked down telecoms more severely than they did the media sector.
Since then, the value of telecoms equities has continued to fall – with the index losing
around 40% of its value by the end of June 2008 (while the FTSE 100 lost 20%) But the
media index recovered ground in 2009, and was valued at 85% of its value in June 2008.

33
Figure 1.22 Media and telecoms share performance against FTSE 100
40
60
80
100
120
Media
FTSE 100
Telecoms
Jul 08 Oct 08 Jan 09 Apr 09 Jun 09
Source: Yahoo! Finance UK & Ireland
Subscriber-based revenues stable, but advertising suffers
Revenue trends across the TV, telecoms and radio sectors are illustrated in Figure 1.23.
Communications market revenue (as reported by operators to Ofcom and as estimated by
Ofcom) reached £43bn in 2008, up by 0.5% in a year but well behind the five-year
annualised average growth rate of 3.7%, and last year’s growth of 4.0%.
The extent to which income has risen year on year varied substantially by sector, and by the
components of revenue within each sector:
 TV was the fastest-growing sector by revenue in 2008, up by 1.3% (although less
than the 4.1% annualised average rate of growth).
 The telecoms sector expanded, by revenue, by 0.4% year on year, considerably
below the five-year growth rate (3.7%).
 The radio industry revenue contracted by 2.5% year on year, compared to a five-year
average growth rate of 0.4% per annum.
Figure 1.23 Revenue trends in the TV, telecoms and radio sectors
£25.8bn
£28.0bn £29.0bn £29.7bn £30.9bn £31.0bn
£9.2bn £10.0bn £10.5bn £10.6bn £11.1bn £11.2bn
£1.1bn £1.2bn £1.2bn £1.1bn £1.2bn £1.1bn
0
10
20
30
40
2003 2004 2005 2006 2007 2008
Telecoms
TV
Radio
£36.1bnTotal
0.4%
£39.1bn £40.6bn £41.5bn £43.1bn £43.3bn 0.5%
-2.5%
1.3%
3.7%
3.7%
0.4%
4.1%
1 year 5yr CAGR
Source: Operators and Ofcom calculations

34
In the telecoms sector, the increasing use of mobile phones rather than fixed-line phones
continued to have a significant bearing on revenue trends during 2008. The 0.4% (£117m)
year-on-year increase was fuelled by substantial growth in mobile voice and data revenue
(£185m and £112m respectively), offset somewhat by ongoing reductions in fixed voice
revenue (-£266m). Mobile messaging and corporate data revenues rose by an additional
£83m.
By contrast, the TV and radio sectors in 2008 found that cyclical pressures on advertising
revenue brought to a halt the revenue growth that has characterised both industries in recent
years (although growth in the radio industry had been relatively modest).
The TV industry expanded by 1.3% (£145m) year on year, fuelled principally by growing
subscriber revenue. Advertising revenue fell by £105m, while we estimate that licence fee
income allocated to television services contracted by an additional £31m.
In radio, sector revenue actually fell by 2.5% (-£29m) in 2008. As with television, the
reduction was driven both by falling advertising revenue and by a reduction in the proportion
of the total licence fee that is spent on radio services. However, this was not offset by any
substantial alternative revenue source such as subscriptions (although sponsorship revenue
did rise).
Figure 1.24 Proportional changes in sector revenues, 2007 - 2008
-0.9 -1.0
-2.0
0.6
-0.3
-0.9
0.4
2.2
0.6
0.3
0.3
-3
-2
-1
0
1
2
3
£31.0bn £11.2bn £1.1bn
+£117m +£145 -£27m
2008 revenue
Change YOY
Net change: 0.4%
Net change: 1.3%
Mobile voice
Fixed voice
Mobile data
Other Subscriptions
Advertising
Licence fee
Other
Sponsorship
Advertising
Licence fee
Driversofthetotalchangeinsector
revenue(percentagepoints)
Telecoms Television Radio
Net change: -2.3%
0.4% 1.3% -2.3%Net change (%)
Source: Operators and Ofcom calculations
Note: Licence fee allocated to TV and radio fell between 2007 and 2008, based on figures reported in
the BBC’s Annual Reports & Account; this came alongside a nominal rise in the cost of a licence fee.
1.3.5 Advertising revenues fall while broadcasters implement cost control measures
Figure 1.25 shows how the contraction in television advertising revenue was absorbed by
the public service broadcasters (PSBs). The reduction was largest for ITV1/STV/UTV and for
Channel 4, where revenues fell by 8.2% and 8.4% respectively during 2008. Five’s
advertising revenue fell by 5.4% while GMTV’s rose by 1.3%. Multichannel revenue, by

35
contrast, rose by 6.6% over the period, reflecting the growing popularity of digital television
platforms and the greater channel choice they offer.
Figure 1.25 Net advertising revenues among television broadcasters
£1036m £1189m £1267m
£1419m
£1365m £1253m
£667m £680m £623m
£286m
£287m £272m
£55m
£54m£54m
0
400
800
1,200
1,600
2,000
2,400
2,800
3,200
3,600
2006 2007 2008
GMTV1
Five
Channel 4
ITV1
Multi-channels
£3,576m£3,462m £3,471m
1.3%
-8.4%
-8.2%
-5.4%
6.6%
-2.9%
Industryrevenue(£m)
Source: Ofcom/Broadcasters
Note: Totals may not equal the sum of the components due to rounding.
The drivers of broadcasters’ cost control measures are complex and can include cyclical
factors such as an advertising downturn. But structural influences such as audience
fragmentation and new editorial strategies can also have a bearing.
The UK’s biggest commercial broadcasters announced a range of cost-control initiatives
during 2008/09, involving job losses, asset disposals and reductions in programming
budgets
ITV said it would cut 600 jobs in March 2009, on top of 1,000 it announced in early 2008;
Channel 4 headcount’s was reduced by more than a third to around 700, while commercial
broadcaster Five announced that up to 87 jobs would be lost from the company’s 354-strong
workforce. The BBC, while funded through the licence fee, also moved to cuts costs (see TV
section).
While the multichannel sector’s claim on advertising revenue rose year on year, it concealed
an unequal distribution of revenue growth between the PSB’s portfolio channels and other
television channels. Of the £78m additional advertising revenue generated by the
multichannels in 2008, £77m accrued to the PSBs’ portfolio services. For the commercial
PSB groups, therefore, the £183m reduction in NAR on the main channels was offset by
rising NAR on their portfolio services (Figure 1.26).
Concurrent with a relatively subdued year for the non-PSB multichannel sector, some
channel groups took steps to control costs. A number of channels closed during 2008/09,
while the major pay-TV platforms announced job cuts. The biggest casualty, in June 2009,
was the UK business of Setanta Sports, which closed its subscription sports channels.

36
Figure 1.26 Multichannel NAR
£695m
£695m
£772m
£808m £810m
£99m
£168m
£270m
£380m £457m
0%
20%
40%
60%
80%
100%
2004 2005 2006 2007 2008
PSB portfolio
channels's NAR
Other
multichannel NAR
20%
0.2%
Growth (%)
£794m £863m £1,042m £1,188m £1,267m 6.3%
47%
3.9%
12.4%
1 yr 4 yr CAGR
Source: Ofcom/Broadcasters
Despite the impact of cyclical advertising revenue on the television and radio industries, they
were more resilient than print media over the period. Newspaper advertising revenue fell by
12% year on year, while it contracted by 10% for magazines over the same period. The
internet has been the beneficiary, although even its growth fell from a five-year average of
48% down to just over 17%.
Figure 1.27 Advertising spending, by sector

£0bn
£1bn
£2bn
£3bn
£4bn
£5bn
£6bn
2003 2004 2005 2006 2007 2008
Newspaper
Television
Internet
Direct Mail
Magazine
Outdoor
Radio
Cinema
Advertising spend (£bn)
-12.0
-4.9
17.3
-6.0
-9.9
-3.8
-8.7
-1.2
-3.3
0.5
48.0
-3.7
-2.9
3.6
-2.9
2.4
CAGR (%)
07/08 5yr
Source: Advertising Association statistics published by www.WARC.com
Note: all figures are nominal.
1.3.6 Telecoms players look to longer contracts as pre-pay subscriptions fall
While the direct impact of the economic downturn is less easy to identify in the telecoms
sector, it is nevertheless facing challenging structural changes that have had a bearing on
revenue growth in 2008.
The UK’s fixed-line telephony market is in decline as use of mobiles and other forms of
communication, such as email and instant messaging, increase. Moreover, in the mobile and

37
internet/broadband sectors, growth has slowed significantly as markets approach saturation
and competitive pressure reduces prices.
With consumers more likely to switch provider as they seek the best deal, mobile operators
have given increasing emphasis to customer retention. This has resulted in more attractive
deals offered to customers who sign up for longer-term contracts, and has produced a
marked shift away from 12-month contracts towards contracts of 18 and 24 months (Figure
1.28). At the same time, consumers are also increasingly taking advantage of low
commitment one-month contracts. These are typically SIM-only tariffs, which allow mobile
operators to reduce subscriber acquisition costs as there is no need to subsidise handsets.
Figure 1.28 Post-pay mobile sales, by length of contract
2
13 10 15 19 24 24
88
76 72
58
44
33
25 19 16 15
11 13
12 8 5 3
12 12
24 27
41
55
66 74 80 84 82 75 72 68 67 63 60
1 1 1 1 1 1 1 1 2 3 5 7 13
1 4 1
88
0
20
40
60
80
100
Q1
2005
Q2 Q3 Q4 Q1
2006
Q2 Q3 Q4 Q1
2007
Q2 Q3 Q4 Q1
2008
Q2 Q3 Q4 Q1
2009
Shareofcontractsales(percent)
Other
24 months
18 months
12 months
1 month
Source: GfK Retail and Technology Ltd, based on factual point-of-sale information
Notes: (1) England, Scotland and Wales only (excludes Northern Ireland); (2) based on GfK’s
coverage of 94% of the consumer market; (3) based on new post-pay connections; (4) excludes
contract renewals; (5) only represents sales through consumer channels (i.e. most business
connections are excluded)
Mobile operators have also sought to migrate pre-pay (pay-as-you-go) customers to post-
pay (pay monthly) contracts as part of their customer retention strategies, by introducing
cheaper tariffs. For the first time in 2008, sub-£10 a month contract tariffs were launched,
while in Q1 2009 32% of new pay-monthly tariffs were under £20 a month, up from 23% in
Q1 2008 and 5% in Q1 2007. The popularity of such offers is reflected in a fall, for the first
time, of pre-pay subscriptions in 2008, while the rate of growth in the number of contract
subscriptions increased (Figure 1.29).
Figure 1.29 Pre-pay and contract mobile subscriptions
35.6 39.8 43.2 45.8 47.0 46.9
17.3
20.2
22.6 24.3 26.8 29.952.9
60.0
65.8 70.1 73.8 76.8
32.7 33.7 34.4 34.7 36.3
38.9
0
20
40
60
80
100
2003 2004 2005 2006 2007 2008
Subscriptions(millions)
0
10
20
30
40
Proportioncontract(%)
Contract
Pre-pay
Proportion
contract
(RHS)
Source: Ofcom / operators
Notes: Based on network operator reported figures; likely to overstate activity in reference quarter;
includes estimates where Ofcom does not receive data from the operators

38
Telecoms operators cut costs
As the economic climate puts pressure on profitability and makes bottom-line margins more
important than top-line growth, operators have focused on reducing costs:
 BT cut 15,000 jobs in 2008 and in March 2009 announced a pay freeze for its
100,000 employees5
. In February 2009, mobile operator Vodafone, said that 500 UK
jobs would be cut6
.
 Some mobile network providers have started to offer preferential tariffs to new
customers signing up with their own (tied) service providers directly rather than using
a third-party dealer. In this way they can reduce commission payments to dealers.
 Some mobile network providers have sought to reduce operating costs by sharing
networks to avoid duplication of infrastructure. In March 2009, Vodafone and O2
agreed to do this in several European countries, including the UK. T-Mobile and 3UK
have jointly operated a 3G network in the UK since 2007.
 In March 2009, Orange announced that it was outsourcing its mobile network
operations in the UK to cut costs7
, and in June 2009 Kingston Communications
signed a similar contract to outsource the management of its network assets to BT.8
5
http://www.btplc.com/News/ResultsPDF/q409release.pdf
6
http://www.independent.co.uk/news/business/news/vodafone-cuts-500-uk-jobs-1630547.html
7
http://www.nokiasiemensnetworks.com/global/Press/Press+releases/news-
archive/Orange+to+outsource+mobile+network+operations+in+the+UK.htm
8
http://www.kcom.com/mediacentre/news/news_article.asp?ArticleID=DA_223187

39
1.4 Consumers embrace DVRs
1.4.1 Introduction, structure and key findings
Introduction
Domestic television recording hit the mainstream in the 1970s with the widespread adoption
of analogue video cassette recorders (VCRs). As innovations such as Videoplus and
barcode readers improved the ease with which programme details could be captured and
programmes recorded, VCR take-up reached a high of 91.2% of UK homes in 2001.
However, by today’s standards, functionality remained limited and the user experience felt
cumbersome. Penetration of VCRs had fallen to 57% of UK homes by 20089
as consumers
abandoned the analogue devices in favour of digital equipment such as DVD players and
recorders, and digital video recorders (DVRs).
The DVR- also known as a personal video recorder (PVR) or digital television recorder
(DTR) - offered consumers greater convenience and control over their television watching
than had been available through VCRs. DVRs removed the need for physical tapes and, for
the first time, viewers could rewind and pause live television and record one or more
programmes while watching another. DVRs contain an internal hard drive - similar to those
used in personal computers - which allows consumers to record and store programmes in
digital format.
American company TiVo was the first to offer DVRs in the UK in October 2000, with the
launch of its eponymous device that worked with satellite, terrestrial and cable television. A
year later BSkyB launched its Sky+ product. This was followed in 2003 by DVRs for the
Freeview DTT service and in 2006 by Telewest’s TVDrive, which later became V+ with the
creation of Virgin Media. Other DVR devices include Top Up TV’s Freeview+, BT Vision’s
Vision+, Tiscali +, Freeview+ (previously Freeview Playback) and Freesat+ (the ‘+’ symbol
now seems synonymous with digital television recorders in the UK).
Structure
We have chosen to focus on DVRs in this section because of the growing appetite among
consumers for recording broadcast programmes for playback later. Nearly 9 million DVRs
have been sold since 2000, helped in large part by the move to digital broadcasting. We
cover other forms of non-linear broadcasting, such as online catch-up TV and video-on-
demand, in the Converging Markets section: 5.2.2 (page 265). Here we set out key metrics
on the take-up and use of DVR products and identify trends in consumer attitudes towards
DVR use.
Key findings
Key findings in this section include:
 More than a quarter of consumers (27%) claimed to use a DVR at the end of
March 2009, equivalent to 7 million homes, according to Ofcom research. This rose
to nearly a third of consumers (31%) in multichannel television homes (page 41).
 These figures are a little lower than those for operator and sales data, which
suggest that nearly 9 million DVRs had been sold in the UK at the end of March
2009. The five million Sky+ boxes (launched in September 2001) made up the
majority of the UK DVR universe at the end of Q1 2009, followed by Freeview+ and
9
Source: BVA Yearbook 2009 (GfK, BVA, Screen Digest)

40
Freesat+ and Top Up TV devices, which together accounted for around 2.6 million
devices (page 41).
 15% of viewing across the five main PSB channels in 2008 was of programmes
recorded using a DVR, according to data from BARB, the television industry’s
audience measurement organisation. In Sky+ homes this rose to 19% (page 42).
 Adults aged 16-34 are the group most likely to watch programmes recorded on
a DVR; 19% of viewing among this age group was on a recorded basis in 2008
according to BARB, compared to 11% for viewers aged 55 and over (page 43).
 High-definition programmes are among those most viewed after their initial
broadcast in Sky+ homes, according to viewing data from the SkyView panel. A
third of viewing of Drama serials and series in Sky+ homes is recorded (pages 46
and 48).
 42% of consumers said that they watched a greater variety of programmes
since owning a DVR, although a third (33%) disagreed with this. Eighty per cent of
consumers believe that they watch more programmes that they enjoy because they
have a DVR (page 51).
 DVRs are becoming increasingly advanced, offering viewers search
functionality and ‘push’ video-on-demand, where programmes are downloaded to
the hard disk drive, for example. Hard drives are also increasing in size; some DVRs
offer up to 250 hours of recording, up markedly from the 40 hours available on early
generations of devices (page 51).
 The average retail price of DVRs for the Freeview market had fallen to £106 at
the end of March 2009, down from £172 in March 2005, according to GfK sales
data. Similarly, the costs of DVRs from the main pay-TV operators have fallen (page
52).
 Consumers are using a range of services to ‘catch up’ on television
programmes including online catch-up TV and TV-based video-on-demand. We
explore these in detail in section 5.2.2 (page 265).
1.4.2 More than a quarter of homes have a DVR
Twenty-seven per cent of consumers (equivalent to around 7 million homes) said that they
used a digital video recorder (DVR) in their home in Q1 2009, according to Ofcom research.
This represents an increase of seven percentage points from Q1 2008 (Figure 1.30). This
rose to nearly a third (31%) among those with multichannel television, up from 23% a year
earlier.

41
Figure 1.30 DVR take-up
20
23
27
31
0
10
20
30
40
Have DVR - all Have DVR - all with multichannel tv
%
Q1 2008
*Q1 2009
Source: Saville Rossiter-Base, Technology Tracker Q3 2008 (July/Aug)
QR1/2 Do you have a recorder for your TV service which allows you to pause and rewind live TV,
such as Sky Plus, V Plus or BT Vision V-Box? Do you personally use this DVR? 2009 – QR1a-e
Ownership asked among owners of each TV service. Does your service allow you to record and store
programmes, pause and rewind live TV? Base: All respondents (1581), all with multi-channel TV
(1345) * Question wording changed in Q1 2009 so data not directly comparable with Q3 2008.
While our research found that 27% of homes claimed to use a DVR, this could be an
underestimate. According to operator and retail data, nearly 9 million DVRs had been sold
(or rented to consumers) at the end of Q1 2009. The discrepancy could be accounted for by
ownership of multiple DVRs, the replacement of devices and also a lack of consumer
understanding of what device they own and its functionality.
BSkyB’s Sky+, which launched in September 2001, accounts for the largest part of the UK
DVR market – 5 million homes, or around 60% of all DVRs sold at the end of March 2009
(Figure 1.31). We estimate that Freeview+, Freesat+ and Top Up TV devices combined
accounted for about 2.6 million, followed by V+ (0.6 million) and BT Vision’s Vision+ (0.4
million).
Figure 1.31 UK DVR sales/rentals, Q1 2003 – Q1 2009
0
1
2
3
4
5
6
7
8
9
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
BT Vision
Freeview+,
Freesat+,
Top Up TV
V+
Sky+ and
Sky+ HD
0
1
2
3
4
5
6
7
8
ep-02
ec-02
ar-03
un-03
ep03
Units sold (m)
Source: Operator results, GfK sales data and Ofcom estimates
Note: Figures represent sales and not homes. Freeview+and Freesat+ data based on GfK sales data.
BT Vision, V+, Sky+ and Sky+ HD based on operator data. Sky+ figures include the Republic of
Ireland. V+ boxes are rented to Virgin Media customers.

42
1.4.3 DVR use varies by age, platform and channel
There are growing signs that DVRs are increasingly influencing the way that people watch
television, but the impact they have varies by age, platform and channel.
Figure 1.32 illustrates the proportion of recorded viewing attributed to the five main PSB
channels. 10
BBC One and ITV1, the two largest networks by audience and programming
investment, attracted the highest proportion of live viewing in 2008, according to BARB data.
Recording was most prevalent among channels that typically carry more Factual or Drama
series in their schedules (particularly US acquisitions); around 20% of viewing on each of
BBC Two, Channel 4 and Five was watched via a DVR in 2008.
The time consumers choose to watch their recorded content also varies on average across
the five PSB channels; there was a roughly equal split between recorded programmes
watched on the same day as the broadcast (8%) and those watched two to six days later
(7%). But for BBC Two and Five, the two channels with the greatest amount of recorded
viewing, more programmes were watched two to six days later (as BARB measurement
covers only up to seven days after the original broadcast, the data may underestimate the
total proportion of recorded viewing).
Figure 1.32 Proportion of live and recorded viewing across five PSB channels
85% 87% 82% 87% 82% 81%
8% 7%
8%
7%
9%
10%
7% 6% 10% 5% 8% 11%
0%
20%
40%
60%
80%
100%
Main PSBs BBC One BBC Two ITV1 Channel 4 Five
Recorded:
viewed 2 - 6
days after
broadcast
Recorded:
viewed
same day as
broadcast
Viewed
initial
broadcast
Proportion of viewing (%)
Source: BARB 2008, all individuals with DVRs
Note: Totals may not equal the sum of the components due to rounding
Recorded viewing was most prevalent among DVR owners aged 16-34, where it accounted
for 19% of all programmes watched. More than half of this (11%) was done on the same day
as the broadcast, while 8% was watched within two to six days. DVR owners aged over 55
watched the lowest proportion of recorded programmes - 11% of their total viewing - of
which most was watched between two and six days after the initial broadcast.
10
The term ‘time-shifting’ is also sometimes used to describe viewing recordings of broadcast
programmes. However, in this report we simply use the term ‘recording’ in order to distinguish it from
the activity of watching programmes on ‘+1’-type channels, those that repeat a broadcast an hour
after the initial showing.

43
Figure 1.33 Proportion of live versus recorded viewing, by age, 2008
85% 84% 81% 85% 89%
8% 8% 11% 8% 5%
7% 8% 8% 7% 6%
0%
20%
40%
60%
80%
100%
All DVR inds DVR Children DVR 16-34 DVR 35-54 DVR 55+
Recorded:
viewed 2 - 6
days after
broadcast
Recorded:
viewed
same day as
broadcast
Viewed
initial
broadcast
Note: Totals may not equal the sum of the components due to rounding
When splitting the DVR user base by socio-economic group, there was little variation. DVR
users in the AB socio-economic group were representative of the national average, with 85%
of their viewing time spent watching live TV, 8% recorded and played back on the same day
as broadcast and 7% within two to six days. Those with DVRs in the socio-economic DE
group watched fractionally more live television (86%) while C1C2s watched the least (84%).
Figure 1.34 Proportion of live versus recorded viewing, by socio-economic group
85% 84% 84% 86%
8% 8% 9% 7%
7% 8% 8% 7%
0%
20%
40%
60%
80%
100%
AB inds with DVR C1 inds with DVR C2 inds with DVR DE inds with DVR
Recorded:
viewed 2 - 6
days after
broadcast
Recorded:
viewed
same day as
broadcast
Viewed
initial
broadcast
Note: Totals may not equal the sum of the components due to rounding errors
Figure 1.35 focuses on how the proportion of average recorded viewing differs by platform.
Of the main DVR services, Sky+ users watched the highest proportion of recorded content
during 2008 (just under 19%), according to BARB. As BSkyB was the first platform operator
to offer a DVR, this could be explained by the maturing Sky+ user base, increasingly at ease
with using recording functionality. V+ users watched significantly less recorded viewing from
the DVR (12%), which might be influenced by the availability of VoD in those homes, while
the figure for Freeview DVR users dropped to 9%.

44
Figure 1.35 Proportion of live versus recorded viewing, by platform, 2008
82%
91% 88%
10%
5% 7%
9%
4% 5%
0%
20%
40%
60%
80%
100%
All inds with Sky+ All inds with Freeview DVR All inds with V+
Recorded:
viewed 2 -
6 days
after
broadcast
Recorded:
viewed
same day
as
broadcast
Viewed
initial
broadcast
0%
20%
40%
60%
80%
Source: BARB 2008, all individuals with DVRs.
Note: Totals may not equal the sum of the components due to rounding errors
Both recorded and live viewing in Sky+ homes increased between January to May 2007 and
the same period in 2009, by two minutes and four minutes respectively (Figure 1.36).
Figure 1.36 Daily TV viewing in Sky+ homes, live and recorded, Jan - May
2 hrs 40 mins2 hrs 40 mins2 hrs 36 mins
34 mins32 mins
34 mins
0
0.5
1
1.5
2
2.5
3
3.5
2007 2008 2009
Recorded
viewing
Live viewing
2 hrs 40 mins2 hrs 40 mins2 hrs 36 mins
34 mins32 mins 34 mins
0
0.5
1
1.5
2
2.5
3
3.5
2007 2008 2009
Recorded
viewing
Live viewing
Hours
Total viewing
Source: BARB: Jan-May 2007-2009 (Base: individuals in Sky+ homes, viewing via the Sky box,
average hours all)
Among younger people, who traditionally watch less television, total viewing was up slightly
between 2007 and 2009. Among adults aged 16-34 in Sky+ homes, between January and
May, the amount of recorded viewing increased by six minutes between 2006 and 2009,
rising from 18% of the total to 22% (Figure 1.37). Live viewing among this group fell over the
same period from 2 hours 21 minutes to 2 hours 18 minutes. The SkyView panel, BSkyB’s
audience measurement panel, covers 33,000 homes, of which around 9,000 have Sky+
devices.11
11
http://www.skymedia.co.uk/_downloads/64/SkyView%20Venn.pdf

45
Figure 1.37 Daily TV viewing in Sky+ homes, live and recorded, adults 16 - 34, Jan-
May
Hours
2 hrs 24 mins2 hrs 21 mins 2 hrs 18 mins
0
0.5
1
1.5
2
2.5
3
3.5
2007 2008 2009
Recorded
viewing
Live viewing2 hrs 24 mins2 hrs 21 mins 2 hrs 18 mins
0
0.5
1
1.5
2
2.5
3
3.5
2007 2008 2009
Recorded
viewing
Live viewing
Total viewing
Source: BARB, (January – May 2007 - 2009, base: adults 16-34 in Sky+ homes. Viewing by the Sky
box, average hours, all)
These findings are broadly compatible with our consumer research, which found that the
majority of DVR owners (72%) claimed to watch ‘about the same’ amount of television since
getting the device, while 17% believed that they watched more television, and 8% thought
they watched less.
Figure 1.38 Whether DVR ownership has changed amount of TV viewing
17 72 8 4
0% 20% 40% 60% 80% 100%
TV watched since
getting DVR
More About the same Less Don't know
17 72 8 4
0% 20% 40% 60% 80% 100%
TV watched since
getting DVR
More About the same Less Don't know
%
Source: Saville Rossiter-Base, Technology Tracker Q3 2008 (July/Aug). Base: Those with a DVR
(320) QR10 Since getting your DVR, do you think you watch more, less or about the same amount of
television?
1.4.4 Films and HD channels prove popular for recording
High-definition (HD) television channels accounted for three of the four channels with the
greatest proportion of recorded viewing in Sky+ DVR homes in the first half of 2009,
according to SkyView data (Figure 1.39). In particular, 59% of Sky 1 HD viewing was
recorded, substantially ahead of Channel 4 HD, with 43%, and BBC HD with 33%.

46
Figure 1.39 Most-recorded channels in Sky+ homes, Jan-May 2009
75%
74%
74%
71%
70%
69%
69%
69%
68%
68%
68%
67%
67%
65%
57%
41%
26%
26%
29%
30%
31%
31%
31%
32%
32%
32%
33%
33%
35%
43%
59%
25%
0% 20% 40% 60% 80% 100%
Channel 4
BBC 3
Sci-Fi Channel
More 4
Living
Sky 1
Sky Movies Premiere
BBC 4
E4
FX
Fiver
Five USA
BBC HD
Five
Channel 4 HD
Sky 1 HD
%
Live viewing
(%)
Recorded
viewing (%)
Source: SkyView Jan – May 2009 (Base: All PVR individuals)
Five and Channel 4 are the only main PSB channels to be included among the 16 channels
with the highest proportions of recorded viewing, with more than a third (35%) of all Five
viewing being recorded, compared to 25% for Channel 4. However, the portfolio channels of
the PSBs constituted half (eight) of the channels included in this analysis. The remainder
were made up by multichannels Living TV, Sci Fi Channel and FX, which often show US
Drama acquisitions, and by Sky Movies Premiere, the only dedicated film channel in this list.
These trends could be explained by a number of factors:
 Given the limited availability of HD compared to standard-definition content, it is
possible that viewers record HD programmes to get the most out of the subscription.
 Generally, the channels included in the list are those that broadcast the commonly-
recorded programme genres: Drama, Soaps, Documentaries, Art, Comedy and
Entertainment. (Film is the exception here) (Figure 1.40).
 A higher proportion of recording could also suggest that a channel offers ‘must-see’
programming (Ofcom research found that 82% of respondents said that their main
reason for recording a programme was that they were not at home).

47
Figure 1.40 Programme genres most likely to be recorded
18
19
24
34
34
35
48
53
62
0 20 40 60 80 100
Entertainment including comedy
Science, nature and wildlife programmes
Sports highlights and sports shows
Live sports
Soaps
Comedy
Documentaries
Drama
Films
%
Source: Saville Rossiter-Base, Technology Tracker Q3 2008 (July/Aug)QR8 Please indicate which, if
any, of the following types of programmes you are more likely to record and watch later using your
DVR? Base: Those with a DVR (320)
Viewing data on actual recording are broadly consistent with consumer research on claimed
behaviour for recorded viewing (Figure 1.40 and Figure 1.41).
Our research found that Film was the genre most likely to be recorded by DVR users. In
Sky+ homes, films ‘for cinema’ and films ‘made for TV’ feature in the list of genres with the
highest proportion of recording. Seventeen per cent of films that were made for cinema were
watched on a recorded basis, compared to 13% of made-for-TV films.
For some Film channels and some households, the film viewing experience is a live family
event at a scheduled time. In addition, many film channels have numerous multiplexes and
‘+1’ channels, so viewers might not need to record films as much as genres like Drama.
Figure 1.41 shows that Drama and Soaps were the most-recorded programming genres in
Sky+ homes, accounting for 33% and 29% of viewing respectively between January and
April 2008. Programme genres that lend themselves best to live viewing, such as Sports and
News, had a lower propensity for recorded viewing, according to Ofcom’s consumer
research and the SkyView data.

48
Figure 1.41 Proportion of live versus recorded viewing, Sky+ homes
97%
94%
92%
92%
91%
87%
87%
86%
83%
84%
73%
71%
67%
6%
8%
8%
9%
13%
13%
14%
17%
16%
27%
29%
33%
3%
0% 20% 40% 60% 80% 100%
News/Weather
Music
Children's
Sport
Current Affairs
Hobbies/Leisure
Films: made for TV
Entertainment
Films: made for cinema
Arts
Drama:Single Plays
Drama:Soaps
Drama:Series/Serials
%
Live viewing
(%)
Recorded
viewing (%)
Source: SkyView 01/01/2008-30/04/2008 (Base: All DVR individuals)
1.4.5 Drama series attract more recorded than live viewing in Sky+ homes
The ten most often-recorded programmes in Sky+ homes were all US series - none of them
with more than 35% live viewing - and nine of the ten were broadcast on channels which
carry advertising (Figure 1.42). US-produced series usually consist of around 22 episodes,
which requires a strong viewing commitment for anyone not wanting to miss a programme;
DVRs make this much easier to achieve.

49
Figure 1.42 Popular recorded shows, series average, Sky+ homes, Jan-May 2009
35%
35%
35%
34%
34%
31%
31%
31%
29%
28%
65%
65%
66%
66%
69%
69%
69%
71%
72%
65%
0% 20% 40% 60% 80% 100%
Lipstick Jungle (Living)
The Mentalist (Five)
A Town Called Eureka (Sky
1)
Desperate Housewives
(Channel 4)
Lost (Sky 1)
Prison Break (Sky 1)
Fringe (Sky 1)
24 Season 7 (Sky 1)
Heroes (BBC 3)
Dirty, Sexy Money (E4)
%
Live viewing
(%)
Recorded
viewing (%)
Source: SkyView, Jan-May 2009 (Min TVR = 1.0, Average all occurrences), all individuals with Sky+
Figure 1.43 shows that in Sky+ homes most recorded programmes are watched within a
week of the recording date. Sixty-one per cent of recorded viewing took place within a day of
broadcast, 91% within seven days, and only 9% later than this, according to SkyView data.
Figure 1.43 Time between recording and playback of programmes in Sky+ homes
61% within a day
91% within 7 days
0
10
20
30
40
50
60
70
80
90
100
Live
P
ause
2
4
6
8
10
12
14
16
18
20
22
24
26
28
% of recorded viewing
Source: SkyView six months ending March 2009 (Total TV).
1.4.6 Three-quarters of viewers claim to fast-forward most adverts
Consumer research carried out last year by Ofcom found that just over three-quarters (76%)
of respondents said that they fast-forward through adverts ‘always or almost always’ when

50
watching recorded programmes on DVRs (this compares to 78% when Ofcom conducted
similar research in July 2007). A further 9% of respondents believed that they fast-forwarded
through adverts ‘about half of the time’. Just 7% said that they ‘never or hardly ever’ skipped
through the adverts, while another 7% said that they never played back programmes from
channels containing adverts.
It should be noted that claimed behaviour in consumer research can differ from actual
behaviour. Thinkbox, the marketing body for commercial television in the UK, cited SkyView
data in its 2008 annual report, which stated that Sky+ DVR homes watched 30% of
advertising breaks at normal speed, which is more than our research would suggest (Figure
1.44). Thinkbox also reported that those with Sky+ DVRs watched 2% more adverts than
they did before they owned a DVR.12
Recent research carried out by Actual Consumer Behaviour (ACB) recorded television
viewing of couples and families in the living room and shared spaces. The research recorded
actual rather than claimed behaviour and found that 29% amount of viewing was from
programmes recorded on a DVR. It also found that participants still overstated their viewing
via DVR and when asked about their overall viewing.
Figure 1.44 Whether viewers fast-forward adverts with DVRs
7
7
9
76
0 20 40 60 80 100
Never play back
programmes from channels
with ads
Never or hardly ever
About half of the time
Always or almost always
%
Source: Saville Rossiter-Base, Technology Tracker Q3 2008 (July/Aug) QR9 When you watch
recordings you have made with your DVR, how often, if at all, do you fast forward through the
adverts? Base: Those with a DVR (320)
However, the emergence of DVRs has not yet had the cataclysmic effect on the UK
television sector that had been predicted by some technologists and advertisers.
Broadcasters and advertisers are now adapting advertising methods to fit the DVR
environment. For example:
 Some channels are displaying programme brand ‘idents’ in advance of the
programme starting, which could help to ensure that viewers fast-forwarding through
advertisements return to the normal viewing speed earlier. This will expose them to
more adverts and trailers at normal speed.
12
http://www.thinkbox.tv/upload/pdf/Thinkbox_Annual_Review_20090319.pdf

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