With BT’s numbers published last week it is possible to make a reliable estimate of the total number of broadband lines in the UK at the end of June. At 16,735,000 the figure is actually a clear 225,000, or 1.3%, ahead of Point Topic’s forecast made in November last year.
Our November forecast was based on the market’s historic performance and took no special account of changing economic conditions. But it did predict a sharp reduction in broadband growth, from 2.9m in the year to mid-2007 to only 2.0m. (The actual was 2.2 million.)
'The reasons for the drop are simple,' says Tim Johnson, Chief Analyst at Point Topic, 'The number of dial-up homes ripe for migration to broadband is rapidly dwindling, there are barely a million of them left now and they are an increasingly resistant minority.'
At the same time, the ISPs are making only slow progress in winning over the 9.6 million households which are still without internet access at all. The fall in broadband adds was entirely predictable on the basis of these trends, and in fact sales have been slightly better than historic performance suggested.
'It is understandable that an ISP CEO should blame his shrinking broadband numbers on the economy rather than lack of foresight or declining market share. It’s his job to put the best face on things. But it gives a misleading impression of how well the broadband business is doing,' continues Johnson.
In fact the growth in the percentage of households with internet access has been quite good by recent standards – up 4.3% to 62.9% in the year to the end of June.
That compares with only 2.6% growth in the previous year. Point Topic estimates the current household breakdown as 58.4% on broadband, 4.5% on dial-up and 37.1% still no-net.
Whether this will continue is another matter. 'The pattern of declining quarterly adds has been clear for several years, it has been fairly consistent year-on-year with Q2 usually being the worst quarter, but expenditure on broadband is clearly a vulnerable part of the household budget. The next test in 2008 will be how well Q3 bounces back from the Q2 trough,' he concludes.