UK communications deals cheaper than in other major countries

• Competitive deals put UK top of league table for communications services
• Prices account for smaller portion of living costs than other countries surveyed
• UK is a nation of online shoppers - spending £1,175 per head online - up 16%

UK consumers are benefiting from lower priced communications services than people in other major European countries and the US, according to new Ofcom research ¹.

Compared to French, German, Italian, Spanish and US consumers, those in the UK can take advantage of consistently cheaper access to mobile phone, landline telephone and broadband deals.

To get the most accurate picture of what people need to spend in each country to get the best deals, Ofcom created five typical household profiles ². These ranged from a low use household with basic needs, through to an affluent household that uses lots of communications services.

Ofcom then identified the best deals available in each country that matched the needs of these households. The UK emerged as either the cheapest or second cheapest in four out of five of the profiles ³. This information was used to create the price rankings table below⁴.

Price ranking for communications services, 2013

While the UK was consistently cheaper, not all communications services were the most competitive relative to other countries. For example, the best deal for a typical family (two parents and two teenage children with average usage needs that bundles together communications and TV services ⁵) was £86 a month in France⁶. This was £6 cheaper than the best UK deal of £92 a month.

Premium TV subscriptions were also found to be more expensive in the UK (£66) than in other countries surveyed - and twice as costly as in Germany (£27), where the cheapest deal was offered. However, the UK package included twice as many channels, making it difficult to compare TV on a like-for-like basis.

The biggest savings available to UK consumers are for mobile phone deals, which are significantly cheaper than in other major European countries ⁷ - and almost three times less than what US consumers pay. For example, a typical handset with 200 minutes, 50 texts and 200MB of data costs on average £14 per month in the UK. In the US, this would cost £57 - four times as much. Overall, Ofcom compared eight mobile phone usage profiles, ranging from a basic handset with a low call allowance, to a premium smartphone with a large call, text and data allowance. The average price across all eight of these profiles fell by 23% for UK consumers during the year.⁸

These findings are included in Ofcom's ninth International Communications Market Report, which examines take-up, availability, price and use of communications services across the world's major countries.

Communications as a proportion of living costs

For the first time, Ofcom also compared the best communications deals offered in each country, relative to total household spending. Using the latest available data ⁹, the UK emerged as having the most affordable communications services for a typical household, with the best deals representing just 2.3% of total living costs.

The best deals available in France, Italy and the US represented 2.5% of consumers' outgoings in these countries. The least affordable country was Germany, where the best deals cost consumers 3.4% of their outgoings - nearly 50% more than UK consumers.

Communications as proportion of household consumption rankings, 2013

James Thickett, Ofcom's Director of Research, said: "The report confirms that consumers in the UK are benefiting from one of the world's most price competitive marketplaces for communications services.

"Telecoms bills have been falling in real terms in the UK for the past ten years. However, consumers are not just benefiting from cheaper deals - they are also getting much more for less, as the quality and range of telecoms services has expanded hugely in that time."

This research follows the publication of a National Audit Office report in November 2013 revealing that telecoms bills have fallen in real terms over the past ten years. At the same time, the quality of telecoms services increased significantly. For example, average actual fixed broadband download speeds have risen from 3.6Mbit/s in November 2008 to 14.7Mbit/s in May 2013.

Ensuring a fair deal for consumers

Ofcom has an extensive programme of work in place to promote competition, innovation and choice for the benefit of consumers. This includes:

• Mid contract price rises: In October, Ofcom issued guidance that consumers and small businesses should be allowed to leave their landline, mobile or broadband contracts without penalty if providers increase the cost of monthly subscription price deals.
• Easier switching: Earlier this year, Ofcom announced new measures to help consumers change landline and broadband providers with greater ease and convenience.
• Lost or stolen phones: Ofcom has expressed particular concerns about the unlimited liability that consumers can face in the event of unauthorised use of a lost or stolen phone. We are fully supportive of Government's recent agreement with industry to work towards the introduction of a monetary cap on customer liability when a phone is lost or stolen.
• Non-geographic numbers: Ofcom is proposing to make the cost of calls much clearer, with 080 numbers to be free for consumers to call from mobiles. A final decision on this is due soon.
• Roaming charges: Ofcom is ensuring providers comply with European Commission regulations to protect consumers when using their mobile phone abroad.
• Basic telephony: Ofcom regulation ensures that low income households have access to an affordable phone service (under £5 per month, with any increases capped at the Retail Price Index).¹⁰

Stamp prices

Despite experiencing a higher increase to stamp prices over the past three years relative to other countries, the UK remains one of the cheapest places to send a standard sized domestic letter. It costs 60p to send a First Class standard sized letter in the UK - the same price as in China. Among its European comparators, it is only cheaper to send a letter with the same dimensions in Ireland (49p) and Poland (46p).

A nation of online shoppers

Ofcom also researched consumers' online shopping habits, comparing a total of 17 countries. This revealed that people in the UK are spending significantly more per head than any other country surveyed, at £1,175 in 2012 - up by 16% from £1,017 in 2011.

This is £307 higher than the second highest country (Australia) and more than double the average spend per head of all the comparator countries: £560. Italy and Spain spent the least online per head in 2012, with figures of £126 and £180 respectively.

For the first time, Ofcom has investigated why online shopping is so popular in the UK relative to other countries. This reveals that UK shoppers trust online retailers more than shoppers in other countries and have greater confidence in the security of the sites they buy from.

UK consumers more likely to trust online retailers

People in the UK are more likely than any other country surveyed to trust online retailers. More than eight in ten (83%) agreed that they trust online retailers to send the correct item, compared to just 64% of Japanese and 68% of Italian consumers.

Equally, UK consumers trust the way products are advertised online - with eight in ten (80%) saying they were confident about advertising being accurate. Japanese consumers were much less trusting, with less than half (48%) having confidence in the way that products are advertised.

Seven in ten people in the UK (70%) feel secure when paying for products online, which may also explain the larger appetite for online shopping in the UK.

Most UK consumers are confident in delivery of goods ordered online

In the UK, the majority of consumers are confident that their goods will be delivered, while one in three (30%) lack confidence in this area. Spanish and Italian consumers are most concerned in this respect, with 50% and 46% lacking confidence that their goods would be delivered, indicating a substantial lack of trust in postal services. German consumers were least concerned, with only 16% indicating a lack of confidence in the postal system delivering their goods.

Consumers in Spain and Italy are most concerned about the cost of online deliveries, with more than half expressing concerns that delivery charges are too high (Italy: 52%; Spain: 53%). UK consumers were among the least concerned about the cost of online deliveries with four in ten (40%) citing delivery charges as their biggest concern when shopping online.

Other key market developments

Television

• The UK experienced a modest growth in television revenues in 2012, up by 1.4% or £0.2bn. Revenues among the 17 countries analysed by Ofcom increased by 3.7% in 2012 to £234bn.
• Almost half (48%) of UK TV homes now have a HD service, 15pp above the average for all European ICMR countries (33%). The UK also has the highest ownership of digital video recorders (41% of households) among all countries included in the research.
• UK consumers are the most likely to access TV content over the internet, with over a third (36%) of internet users claiming to do this every week.
• UK and French households have the lowest take-up of 3D ready TV (at 9% each)
• Four out of five (78%) UK smart TV owners have enabled their device to connect to the internet.

Radio and audio

• Among countries with licence fees, revenue growth is highest in the UK. Of all of the comparator countries with licence fees, only the UK experienced growth in revenues, and it is also the only country where both advertising and licence fee revenues increased.
• One fifth of those with a mobile phone in the UK use it to listen to the radio. Only mobile phone owners in Italy, Spain and China were more likely to use their mobile phone for this purpose.
• DAB take-up among radio listeners is highest in the UK. Almost half (48%) of regular radio listeners claimed ownership of a DAB digital radio set. Among our European comparator countries, Spain and Italy had the next highest take-up, with almost a fifth of radio listeners in each country claiming ownership.

Internet and web-based content

• The UK had the greatest spend per head on mobile internet advertising in 2012, rising by almost £5 to £8.04 per person. This is the first year on record that Japan did not have the greatest spend: it had the second highest at £7.50 per person. The surge in mobile internet advertising has been driven by an increase in smartphone take up along with the growth of in-search, in-app and Facebook advertising.
• Social networks remain among the most searched-for terms online for the majority of our comparator countries. 'Facebook' was the most searched-for term on Google for 14 out of the 17 countries compared, while photo sharing website ‘Instagram’ was the fastest growing term in the UK, the US, Canada, and Ireland.
• YouTube is the most popular website for viewers of online video content on a desktop or laptop.

Telecoms

• Total telecoms revenues among the countries compared increased by 0.4% in 2012.
• France was the only comparator country where fixed call volumes increased in 2012. Total fixed-line voice call volumes fell by an average annual rate of 5.5% to 1.5 trillion call minutes between 2007 and 2012. Fixed call volumes increased in France by an average annual rate of 1.3%. In the UK, volumes fell at an average annual rate of 7.3% in the same period, mainly due to fixed to mobile substitution.
• Fifteen per cent of UK fixed broadband connections were superfast at the end of 2012 - this represents the highest proportion among the EU5 countries and fourth highest among Ofcom's comparator countries, after the Netherlands (35%), Sweden (29%) and Australia (20%).
• The UK had the lowest proportion of total revenues that were generated by data services in 2012 at 31%. Japan had the highest proportion with 55%.
• Take-up of dedicated mobile broadband connections fell for the first time in the UK, Spain and Ireland in 2012. The main driver of falling mobile broadband use with a dongle/datacard/data-only SIM is likely to be consumers accessing data services on smartphones, meaning that the drop in mobile broadband use with a dongle/datacard will be more than offset by rising use of data services on mobile handsets.

Post

• A higher proportion of online UK adults send invitations, greetings cards or postcards in comparison to the other countries that we surveyed. More than a third (35%) of respondents in the UK had sent this type of mail in the past month. Those in Germany were least likely to have sent greetings cards, with around a fifth (18%) doing so.
• People in the UK receive more items of mail in a week than those in Italy, Australia and Spain. The average number of items received by people in the UK was 6.8, on a par with Germany (6.4) but far less than those in France where the average number of items received was highest (12.5).
• The UK is among the countries with the highest proportion of consumers who had received a parcel in the past month. Six in ten (61%) of people claimed to receive parcels, on a par with France and Germany. Those in Italy and Spain were least likely to have received a parcel in the past month.

Ofcom's International Communications Market report, which compares broadband, landlines, mobiles, TV, radio and post, will be available on the Ofcom website on 12 December 2013.

For an embargoed copy of the report, please contact news@ofcom.org.uk.

Notes to editors

1.    The prices of UK communications services in July 2013 were compared to those in France, Germany, Italy, Spain and the US (where Illinois has been used because it is broadly representative of the US as a whole in terms of its relative wealth and rural-urban split. This is an accepted methodology to reflect typical pricing in highly geographically fragmented markets).
2.    Typical houshold profiles included:

1. A low use household with basic needs
2. A broadband household with basic needs
3. A mobile 'power user'
4. A family household with multiple needs
5. An affluent household with high needs

3.    The UK emerged as providing the cheapest services for households 2 and 3 above. The UK was second cheapest for households 1 and 4; and fourth cheapest for household 5. This analysis compared the best deals offered in each country and included bundled service deals.
Ofcom also conducted a separate analysis that took the weighted average of the best three standalone deals offered in each country that were needed for each household profile. This excluded bundled deals. The UK was cheapest for households 2, 3 and 4 and second cheapest for households 1 and 5.
4.    Each country is ranked according to the best offer prices for each of our five baskets and the weighted average standalone prices. To calculate a final score, each country's position for each individual comparison was added up and divided by the total number of packages.
5.    Basket 4 represents usage typical of a family of two parents and two teenage children, each with their own mobile handset but with different mobile usage profiles, with the adults using more voice and the children more messaging and data. However, they are also heavy users of the fixed-line phone and the internet, requiring a minimum headline connection speed of 'up to' 10Mbit/s, and subscribe to an HD entry-level pay-TV service with a DVR.
6.    All prices have been converted to UK currency using purchasing power parity (PPP) adjustment based on OECD comparative price levels and exchange rates as at 1 July 2013.
7.    Overall, Ofcom looked at eight different user profiles to get a comprehensive overview of how much consumers are paying for mobiles. The UK was cheapest for six of these. Overall, the total weighted average cost of all eight connections fell by 23% during the year.
8.    This is a weighted average price, which relates to the top three cheapest mobile deals available in each country for each of the eight connections used. The largest falls in the UK related to the highest use connections.
9.    The comparison of best communications deals offered in each country, relative to total household spending, uses OECD household consumption data from 2011.
10.    'BT Basic' is an example of a basic telephony service. It provides a low cost means to make and receive calls, and is designed for low users of outbound calls. It currently costs £4.95 a month and is available to claimants of:
*    Income Support
*    Income-based Jobseeker's Allowance
*    Pensions Credit (Guaranteed Credit)
*    Employment Support Allowance (Income related)
*    Universal Credit (and are on zero earnings)