Broadband market volume growth resumed its downward trend in the September quarter after a blip in the previous quarter that was likely caused by a wholesale transfer distorting the figures. Revenue growth, however, perked up to 1.9% from 1.7% in the previous quarter, an encouraging recovery especially given that it was not primarily driven by the timing of a price increase

ARPU growth improved across all four of the major operators, countering recent trends, with a focus on higher value offerings a common theme. High speed broadband adoption accelerated in the quarter across most operators, encouraged by Openreach’s volume discount offer, although this was partially driven by keener high speed pricing

Revenue growth at Virgin Media, Sky and TalkTalk converged at around 3%, with BT Consumer lagging at -1%. However, excluding the effect of BT’s shrinking telephony-only base and smoothing the sporadic boost of its 9-monthly price rise, BT Consumer’s revenue is in the middle of the pack at 3.0% 

BT’s Q2 results were well ahead of both its full year guidance run-rate and financial market expectations, with revenue flat and EBITDA up 3% versus guidance and consensus at -2% for both metrics 

Operating metrics were more mixed, with broadband churn high and (our estimate of) net adds low, but fixed ARPU was solid, backed up by rapid adoption of BT Plus, fibre adoption re-accelerated and mobile was strong across all metrics

While part of the outperformance was likely due to H1/H2 phasing, it also reflects fairly conservative expectations and a solid operating performance, and hence full year guidance still looks very beatable, with a positive outlook beyond this

UK broadband subscriptions re-accelerated in Q2, bucking a three-year downward trend, but market revenue growth still fell as BT’s overlapping price increase dropped out and all of the operators continued to struggle to meaningfully grow ARPU

Regular existing customer price increases and continued (but slowing) migration to high speed are being cancelled out by flat-to-down new customer pricing, and the frequent need to discount existing customers down to these levels to retain them

High speed net adds disappointed despite Openreach’s price cut, with many consumers unwilling to pay even a modest price premium for extra speed, a sobering thought as aggressive full fibre network roll-outs are being considered

Video-sharing platforms, such as YouTube and Facebook video, enjoy a light-touch regulatory regime for harmful content and advertising. As video viewing of non-broadcaster content grows, the regulatory gap between TV broadcasters and video-sharing platforms widens, part of a broader uneven playing field for publishers and platforms.

However, there is momentum against this: the “platforms vs publishers” divide looks set to weaken in EU law, and the platforms themselves are investing more in combatting harmful content within a self-regulatory regime, though their internal policies and outcomes are still opaque.

Effective and fair regulation of video-sharing platforms would involve the balancing of national freedom of speech conventions and the public utility of user-generated video hosting with concerned stakeholder views: something approaching a co-regulatory system for online video-sharing platforms.

BT has emphasised ‘convergence’ in its new Consumer strategy, but it has avoided most of the usual fixed-mobile convergence mistakes, with separate brands, minimal discounting and only slightly flawed converged products

The general strategy is to improve customer service to improve market share trends (particularly in broadband), enable premium products/positioning, and allow for cross-selling of a strong set of converged (in a broader sense) products, which is very sensible in our view

It does require extra spending in the short-term to improve customer service and the perception thereof (particularly in broadband) before premium positioning and cross-selling can be effective, therefore improved trends at the bottom line may take some time to come through

UK residential communications market revenue growth fell again to 1.2%, with weakening ARPU growth the main driver. New customer pricing remains flat to down, and existing customers are being increasingly discounted, fuelling the ARPU weakness

High speed broadband adoption is proceeding apace, but the high speed premium is fairly thin, muting the impact on ARPU. Regulated wholesale price cuts from Openreach finalised today and due in April 2018 will not help

Looking forward, the March quarter will benefit from price timing effects at BT and Virgin Media, but we fear that the rest of 2018 will follow the current downward trend and the operators will need to adjust to an ex-growth environment

BT Group revenue growth held steady at -1.5% during the quarter, but this was helped by some recovery in the (still declining) Global Services division, with weaknesses appearing in a number of other areas

BT Consumer is of particular concern, with revenue growth turning negative as a result of declining volumes and weak ARPU growth, which are driven by industry-wide trends that are hard for BT to avoid

Looking forward, the March quarter will be flattered by an overlapping price rise at BT Consumer, but thereafter pressures will resume, with few obvious sources of upside on the horizon

The Competition and Markets Authority (CMA) has provisionally found that Fox’s acquisition of Sky is against the public interest on media plurality grounds, although it could proceed with an appropriate remedy

The CMA found the merger would give the Murdoch Family Trust (MFT) and family members “too much influence over public opinion and the political agenda”

The CMA now enters the challenging remedies phase. Fox could offer an Editorial Board for Sky News pending finalisation of Disney-Fox (by 2019). Third parties seem likely to continue to seek to prohibit the merger

21CF’s bid for 100% ownership of Sky has been referred for a Phase 2 investigation to the Competition and Markets Authority (CMA), which will decide by 6 March 2018

Third parties Avaaz and Ed Miliband MP complain of the influence of the Murdoch Family Trust (MFT) and family members over the UK’s news agenda and political process 

A remedy could insulate Sky News from this influence. The offer of a Sky News Editorial Board at Phase 1 was refused. Third parties will ensure the debate in Phase 2 is very lively

The Federal Communications Commission’s Privacy Order (FCC) was overturned by the Senate, clearing the way for ISPs to ramp up consumer data-driven advertising revenue.

While Google and Facebook dominate digital advertising in the US as in other markets, the US is alone in removing regulatory barriers to ISPs taking a piece of the pie.

US ISPs now have a self-regulatory regime for consumer rights on transparency, security and data breaches; but in the UK and EU, privacy advocates prefer enforceable rights.