In a year of soaring inflation, global conflict, and political instability, almost everyone will have seen prices increase. While all sectors of the economy have been asked to consider their role in limiting the impact, the pricing mechanism of telecoms operators in particular has come under the spotlight.
In this report (commissioned by BT/EE, Virgin Media O2, Vodafone), we consider the relative value for money UK consumers continue to receive from fixed and mobile services given the increased usage and the investment in networks their providers have been making. We find this to be in stark contrast to other regulated industries (such as energy and water), where bills continue to rise but where there has been no increase in the quality of the service provided.
This continued investment by telecoms operators, which has given way to faster services and increased use, must be considered as part of a wider value equation, and in the context of meeting the UK’s connectivity ambitions.
In summary:
Even as inflationary pressures begin to ease, consumers continue to face financial challenges. While inflation is falling, access to affordable and high quality fixed and mobile services remains crucial for households and businesses across the UK. Given the importance of connectivity to the economy and to society more broadly, we consider developments in the price and value of telecoms services over the past five years, and highlight the efforts of operators to support customers being squeezed by the cost of living crisis.
Competition and investment in the UK’s telecoms sector continue to deliver positive outcomes for consumers. Operator capex is rising and has reached £7.2bn per year, with the majority going into the rollout of gigabit-capable broadband. Persistent industry investment is driving network performance upwards, with both fixed and mobile download speeds having more than doubled since 2017 and 2019, respectively. Meanwhile, average monthly mobile data usage has more than trebled in the last five years to 7GB, while fixed data consumption per capita has increased three-fold, from 74GB to over 220GB.
UK operators are providing clear value for money for their customers. The average monthly price of a typical basket of telecoms services has fallen by over a fifth since 2017. When broadband prices are considered relative to usage per capita, the UK consistently paints an improving picture over time. Similarly, the cost of 1GB of data has decreased significantly as consumers use mobile services more intensively. Over time, consumers are therefore paying less relative to the data they use, while benefiting from improved network quality and coverage.
Telecoms services make up a small and declining share of household outgoings, representing just 3.5% of average monthly spend. Even when taking into account recent price rises, telecoms represented only 0.09 percentage points of the overall change in the annual rate of inflation. Water companies are planning to pass on an average 34p per day price rise to consumers to pay for maintenance. Comparatively, telecoms customers have not seen an average daily price rise of more than 13p despite the rising levels of network investment by operators.
Operators have offered support to the tune of £290m to those in financial difficulty. Contributions of over £290m were made by operators to support for consumers and businesses during the height of the cost of living crisis. This support included excluding certain groups from price rises, free speed upgrades, increased contributions to the National Databank, smartphone donation and redistribution initiatives, and zero-rating of content. Over 30% (£90m) of support has sought to tackle digital exclusion through digital literacy programmes and charity partnerships. Long-running rewards schemes provide extra value for consumers at no additional cost.
Operators are subsidising the provision of social tariffs by an estimated £62m a year. Ensuring access to affordable connectivity has remained a key priority. We’ve identified over 30 social tariffs now available, which typically cost between £12-£20 per month and cover both fixed and mobile broadband. Compared to the current average prices of equivalent telecom services, social tariffs can offer eligible households savings of around £160 per year. With these plans offered voluntarily by industry, we estimate that operators are subsidising the provision of social tariffs by £62m a year, based on current levels of adoption.
We will soon present how UK consumers fare against their peers in Europe (France, Germany, Italy, Spain) and also in Japan and the US.
