Home broadband: a market overview

julia kukiewicz
By Julia Kukiewicz

computer hand mouse

THE average Briton spent almost six hours a day online in 2016 according to research gathered by We Are Social, with 41.36 million purchases made online during that year.

Each one of us was worth an average of £1,670 to online retailers last year - making the UK's e-commerce habits worth a grand total of £69.1 billion in 2016.

And with the level of internet penetration in the UK at 92%, the only nations with higher levels of penetration are Japan (93%) and the United Arab Emirates (99%).

That makes the UK's broadband providers worth a little attention.

Subscriber numbers

Ofcom's December 2016 infrastructure report stated that 78% of the UK's households have an internet connection of some sort, unchanged from 2015.

The vast majority - more than 95% - get online through one of the big four ISPs - BT, Virgin Media, TalkTalk and Sky.

isp market share

SOURCE: Choose.net from quarterly results, customer numbers in millions.

Provider overview: The Big Four

BT

Broadband subscribers Q4 2016: 9.28 million

After some years on the ISP naughty step - synonymous with iffy broadband and poor service in the minds of consumers - BT Group's retail arm has come back with a vengeance.

In the quarter ending December 2016 the ISP reported that they had gained 83,000 new broadband customers in the previous three months. That's considerably down on the same period the previous year when they added 130,000 users.

But 2016 saw them expand their customer numbers massively overall - because of the absorption of EE's customer base towards the start of the year.

In total, by the end of December 2016 BT had almost 9.28 million internet customers - including those with EE and Plusnet - and just over 50% of them, some 4.7 million, take fibre of some sort.

Work to expand their fibre and standard broadband networks won't have hurt; they've been responsible for all of the infrastructure built under phase one of the Broadband UK (BDUK) project, which has now brought superfast FTTC broadband access to more than 4.3 million homes.

As well as getting a certain amount of government funding to help with that effort, BT have put in plenty themselves over time: they had to put up £2.5 billion a few years back, on top of an earlier £1.5 billion.

They're firmly on target to reach the first of the BDUK superfast deadlines - 95% coverage by the end of this year - having reached more than 90% of UK premises by the end of 2016, up from 82% at the end of 2015 and about 75% at the close of 2014.

Admittedly that's not just because of BT's efforts to expand the fibre network - they've had some help from niche ultrafast providers and one of their biggest rivals, Virgin Media.

Virgin Media

Broadband subscribers Q4 2016: 5.28 million

While the BT Group have the advantage of owning of the biggest broadband network in the UK - for the time being - they lose out in terms of speed to smaller providers with their own networks. The biggest and best known of these is Virgin Media.

In early 2014, the ISP doubled their standard broadband speeds to bring their top deal up to 152Mb; in October 2015 they started to roll out another speed boost taking that to 200Mb - leaving BT's up to 78Mb package even further behind.

In terms of broadband subscriber numbers, however, Virgin Media look like slightly less of a threat to BT's dominance. Almost 5.3 million customers now take internet from them, an increase of 214,000 over the year - a significant increase on 2015's customer growth of 158,000.

Early in 2015 they announced their £3 billion plan to fill the gaps in their network. Work began in June of that year, and they've passed nearly 720,000 homes during 2016, building on the extra half a million or so they added to the network in 2015.

Going beyond broadband is a key area for Virgin. Customers who take more than one service - i.e. some combination of broadband, home phone, TV, or mobile phone packages - have long been far more profitable.

In fact, only 17.2% of customers take just one service from the provider, with nearly 21% taking two. The vast majority - 62% - are triple-play subscribers, taking all bar their mobile service from the provider.

And as quad-play deals become more common across the media sector, 18.9% of Virgin customers already take all four services from the provider.

It's easy to forget now that just a few years ago they were really struggling.

The network they inherited from NTL was shaky and badly in need of repair and, in October 2007, bowing under the weight of huge debts, the firm even began a strategic review of its business after receiving a £5.5 billion offer from a private equity firm.

It took until Q4 2011/12 for the company to post their first £48.2 million profit.

Now owned by Liberty Global, they're in much better health.

Sky

Broadband subscribers Q4 2016: approx 6.1 million

The second biggest ISP in the UK is Sky.

The provider broke the five million subscriber mark in late 2013, and they passed six million in the second half of 2016, gaining 140,000 customers in the six months to the end of the year.

For the final quarter of 2016, they lagged behind BT in terms of broadband customer additions - but by quite how much is difficult to tell as since the end of 2014, Sky have combined their UK and Ireland customer bases in their results.

A couple of years ago, in summer 2013, Sky boosted their subscriber numbers by acquiring Telefonica's broadband business (O2 and Be) - although in 2014 they saw a dip as some of those newer customers left, unhappy with the takeover.

Before that, in 2011, the ISP expanded their network to cover around 80% of UK homes - another move that undoubtedly helped to swell subscriber numbers.

Sky's focus has always been TV, as the company's 2010 buy out of Virgin TV and apparent reluctance to offer broadband as a standalone product has demonstrated.

The reticence is at least partially a result of the ISP's reliance on Openreach for development and repair - and in the past few years an already strained relationship has been openly hostile at times, with Sky leading the calls for Openreach to be completely split from BT.

At the start of 2015 they announced plans to launch a mobile phone service, seeming to accept that multimedia - and quad-play in particular - is the only way to stay competitive in future.

However, that old preference for TV is still very much in evidence: the new mobile plans all come with a data allowance of some kind, but only customers who have Sky TV get any inclusive calls and texts.

TalkTalk

Broadband subscribers Q4 2016: approx 3.93 million

2016 has been a relatively quiet year for TalkTalk, the only one of the Big Four ISPs who saw their customer base shrink. Their half year results ending September 2016 showed they had almost 3.97 million customers, and in the following three months they lost 42,000 subscribers.

Some of this is undoubtedly the continued aftermath of the massive cyber attack in October2015 - but TalkTalk also suggest that they didn't pick up as many new customers as they might have because of their move to all-in pricing earlier than their biggest competitors.

The good news for the ISP is that those who have stayed loyal have been upgrading their packages: in the three months ending December 2016 they gained another 74,000 fibre subscribers.

In the immediate weeks and months after the data breach, TalkTalk said they would only waive exit fees for those customers who could prove they'd suffered financially as a direct result of the attack - leading to a smaller than predicted exodus.

Even so, they lost 101,000 customers in the last three monthsof 2015. That makes their previous stinker of a year, in 2010-2011, when they lost around 50,000 customers over about six months, seem like a walk in the park.

Some of that was continued fall-out from TalkTalk's acquisition of Tiscali in 2009. Integrating them into the TalkTalk brand proved to be a long-running headache, with the result that the ISP had to pay out £2.5 million to customers who had been incorrectly billed, in some cases for years, and another £3 million in fines to Ofcom for their mistakes.

But they seemed to learn their lesson, as in late 2013 they took over Post Office broadband, gaining 103,000 subscribers, with far less difficulty.

Even so they remain highly influential.

In April 2011, along with BT, the ISP took aspects of the Digital Economy Act to judicial review and, from 2011 to the present, TalkTalk have been setting the technology agenda with their router level internet controls, Homesafe and Worksafe.

Provider overview: smaller ISPs

As we noted above, the vast majority of UK broadband customers get their internet from one of the big four.

Before they were bought by BT and absorbed into their customer numbers, EE were the largest small ISP, with fewer than one million broadband customers.

EE

Broadband subscribers Q4 2015: 933,000

It's fair to say that EE's broadband journey has been a bit of a roller coaster - and even now they're part of BT it's unlikely to be over.

In November 2009, Orange found their broadband customer base flagging, as in the quarter leading up to then they lost 55,000 customers - 12.5% of their then user base.

The provider's decline was managed somewhat. Most notably, in 2010, Orange abandoned their LLU network in favour of reselling BT Wholesale broadband and then the company merged with T-mobile to become EE.

As EE, they added a few customers but managed to lose 29,000 in just one quarter at the end of 2012 - after withdrawing a free broadband offer.

Despite reports of poor customer service during 2014 and continuing into 2015 they've shown steady growth - and they've been working hard to improve their customer service, as seen by a significant drop in the number of complaints being taken to Ofcom about them.

What impact that has had on their home broadband customer numbers is unknown, however, as the 933,000 subscribers they had at the end of 2015 are now counted as belonging to BT.

Plusnet

That also seems to be the case with Plusnet.

One of the biggest small ISPs in the UK, they're actually owned by the BT Group, although they continue to operate in the main as a separate business. In turn, they provide the network for John Lewis Broadband (reviewed here), and previously for the now dead in the water Madasafish (reviewed here).

Once famous for their use of geographic pricing, under which customers in the most competitive areas get cheaper deals than those served by less commercially attractive exchanges, Plusnet's cheapest deals are now available to a much wider audience.

In summer 2015 the ISP even started to refund some customers whose exchanges are now considered more competitive - and therefore eligible for cheaper deals.

As they've grown their reputation for excellent customer service has taken a few knocks, both in general terms and in regard to specific incidents - but they still rate highly in numerous surveys.

Zen Internet

Zen Internet are one of the UK's smallest big ISPs. They operate approximately 100,000 leased lines. Some of these are used by business customers - and Zen also have their own small group of resellers.

That business may take away from the number of home users they can claim to have - but it also reflects Zen's not insignificant reputation as one of the best providers when it comes to quality of service and customer care.

They consistently score highly in independent surveys, and as a result they wield far more clout than we might otherwise expect. See our Zen broadband review for more information.

Kingston Communications (KCOM), including KC in Hull and the East Riding of Yorkshire, and Eclipse Internet

KCOM were formerly known as Kingston Communications. They own KC, the sole fixed line internet provider in Hull and the surrounding area, and Eclipse Internet.

They don't have a complete monopoly in the Hull region any more, thanks to the arrival of Sure Broadband, who use wireless technology to provide broadband to homes in certain areas - but KC are still the only provider available to many.

That gives them a market power slightly greater than their position as one of the smallest national ISPs would suggest.

In autumn 2014 Eclipse, reviewed here, quietly removed mention of home broadband services from their website, cementing their shift towards business internet access. Those who already had the service were assured they could stay with the ISP.

KCOM are also coy about their exact customer numbers, but their corporate website says KC serves "more than 130,000 households in Hull and East Yorkshire".

As well as offering standard broadband, KC are rolling out what they modestly call superfast broadband - their Lightstream fibre service comes with guaranteed download speeds of 100Mb or 350Mb.

At present it's available to around 100,000 properties, with ambitious plans to expand the network to pass 150,000 by the end of 2017.