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Bundled Communication Services - UK - June 2010

This report examines the UK market for bundled TV, broadband and fixed-line telephone packages. ‘Bundled’ packages are those where TV, broadband and/or telephone services are supplied by a single provider and charged via a single monthly bill.

  • There has been a sixfold increase in the value of the triple-play (phone, television & broadband services) market over the last five years, making it worth more than £3 billion in 2010.
  • Around half of all UK households are likely to be signed up to bundled home communications services by the end of 2010. Although the largest proportion of these bundled packages remain dual-play, double-digit growth in triple-play penetration is expected to be sustained.
  • Virgin Media is the triple-play market leader, both by number of subscribers and revenues generated, with 2.9 million triple-play homes (62% of its subscriber base), against BSkyB’s 1.9 million homes and 19% penetration.
  • Price is the most important driver in the market, with nearly half of bundle users citing this an important factor in their decision to buy a bundle from a particular provider. The next most important factors are the convenience of single-billing and trust in the provider’s brand.
  • Younger and more affluent consumers are least likely to be attracted to bundling by its cost advantages. A new offer is required to tap into these demographic groups who are most able and willing to spend.
  • Fixed-line internet is considered the most important component of any bundle by 46% of consumers, with multichannel considered the most important by 28%.

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Table of contents

  1. Issues in the Market

      • Main issues
        • Definition
          • Abbreviations
          • Future Opportunities

            • More than just another pipe
              • Value beyond price
                • It’s about what we want, not how we get it
                  • Choosing à la carte
                  • Market in Brief

                    • A market built on price
                      • Resistance to recession
                        • Restricted consumer engagement with products
                          • Price buys market share, but service boosts subscriber value
                            • Attracting the better off: A question of content?
                              • Internet takes centre stage
                                • Lack of baggage makes Virgin leader in triple-play
                                  • Retail therapists help consumers and suppliers alike
                                    • Technology the future game changer
                                    • Internal Market Environment

                                      • Key points
                                        • Internet penetration: Speed is of the essence
                                          • Figure 1: UK internet penetration, 2003-09
                                        • Mobile computing to bind bundles together?
                                          • Figure 2: UK computer sales, 2004-10
                                        • Multichannel TV creates multiple opportunities
                                          • Figure 3: UK multichannel TV households, 2003-09
                                        • Convergence can create demand for a new type of bundling
                                          • Figure 4: UK multichannel TV penetration, by platform, 2003-09
                                        • TV viewing habits
                                          • Figure 5: UK volume retail sales of TV sets, by screen type and size, 2007-09
                                        • Legislation and regulation: Ofcom seeks to increase competition
                                          • Fibre network unbundling
                                            • Mobile termination charge reductions
                                              • Sky Sports wholesale prices
                                                • Technological change
                                                  • Super-fast broadband: Faster and broader access
                                                    • Falling technology prices = falling bundle prices?
                                                      • Consumers to question duplicate functionality
                                                        • Content remains king
                                                        • Broader Market Environment

                                                          • Key points
                                                            • Recession steers consumers towards bundled services...
                                                              • Figure 6: GDP, PDI, consumer expenditure and savings, at constant 2005 prices, 2005-15
                                                            • ...but confidence remains fragile
                                                              • Figure 7: GfK NOP Consumer Confidence Index, 1988-2010
                                                            • Investment needed in elderly care
                                                              • Figure 8: UK population structure, by age and gender, 2005-15
                                                            • Upwardly mobile move market towards a value view
                                                              • Figure 9: Forecast adult population trends, by socio-economic group, 2005-15
                                                            • Home alone to downsize their bundles?
                                                              • Figure 10: UK households, by size, 2005-15
                                                          • Competitive Context

                                                            • Key points
                                                              • Competition in volume: More bundle providers
                                                                • Figure 11: UK bundled home communications services providers, by type of bundle, April 2010
                                                              • Competing on value: More options for consumers
                                                                • Figure 12: UK home communications services bundle pricing, April 2010
                                                              • Can mobile move indoors?
                                                                • Figure 13: Active UK mobile phone subscriptions, by quarter, 2004-09
                                                              • The main challenges
                                                                • Fight looms over Freeview
                                                                  • Figure 14: UK free-to-air TV households, 2003-09
                                                                • Broadband: The new single-play?
                                                                • Strengths and Weaknesses in the Market

                                                                    • Strengths
                                                                      • Recession resistance
                                                                        • Mainstream status
                                                                          • Technological change
                                                                            • Enabling legislation
                                                                              • Choice
                                                                                • Weaknesses
                                                                                  • Consumer confusion
                                                                                    • The utilities factor
                                                                                      • Price focus
                                                                                        • Limited promotion
                                                                                          • Demographic change
                                                                                          • Who’s Innovating?

                                                                                            • Key points
                                                                                              • TV looks to make the broadband connection
                                                                                                • Showcasing services switches focus from price to value
                                                                                                  • An online race for bundle buyers
                                                                                                    • Quad-play attracts a crowd
                                                                                                      • It’s good to talk
                                                                                                      • Market Size and Forecast

                                                                                                        • Key points
                                                                                                          • New entrants, new subscribers keep growing market value
                                                                                                            • Figure 15: Consumer expenditure on bundled home communications services, triple-play only, 2005-15
                                                                                                          • Bundle buyers to become the majority
                                                                                                            • Figure 16: Penetration of bundled home communications services, 2007-09
                                                                                                          • Consumers most willing to pay for TV
                                                                                                            • Figure 17: Consumer expenditure on home communications services, by service (including unbundled), 2005-09
                                                                                                          • Trading up a major market force
                                                                                                            • Figure 18: Take-up of bundled home communications services, by number of services, 2005-09
                                                                                                        • Companies and Products

                                                                                                          • Key points
                                                                                                            • Two-lane traffic divided by TV
                                                                                                              • British Sky Broadcasting Group
                                                                                                                • Services offered
                                                                                                                  • Figure 19: BSkyB bundle offerings, April 2010
                                                                                                                • Financials
                                                                                                                  • Figure 20: Key financials for British Sky Broadcasting Group plc (interim), 2008 and 2009
                                                                                                                  • Figure 21: Key financials for British Sky Broadcasting Group plc, 2008 and 2009
                                                                                                                  • Figure 22: Subscriber statistics, British Sky Broadcasting Group plc, 2008 and 2009
                                                                                                                • British Telecommunications Plc
                                                                                                                  • Services offered
                                                                                                                    • Figure 23: BT bundle offerings
                                                                                                                  • Financials
                                                                                                                    • Figure 24: Key financials for BT Retail (interim), 2008 and 2009
                                                                                                                    • Figure 25: Key financials for BT Retail, 2008 and 2009
                                                                                                                    • Figure 26: Subscriber statistics, BT Retail, 2008 and 2009
                                                                                                                  • TalkTalk
                                                                                                                    • Services offered
                                                                                                                      • Figure 27: TalkTalk bundle offerings
                                                                                                                    • Financials
                                                                                                                      • Figure 28: Key financials for TalkTalk (interim), 2008 and 2009
                                                                                                                      • Figure 29: Key financials for TalkTalk, 2008 and 2009
                                                                                                                      • Figure 30: Subscriber statistics for TalkTalk, 2008 and 2009
                                                                                                                    • Virgin Media
                                                                                                                      • Services offered
                                                                                                                        • Figure 31: Virgin Media bundle offerings
                                                                                                                      • Financials
                                                                                                                        • Figure 32: Key financials for Virgin Media Inc, consumer segment, 2008 and 2009
                                                                                                                        • Figure 33: Virgin Media subscriber statistics, 2008 and 2009
                                                                                                                      • Others
                                                                                                                        • O2
                                                                                                                          • Orange
                                                                                                                            • Tesco
                                                                                                                              • Vodafone
                                                                                                                              • Brand Elements

                                                                                                                                  • Key points
                                                                                                                                    • Brand map
                                                                                                                                        • Figure 34: Attitudes towards and usage of bundled communication service brands, January 2010
                                                                                                                                      • Brand qualities of bundled communication service brands
                                                                                                                                        • Sky for simplicity, Virgin for vibrancy
                                                                                                                                          • Figure 35: Personalities of various bundled communication service brands, January 2010
                                                                                                                                        • Experience of bundled communication service brands
                                                                                                                                          • BT most used, but rivals stealing share
                                                                                                                                            • Figure 36: Consumer usage of various bundled communication service brands, January 2010
                                                                                                                                          • Brand consideration for bundled communication service brands
                                                                                                                                            • Sky and Virgin tussle at the top
                                                                                                                                              • Figure 37: Consideration of various bundled communication service brands, January 2010
                                                                                                                                            • Brand satisfaction for bundled communication service brands
                                                                                                                                              • Virgin nudges ahead, Tiscali disappointed
                                                                                                                                                • Figure 38: Satisfaction with various bundled communication service brands, January 2010
                                                                                                                                              • Brand commitment to bundled communication service brands
                                                                                                                                                • Virgin best for bundles?
                                                                                                                                                  • Figure 39: Commitment to various bundled communication service brands, January 2010
                                                                                                                                                • Brand intentions for bundled communication service brands
                                                                                                                                                  • TalkTalk to the rescue for Tiscali customers?
                                                                                                                                                    • Figure 40: Future usage intentions for various bundled communication service brands, January 2010
                                                                                                                                                  • Brand recommendation for bundled communication service brands
                                                                                                                                                    • Virgin most recommended, Tiscali unlikely to be missed
                                                                                                                                                      • Figure 41: Recommendation of various bundled communication service brands, January 2010
                                                                                                                                                    • Sky
                                                                                                                                                      • What the consumer thinks
                                                                                                                                                        • Figure 42: Attitudes towards the Sky brand, January 2010
                                                                                                                                                      • TalkTalk/Tiscali
                                                                                                                                                        • What the consumer thinks
                                                                                                                                                          • Figure 43: Attitudes towards the TalkTalk brand, January 2010
                                                                                                                                                          • Figure 44: Attitudes towards the Tiscali brand, January 2010
                                                                                                                                                        • Virgin Media
                                                                                                                                                          • What the consumer thinks
                                                                                                                                                            • Figure 45: Attitudes towards the Virgin Media brand, January 2010
                                                                                                                                                          • BT
                                                                                                                                                            • What the consumer thinks
                                                                                                                                                              • Figure 46: Attitudes towards the BT brand, January 2010
                                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                                            • Key points
                                                                                                                                                              • Promoting consumer confidence
                                                                                                                                                                • Services still sold on quality, not quantity
                                                                                                                                                                  • Figure 47: Expenditure on bundled communications services advertising, by provider, 2006-09
                                                                                                                                                              • Whose Bundles Do We Buy?

                                                                                                                                                                • Key points
                                                                                                                                                                  • Providers still seen as individual service specialists
                                                                                                                                                                    • Figure 48: Usage of service providers for phone, internet and/or multichannel TV services, April 2010
                                                                                                                                                                  • Only cable connects on a cross-service level
                                                                                                                                                                    • Consumers stick to what their providers know
                                                                                                                                                                      • Figure 49: Penetration of bundled services, by brand, April 2010
                                                                                                                                                                    • Focus on value misses the more affluent
                                                                                                                                                                      • Dual-play market tightly defined
                                                                                                                                                                        • More room for rivals in triple-play
                                                                                                                                                                          • Reaching the potentials
                                                                                                                                                                          • What Guides Our Bundle-buying Choices?

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Just another utilities bill
                                                                                                                                                                                • Figure 50: Reasons for choosing a particular service provider for multiple services, April 2010
                                                                                                                                                                              • More than one type of convenience buy
                                                                                                                                                                                • Content and features appeal more to men
                                                                                                                                                                                  • Super-fast broadband gives Virgin a USP
                                                                                                                                                                                  • Which Bundle Elements Do We Value Most?

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • We want to stay connected – web-connected
                                                                                                                                                                                        • Figure 51: Top priorities for bundled communications packages, April 2010
                                                                                                                                                                                    • Attitudes Towards Bundled Communications Services

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Convenience becoming more important than cost
                                                                                                                                                                                          • Figure 52: Attitudes towards bundled home communications services, April 2010
                                                                                                                                                                                        • A barrier to churn
                                                                                                                                                                                          • Generation why? The young question buying on price alone
                                                                                                                                                                                            • Low costs no cure for technophobia
                                                                                                                                                                                              • Viewing for value, surfing for freedom
                                                                                                                                                                                              • Bundled Communications Target Groups

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • Figure 53: Bundled home communications services target groups, April 2010
                                                                                                                                                                                                • The Unbundled
                                                                                                                                                                                                  • What do they think and do?
                                                                                                                                                                                                    • Who are they?
                                                                                                                                                                                                      • Marketing message
                                                                                                                                                                                                        • Switchers
                                                                                                                                                                                                          • What do they think and do?
                                                                                                                                                                                                            • Who are they?
                                                                                                                                                                                                              • Marketing message
                                                                                                                                                                                                                • Nervous Novices
                                                                                                                                                                                                                  • What do they think and do?
                                                                                                                                                                                                                    • Who are they?
                                                                                                                                                                                                                      • Marketing message
                                                                                                                                                                                                                        • Televisionists
                                                                                                                                                                                                                          • What do they think and do?
                                                                                                                                                                                                                            • Who are they?
                                                                                                                                                                                                                              • Marketing message
                                                                                                                                                                                                                              • Appendix – Broader Market Environment

                                                                                                                                                                                                                                  • Figure 54: Forecast adult population trends, by lifestage, 2005-15
                                                                                                                                                                                                                              • Appendix – Brand Communication and Promotion

                                                                                                                                                                                                                                  • Figure 55: Expenditure on bundled communications services advertising, by type of bundle, 2006-09
                                                                                                                                                                                                                              • Appendix – Whose Bundles Do We Buy?

                                                                                                                                                                                                                                  • Figure 56: Penetration of bundled services, by brand, by demographics, April 2010
                                                                                                                                                                                                                              • Appendix – What Guides Our Bundle-Buying Choices?

                                                                                                                                                                                                                                  • Figure 57: Most popular reasons for choosing a particular service provider for multiple services, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 58: Next most popular reasons for choosing a particular service provider for multiple services, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 59: Most popular reasons for choosing a particular service provider for multiple services, by penetration of bundled services, by brand, April 2010
                                                                                                                                                                                                                                  • Figure 60: Next most popular reasons for choosing a particular service provider for multiple services, by penetration of bundled services, by brand, April 2010
                                                                                                                                                                                                                                  • Figure 61: Reasons for choosing a particular service provider for multiple services, by most popular reasons for choosing a particular service provider for multiple services, April 2010
                                                                                                                                                                                                                                  • Figure 62: Reasons for choosing a particular service provider for multiple services, by next most popular reasons for choosing a particular service provider for multiple services, April 2010
                                                                                                                                                                                                                              • Appendix – Which Bundle Elements Do We Value Most?

                                                                                                                                                                                                                                  • Figure 63: Top priorities for bundled communications packages, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 64: Top priorities for bundled communications packages, by penetration of bundled services, by brand, April 2010
                                                                                                                                                                                                                                  • Figure 65: Top priorities for bundled communications packages, by reasons for choosing a particular service provider for multiple services, April 2010
                                                                                                                                                                                                                              • Appendix – Attitudes Towards Bundled Communications Services

                                                                                                                                                                                                                                  • Figure 66: Most popular attitudes towards bundled services, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 67: Next most popular attitudes towards bundled services, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 68: Other attitudes towards bundled services, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 69: Most popular attitudes towards bundled services, by penetration of bundled services, by brand, April 2010
                                                                                                                                                                                                                                  • Figure 70: Next most popular ttitudes towards bundled services, by penetration of bundled services, by brand, April 2010
                                                                                                                                                                                                                                  • Figure 71: Reasons for choosing a particular service provider for multiple services, by most popular attitudes towards bundled services, April 2010
                                                                                                                                                                                                                                  • Figure 72: Reasons for choosing a particular service provider for multiple services, by next most popular attitudes towards bundled services, April 2010
                                                                                                                                                                                                                                  • Figure 73: Top priorities for bundled communications packages, by attitudes towards bundled services, April 2010
                                                                                                                                                                                                                                  • Figure 74: Attitudes towards bundled services, by most popular attitudes towards bundled services, April 2010
                                                                                                                                                                                                                                  • Figure 75: Attitudes towards bundled services, by next most popular attitudes towards bundled services, April 2010
                                                                                                                                                                                                                                  • Figure 76: Attitudes towards bundled services, by other attitudes towards bundled services, April 2010
                                                                                                                                                                                                                              • Appendix – Bundled Communications Target Groups

                                                                                                                                                                                                                                  • Figure 77: Target groups, by demographics, April 2010
                                                                                                                                                                                                                                  • Figure 78: Penetration of bundled services, by brand, by target groups, April 2010
                                                                                                                                                                                                                                  • Figure 79: Reasons for choosing a particular service provider for multiple services, by target groups, April 2010
                                                                                                                                                                                                                                  • Figure 80: Top priorities for bundled communications packages – rank 1, by target groups, April 2010
                                                                                                                                                                                                                                  • Figure 81: Attitudes towards bundled services, by target groups, April 2010

                                                                                                                                                                                                                              Companies Covered

                                                                                                                                                                                                                              • Aldi Stores Ltd (UK & Ireland)
                                                                                                                                                                                                                              • America Online UK (AOL UK)
                                                                                                                                                                                                                              • Apple Computer UK Ltd
                                                                                                                                                                                                                              • Asda Group Ltd
                                                                                                                                                                                                                              • British Broadcasting Corporation (BBC)
                                                                                                                                                                                                                              • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                                                                                              • BT Group plc
                                                                                                                                                                                                                              • Cable and Wireless plc
                                                                                                                                                                                                                              • Channel 4
                                                                                                                                                                                                                              • Co-operative Group
                                                                                                                                                                                                                              • Easynet Group Plc
                                                                                                                                                                                                                              • ESPN, Inc.
                                                                                                                                                                                                                              • Five
                                                                                                                                                                                                                              • France Telecom SA
                                                                                                                                                                                                                              • Freeview
                                                                                                                                                                                                                              • Gfk NOP
                                                                                                                                                                                                                              • Government Actuary's Department (GAD)
                                                                                                                                                                                                                              • J. Sainsbury
                                                                                                                                                                                                                              • Kantar Media
                                                                                                                                                                                                                              • London Stock Exchange plc
                                                                                                                                                                                                                              • Marks & Spencer
                                                                                                                                                                                                                              • mmO2 plc
                                                                                                                                                                                                                              • Netto Foodstores Ltd
                                                                                                                                                                                                                              • News Corporation (The)
                                                                                                                                                                                                                              • NTL Europe, Inc.
                                                                                                                                                                                                                              • Ofcom
                                                                                                                                                                                                                              • Office of Fair Trading
                                                                                                                                                                                                                              • Orange plc (UK)
                                                                                                                                                                                                                              • PlusNet Technologies Limited
                                                                                                                                                                                                                              • T-Mobile (UK) Ltd
                                                                                                                                                                                                                              • TalkTalk Telecom Ltd.
                                                                                                                                                                                                                              • Telefónica UK Ltd.
                                                                                                                                                                                                                              • Telewest Broadband
                                                                                                                                                                                                                              • Tesco Plc
                                                                                                                                                                                                                              • The Carphone Warehouse Ltd
                                                                                                                                                                                                                              • Tiscali UK
                                                                                                                                                                                                                              • Virgin Group Ltd.
                                                                                                                                                                                                                              • Virgin Media Ltd
                                                                                                                                                                                                                              • Virgin Mobile
                                                                                                                                                                                                                              • Vodafone Group Plc (UK)
                                                                                                                                                                                                                              • Waitrose
                                                                                                                                                                                                                              • Wm Morrison Supermarkets

                                                                                                                                                                                                                              Bundled Communication Services - UK - June 2010

                                                                                                                                                                                                                              £1,995.00 (Excl.Tax)