Recession hits but broadband keeps growing

Point Topic estimates that the UK added less than 200,000 new broadband lines in the fourth quarter of 2008. This is one more piece of news confirming the gloomy picture for the UK economy at the end of last year. Numbers were expected to be down anyway, but this is less than half what was forecast before the recession hit

“The main loser was BT Wholesale and its resellers who dropped almost 300,000 lines in 3 months according to our estimates,” says Tim Johnson, Chief Analyst at Point Topic.

“The local loop unbundlers, mainly Carphone Warehouse, Sky, Tiscali and Orange, did comparatively well in the quarter as consumers churned to their low cost bundles,” he continues. LLU operators added over 420,000 lines in the period according to BT Openreach figures.

Point Topic believes that Virgin gained too. It offers the cheapest broadband-plus-phone bundles available while its 20Mbps and, recently, 50Mbps services give it a strong offering at the other end of the scale as well.
Between them these operators offset the fall in BT’s numbers and contributed close to half a million new customers to bring the UK up to 17.23 million broadband subscribers at the end of 2008.

What does the future hold?

Point Topic tracks broadband numbers and market shares in the UK as part of its UK Plus service. It also forecasts future growth. Significant divergences from the forecasts provide a good measure of the effects of new developments in the market, such as the effects of the recession.

“The broadband market has been growing rapidly in the last few years and we project it will continue to add numbers through the recession, just much more slowly,” says Johnson. In fact it is striking how falls in broadband growth have closely mirrored the UK’s changing Gross Domestic Product.

“In Q3 2008 the economy shrank by 0.6% and broadband adds were 20% below pre-recession forecasts, in Q4 a 1.5% reduction in GDP has gone with a 50% shortfall compared to our pre-recession predictions. For every 0.3% fall in GDP there seems to be a 10% drop in broadband adds compared with expectations,” says Johnson.

“By our calculations, even if the economy shrinks by a further 3% in 2009 then there still will be about 900,000 new broadband customers by next December. That would take the UK total to over 18 million,” he predicts.

On the other hand internet access as a whole is struggling to increase. Broadband has grown mainly because homes and businesses are migrating from their dial-up connections. The 200,000 broadband gains in Q4 2008 were probably offset by a similar reduction in the number of people relying on dial-up.

“This means that the onward march of the internet has been brought to a halt, at least for the moment,” says Johnson. “There are still over 9 million homes and 700,000 businesses without the benefits of internet access. If the government is looking for ways of spending money to stimulate growth, then bringing access to no-net homes and businesses would be a good choice.”

More detail on Point Topic’s new estimates is available at
http://point-topic.msgfocus.com/c/12zwEB2vDpAlK2r .

***END***

For more information please contact:

Point Topic: Oliver Johnson

Email: oliver {at} point-topic(.)com

Tel. +44 (0) 20 3301 3303

About Point Topic

http://point-topic.msgfocus.com/c/12zwLdKZpCikTIY

Point Topic is an analyst company focusing entirely on broadband. Point
Topic’s international services have a global reputation for providing the
most up-to-date and authoritative user statistics, supplier profiles and
applications reports on DSL, FTTx, cable and other broadband services
worldwide.

Point Topic, reg. in England 3503830. 61 Gray’s Inn Road, London WC1X
8TL.