Netflix and chill the great broadband driver

The annual Communications Report from Ofcom came out a few days ago and the consumer research within, which is combined with data with the Connected Nations Report published back in December 2016 gives the industry and Government lots of data to get its teeth into. The key message as called out in all the PR material is that lots of people use their broadband for watching TV, hardly a surprise for many of our visitors, the figures of 40 million adults (79%) using catch-up or streaming service shows just how popular it us, even more so when 35% are doing it weekly and 55% at least monthly. For broadband providers this growth is something they are well aware of in terms of the growth for peak time bandwidth, where the bottleneck may well not be the broadband connection over that ‘final mile’ but the core fibre network where you are just a flow of packets amongst millions of other packets.

If you have a spare few days on holiday and you work in the broadband industry then downloading the full PDF[1] onto a mobile or tablet to read on the beach or during a boring flight might be a good idea, but do remember to take some time away from your electronics when on holiday. Not everything in the report is crystal clear, on page 133 its suggested ‘Video streaming is data-hungry; an hour of 1080p full-HD video viewed on YouTube requires around 750MB of data’ this works out at just 1.6 Mbps which is a fairly low quality. BBC iPlayer HD weighs in at a bit rate of just over 5 Mbps (Mega bits per second) so one hour would chew 2.3GB of data.

Data collected from an android app Ofcom is using to collect research data suggests YouTube when connected via Wi-Fi is using 6.6 Mbps down to 3.8 Mbps when connected using 4G and lower still at 2.7 Mbps if connected with 3G. Netflix streaming suggests 3GB per hour for HD and rising to 7GB per hour for Ultra HD. What has changed a lot is the broadband market in the last few years and the pace of change is still high, for example during April, May and June Openreach connected some 437,000 new FTTC services so the Ofcom data for the end of 2016 while useful is still behind the curve of what is actually live.

The change is also evident when you look at the speed profile Ofcom reports, that at the end of 2016 was showing 44% on a 30 Mbps or faster connection, some 8% on a 100 Mbps or faster connection. The figures may look low but once you remember that the majority do not buy the fastest service available but play a balancing act of price versus bragging rights. Looking at our own data where Q2 2017 is the latest data set we see figures that backup what Ofcom is saying, to reduce the impact of Wi-Fi we have filtered out the mobile phones and tablets from this data-set, but there will still be plenty of computers using Wi-Fi connectivity which means figures could be better still and we think the Ofcom figures are based on connection speed data.

The download chart shows we have 43% of speed tests done in Q2 2017 at 24 Mbps or faster and 4% at over 100 Mbps, the key area is the 33% of people with speed tests under 10 Mbps. Of course we can also show the upload speed profile which has 36% of tests with an upload under 1 Mbps with the various bumps indicating the upload speed limits of the most popular products. For Q3 2017 we will try to get an analysis where we can look at the speed profile for those areas with a superfast broadband option and those without.

Rolling out the faster broadband services to allow even more people to reliably stream TV and movies means investment, and while there is an indication of an increase in revenue to the telecoms industry as a whole up ?0.2 billion in the last 12 months to ?35.6 billion this is still well below the revenue levels of 2011 when revenue was ?39.7 billion. The perculiar game that is continuing with voice line rental is highlighted with the decrease in wholesale costs going against the grain of what is happening at the retail level – there is a new caveat and that with broadband and line rental now advertised at a single price for some providers even Ofcom has no idea what the line rental component is now at the retail level on some providers, one of the side effects of the changes in broadband advertising in 2016, which also say things like delivery costs of routers increase when the various upfront costs were merged into a single fee. One of the key reasons for the retail line rental increasing seems to be the collapse in call volumes over landlines and the popularity of call bundles.

A caution for those counting down the days until broadband without voice line rental is available, while there may be a small price saving the revenue options from calls mean providers at the retail level may only have very small price differentials, once only has to look at the cable broadband and FTTH market to see that dropping voice rental does not massively reduce the retail price.


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