Executive Summary

The UK market for telecommunications was worth £22.98bn in the year to March 2000. This represents an increase of 13.6% on the year to March 1999, when the market was valued at £20.24bn. Growth was not spread evenly across all sectors between 1996 and 2000. While revenues from fixed lines and exchange lines increased over this period, these sectors lost share to cellular telephony and revenues from terminating calls, revenues from which increased by 135% and 142.9% respectively. Private leased circuits maintained a relatively stable share of the market. However, revenue from telex services showed a sharp decline over the period.

These figures include the provision of network services for the transmission of voice or data signals, either by fixed wire, fixed radio link, or mobile cellular services, to both residential and business markets. They do not include telecommunications equipment suppliers, manufacturers, or cable television revenues. Telecommunications industry revenues are made up of connection fees, monthly line rental charges, call rates, charges for special residential and business services (e.g. private business circuits) and interconnection fees payable within the industry.

The UK was one of the first markets to begin the process of deregulating its domestic telecommunications market. The position of British Telecommunications PLC (BT) as a monopoly supplier is increasingly being challenged by rivals that are due to complete network roll-out within the next 5 years (to 2005). The competitive threat posed by cable, fixed radio link and even the development of the digital cellular networks, points to a period of fierce competition in the local loop — the last sector in which BT has managed to retain a dominant market position.

Into the 21st century, two trends are likely to characterise the telecommunications industry. The first is increasing competition between the fixed and mobile network operators, which will be competing directly against each other for the same pool of customers. The fixed networks have the advantage of a broad customer base and, for the time being, cost advantages over the cellular operators. The second, longer-term trend will be the convergence between fixed-line and wireless communications operators. This trend is already apparent, with a number of companies planning to offer a full range of fixed and mobile telecommunications services. These developments will change the face of the telecommunications market, blurring the distinctions between mobile and fixed communications.

Key Note forecasts average annual growth of 9% in telecommunications revenues between 2001 and 2005, bringing the total value of the market to £35.36bn. However, growth will not be distributed evenly across all sectors, with cellular telephony forecast to show the most growth, followed by revenue from terminating calls.

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