The number of broadband customers in the UK will continue growing steadily, but at a lower rate, to reach about 21 million by the end of 2012 (19 million consumer lines and 2 million business ones). The current downward trend in a growth rate of net additions to the number of consumer broadband lines is not just a blip but shows the pattern for the future, predicts analyst company Point Topic.
About 330,000 and 550,000 consumer broadband lines were added in the middle two quarters of 2007 respectively, the lowest numbers since 2003. This is barely half the growth achieved in the previous two quarters.
The third quarter saw a slight improvement. Almost 600,000 broadband lines (business and consumer) were added which is a better result than projected. The increase was due to good performance by the main broadband operators (Sky, BT Retail and Orange, and to a lesser degree Carphone Warehouse and Virgin Media). Together they added 660,000 lines while smaller competitors shared net losses of over 60,000.
A primary reason for the current slowdown in the market is the shrinking size of the remaining pool of dial-up users ready to be converted to broadband. Potential users are also put off by the widely reported problems in getting a broadband connection up and running, and controversy over the gap between promised and actual speeds.
One driver of steady growth in the consumer sector will be demographic advance. As people grow older, they will carry their internet usage habits with them into older age groups. This trend will contribute to about a 1% reduction of the number of non-user households each year. Another factor spreading appeal of new applications will be social networking.
Additionally, the efforts of both UK ISPs to tap this market sector and the government to increase digital inclusion should lead to the growth of market shares for broadband operators.
One key factor in Point Topic’s forecast is how quickly homes and businesses which are still without the internet will get online.
‘We forecast that about 4% of the remaining households without internet access will convert each year. That’s roughly the average for the past two years as a whole, but much better than in the last few quarters - so it implies improved performance by the industry,’ says Tim Johnson, Point Topic’s Chief Analyst.
Point Topic estimates that by the end of 2012 about 73% of homes and 85% of business premises will have a broadband connection. In the business market, which is expected to have lower barriers to take-up than the consumer sector, about 6.5% of the remaining business premises without broadband will get connected each year.