UK ISP, Cable and Dongle Users January 2011

Here is an update of the UK ISP market covering DSL and Cable Access market as well as the Mobile Dongle market in the UK. I have used ITU published data for Broadband usage numbers and Neilson Ratings and ISP published figures to get an accurate picture as well all the reports and disclosures for each of the companies shown below. I believe these figures represent a reasonably accurate representation of the genuine adoption of broadband either via DSL, Cable or mobile dongle. Broadband connections included in this data cover download speeds equal to or faster than 256kbit/s

ISP		Total	% of UK Accts.
BT (inc Plusnet)		5,341,000	27.00%
Talk Talk		4,249,000	21.50%
Virgin Media		4,242,000	21.49%
Sky		3,006,000	15.20%
Orange		795,000	4.00%
O2 (Be Broadband)		663,800	3.40%
Royal Mail		600,000	3.00%
3 (Mobile Dongles)		255,000	1.30%
T-Mobile (Dongle)		195,000	0.90%
Vodafone (Dongle)		190,000	0.80%
Kingston		178,200	0.70%
Thus		93,000	0.50%

The UK Broadband market has become very concentrated with almost 20 million broadband accounts with over 98% concentrated in the top twelve providers with a high degree of consolidation among the top 5 players. The standard speed offering has increased from around 2Mb to 8Mb over the past two years, however many of the grand claims of the leading providers offering 20Mb broadband access is far of the mark with most only achieving 7-8 Mb on average.
The super fast 40Mb and 50Mb deals are beginning to enter the market but mainly only appeal to specialist hard care users in the consumer market.

Whilst the growth of mobile dongles has slowed the market continues to evolve. There are a number of players offering a range of speeds and costs. The market for the iPad and Kindle 3G devices is growing very quickly through sim only offerings. The new tablet applications such as the iPad and Samsung Galaxy and the soon to be launched Motorola Zoom represent the most exciting sector of the market and the mobile networks are likely to be climbing over each other to offer the 3G broadband connectivity. A quick look at the offerings below reveal the developments in the dongle market which will form the basis of any 3G Sim deals for the new tablets.

Who offers mobile broadband via mobile broadband dongles?

• Vodafone offers a range of mobile broadband dongles, the most popular being its small and speedy "USB Modem stick" starting at £15 a month. With speeds of up to 7.2Mb and download allowance of 3Gb, this offer is a real no-brainer.
• 3's mobile USB modem dongle comes free on many of the 3 packages. Offering 1Gb downloads and speeds of up to 7.2Mb, 3’s £10 per month offer is great value for money.
• T Mobile's USB dongles offer speeds of up to 7.2Mb and download allowances of 3Gb - 9/10 T Mobile customers say it "works like a dream".
• Orange's dongle is the sleekest and fastest they've ever made, offering speeds of up to 7.2Mb.
• Virgin Media was late to the mobile broadband market, but it is making some very attractive offers speeds of up 7.2Mb at excellent price points.
• O2 dongles get you online at speeds of up to 3.6Mb and start from just £10 per month.

Virgin Media sinks deeper into the red but grows broadband!

The cable services provider Virgin Media had a difficult last quarter of 2008, with new customer sign ups dropping by a massive forty per cent.

The company posted losses of £50 million for the same quarter, which it said was due to the fact that it only managed to attract 14,800 new customers compared to 24,000 in the same period in 2007.  At the same time Virgin Media has seen a fall in customers taking out the profitable broadband, TV and phone packages, with only 185,000 sales in the last quarter compared to 272,100 in the same quarter of 2007.   However Virgin Media claims that "record numbers of customers" are now making use of its services and despite the economic crisis they have seen an increase of 57,100 on-net broadband customers, taking their total to 3.68 million.  This is just 1.5% growth in user numbers at a time when Virgin has been advertising heavily and launching new services such as the new 50Mb package at the end of last year

Virgin Media also noted an improvement in tier mix, with a third of their users now subscribing to their next-generation (10Mb and above) services.   Virgin Media also announced this week that it will be upgrading its 2Mbps broadband customers to a superfast 10Mbps service as it steps up its bid to become "the highest-quality broadband service in the UK". Indeed Virgin will begin migrating customers to the new connection in May, with prices for the 10Mbps package starting from £14 a month.

With Virgin’s broadband user numbers growing slower due to the economic downturn and increasing numbers of broadband users choosing to go to 3G Mobile broadband rather than tethered broadband.   Recently the Office of National Statistics indicated that fixed broadband has started to fall for the first time and this trend looks will have an impact on the major operators.  Expect to see aggressive price cuts to lure new customers from the major broadband ISPs such as BT and Sky during to spring of 2009 to compete with Virgin’s £14 a month 10Mb service.

At least Virgin has not yet decided to opt for Phorm like BT, however, there remain a number of legitimate revenue generating activities it could opt for now that it has deployed DPI (deep packet inspection) such as DNS and HTTP error monetisation.

UK Mobile Dongle User Numbers – Feb/March 2009

I have been researching the number of users now using 3G mobile dongles to link to the Internet in order to offer some insight into this largely hidden phenomenon.

Globally the market for 3G dongles is set to grow from 20 million units in 2008 to 26 million units in 2009 despite the downturn.

In Europe, some of the strongest growth has been recorded mainly due to the near saturation level of mobile usage compared to other parts of the world due to aggressive marketing push from the operators and the handset manufacturers.  This has resulted in an interesting development amongst Generation Y, those users born between 1978-2000.  This group have led the way in not bothering with fixed access telephony and are consequently adopting the 3G Dongle as their preferred method of Internet access.  Much of this growth is based on competitive all-you-can-eat tariffs and ease of use.

In the UK, which makes up approximately 3.5% of worldwide dongle sales, the mobile dongle user community now makes up over 4% of the overall broadband market.  These figures may not seem very impressive; however, with overall dongle sales set in 2009 to see 15% growth over 2008 and with the traditional broadband market at a standstill, the dongle market is likely to continue to make significant in-roads into the broadband market in 2009.  With increasing choice of low cost tariffs and user numbers in the UK could easily top one million by the end of 2009.

UK Market – February 2009

No	Operator	Number of Users	% Share	Comment
1	3	255,000	34%	The established leader of the dongle market, 3 has led the pack with its innovative pricing packages.
2	T-Mobile	161,000	22%	T-Mobile has used the UK as its primary test market for their dongle strategy and their innovative “webNwalk” service.
3	Vodafone	132,000	18%	Vodafone is the fastest growing of the major networks aggressively promoting and subsidising dongles because they are viewed as a secondary device that provides additional revenues for carriers beyond a traditional handset.
4	O2 (Dongles only)	122,000	16%	02 were the first major mobile network to enter the broadband market in the UK following its acquisition of Be, however, this seems to have been a distraction which has slowed their adoption of a dongle strategy.
5	Orange	57,000	7.7%	Orange seem to stumble from drama to crisis.  Their 3G Dongle strategy is little better.  They are seeing declining share of the broadband market and have been slow to put together a competitive offering for the dongle market.
6	Virgin Mobile	15,000	2%	Somewhat off the pace with their 3G dongle priced at £15 per month running over T-Mobiles network as MVNO.
	Total	742,000

To get an accurate picture, a number of published and unpublished sources have been used.  One needs to guard against the marketing hype that is put about regarding sales of individual networks, but the 3G dongle market is viewed as an area of vital importance by the mobile networks.  It will be interesting to see how the traditional ISPs respond.  Late in 2008, BT Broadband started to offer a WiFi dongle that connected to their network hotspots, BT Openzone, to their customers as an extension of their standard contract.  Neither  Sky or Tiscali have a competitive offering as yet, although Tiscali could still make a good fit for Vodafone.

Will 2009 be the year of the Dongle?

With the global market for 3G dongles set to grow from 20 million units in 2008 to 26 million units in 2009, the dongle is set to become a standard accessory for the “mobility”.  Fuelled by subsidized access from the major mobile networks such as Vodafone and 3, the dongle is grabbing an increasing share of the internet access market.   Nokia was reported in December to be launching a new Nokia dongle which has been unofficially christened the “donkle”.

This is all very bad news for traditional fixed line ISPs and Cable operators who with one or two notable exceptions have failed to capture any significant numbers from the IPTV developments.  Now plain utility broadband (PUB) is about to be squeezed by the major mobile companies aggressively moving on to their turf.

With 3G Broadband dongle service costing as little as £10 a month and you get a free laptop offers, ISP’s PUB service is going to find it hard to compete.  As we have seen with the growth of the mobile telephony market, the market has seen the entry of all manner of players from telcos to supermarkets, all seeking to tie their users in with some very low offer just to retain customers for a broad range of services.  ISPs look like a threatened species and will need to evolve very quickly if they are to survive.

Whilst Europe is seeing double digit growth for the major mobile players, the US market which is traditionally slow to adopt mobile developments is just beginning to see the dongle develop a small market share.  The entry of Nokia and the proof of success in Europe will undoubtedly see the likes of Vodafone and T-Mobile seeking to capitalise on their European experience in the US.   This will undoubtedly drive some of the middle rank ISPs to the wall.  2009 will be a very interesting year.

The Mobile Dongle is becoming mainstream

The fastest growing segment broadband internet access in the UK is the mobile dongle.  Almost overnight - well the last 12 months - the dongle has become the preferred method of access for new internet users. 

The term dongle has traditionally referred to any USB device; however, with the rise of mobile broadband it has become synonymous with mobile broadband modems.

Mobile broadband dongles are portable modems that plug into the USB port of your laptop or computer providing internet access via 3G signalling. Dongles are popular with business and personal users alike as they offer greater flexibility and increase communication opportunities.

All dongles come with “plug and play” technology so there’s no need to install any software; you just insert your mobile broadband sim card and plug in your dongle. The software will automatically be loaded onto your laptop and you’ll be able to connect to the internet within minutes.  The recent introduction of Pre Pay PAYG (Pay as you go) dongles from the leading mobile players has resulted in accelerating their adoption with price having traditionally been the main barrier to the roll-out of the mobile internet amongst personal users.  Pre-pay dongle sales have jumped from 10% to 25% of the market in just two months.

The market leader in the UK with 40% of the market is Mobile player 3 who were the first to enter the market and introduce the PAYG option.  T-Mobile have established themselves as an innovator in the traditional mobile phone tariffs and have been quick to grow their position in the UK to take 24% of the market.  Vodafone having largely missed out on the Internet market in the UK, have been quick to adopt the dongle as their preferred approach and have been the fastest growing player in the UK achieving 21% of the market today.

O2 has only a very small share of the market with 4% market share, but has largely focused its attention to growing its fast 24M Broadband fixed line service based on their acquisition of Be last year.

3G broadband modem has increased in popularity by an 18 per cent growth rate every month since February 2008. If this trend continues then around 300,000 mobile broadband devices would have been sold by December this year.  This suggests a mobile dongle market somewhere in the region of 500,000 users across the five operators offering the dongle service.

Whilst the mobile dongle has a long way to go to challenge the traditional fixed line broadband access with an installed base of in excess of 16 million lines in the UK, the pre-paid PAYG dongle could well become the de facto gadget for students and users on the move.