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Ofcom: Data use rising, telecoms revenue falling

Income for telecoms operators has fallen for the first time since the 1990s, as data use shoots up, particularly among mobile broadband customers
Written by David Meyer, Contributor on

Data usage across the UK's internet infrastructure is increasing sharply thanks to mobile broadband, but customers are paying less to use telecommunications services, according to research from Ofcom.

On Thursday, the telecoms regulator published its annual Communications Market Report (PDF), which found that UK broadband take-up grew by three percentage points between the first quarters of 2009 and 2010, reaching 71 percent. However, fixed broadband take-up remained flat, indicating that mobile broadband was the driving force behind the increase.

Data volumes over the country's internet infrastructure rose by 68 percent over the same period, with data carried over mobile networks jumping by 240 percent, according to Ofcom. The data explosion is partly down to the increased consumption of high-bitrate online video, although factors such as the rise of social networking and online gaming also come into play.

Against this backdrop of the data explosion, the telecoms companies delivering the connectivity are seeing their retail revenues fall.

"Operator-reported retail telecoms revenue declined by 2.6 percent in 2009 to £30.4bn (the lowest annual figure since 2006), the first time since Oftel began collecting data on the telecoms industry in the 1990s. This represents the lowest annual figure for such revenue since 2006, and the first fall since Ofcom's predecessor Oftel began its measurements in the 1990s," the regulator said in its report.

The drop in revenues was the result of the first year-on-year fall — of 3.5 percent — in mobile voice revenues, Ofcom said, along with a small fall in fixed-line internet access revenues. It added that the average household spend on telecoms services fell by 3.7 percent to £62.10 during 2009.

Over the last five years, this household spend has declined by 13 percent in real terms, even though call volumes have gone up by 10 percent and internet connections have increased 50 percent over the same period. This is partly down to increased take-up of communications bundles, where connectivity is packaged with services such as pay TV.

Ofcom's findings give weight to the fears expressed by telecoms operators, which are concerned that their revenues are falling just as they need to upgrade their infrastructure to cope with the data explosion. The situation is driving many — particularly mobile network operators — to look towards tiering their services as a way of mitigating data pressure and boosting income.

This stance is, in turn, central to the net neutrality proposals of Google and Verizon in the US. They propose that fixed-line operators should be forced to keep different types and sources of traffic equal on their networks, but that mobile operators should be free to discriminate as they wish.

In reaction to Ofcom's report, mobile operator 3 pointed out on Thursday that 97 percent of traffic on its own network is now data, rather than calls or texts.

"Facebook use on 3's network has more than doubled this year, as has the number of people using 3's network for maps," the operator said. "Google searches have risen by about 50 percent since last year, as have YouTube video views."

Indeed, Ofcom's report found that social networking is now responsible for 23 percent of all time spent online, largely thanks to Facebook. In addition, 23 percent of adults now access online content on their handsets, up from 20 percent a year ago.

The use of mobile data services reaches 45 percent in the 15-24 age group. Across the fixed and mobile internet, take-up has also increased by six percentage points among the 55-64 age group and by seven percentage points among those aged 65 to 74.

"Younger people have shown the biggest changes in how we use media — particularly using different media at the same time," Ofcom strategy and market developments partner Peter Phillips said in a statement. "But the divide between younger and older people's use of technology is starting to narrow as more older people are getting online and finding that things like email are very important to them."

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