Superfast broadband take up will remain slow whilst online video remains uncompetitive.
Ofcom’s just published ‘Communications Market Report’ shows that although nearly 60% of homes in the UK have access to connections providing downloads faster than 25Mbps, only 7% of households have actually signed up to them.
On the surface, this will not be good news for the British government, which aims to make the UK a broadband leader in Europe by 2020. It also shows that the UK is far from achieving the EU's Digital Agenda goal, to have half of Europe’s households signed up to 100Mbps broadband services by 2020.
Ordinarily, I would say that the provision of superfast broadband is a classic example of a ‘if we build it, they will come’ approach (remember the Millenium Dome anyone?). However, I don’t believe this is necessarily the case here. It is no good having online content services in place that require fast broadband when the fast broadband infrastructure isn’t in place.
Cue this week’s partial launch of Sky’s ‘Now TV’ internet on-demand service. In a sign we are in transition to a post-satellite world, Sky is going to use the service to attract some of the remaining households not signed up to Sky’s satellite service or to its competitor, Virgin Media. Yet it is Sky’s hold on the top-tier movie line up that has helped constrain take up of superfast broadband. Recent launches of Netflix and Lovefilm’s UK online movie subscription services have not helped superfast broadband take-up because they don’t have the rights that Sky has. This said, these services together with Google TV and YouView launches will add to the mix and continue to bring on-demand to people’s attention.
So, we will see people taking advantage of superfast broadband as the content becomes available that people want, but don’t expect this to increase rapidly. A caveat remains that we need a competitive market around film and other on-demand content, which we are unlikely to have whilst Sky is able to retain its dominance around premium movie rights.