Demand constraint in the UK broadband market

According to the Office for national Statistics the number of households in 2008 that have internet access in 2008 currently stands at 16.46 million, which represents 65 percent of all homes, showing that since 2007 the number of households has risen be 1.23 million.

In 2007 the penetration of broadband stood at 51 percent but this figure has now increased to 56 percent. In 2008, 86 percent of households in the UK with access to the internet have a broadband connection. This has had a knock-on effect for dial up usage with the percentage of homes with it falling to just 9 percent compared to the 17 percent of homes that had it in 2006.

2008 saw a drop in the proportion homes within the UK that do not have a connection to the internet with only 35 percent of household with no access. However, due to a large number of people that are resisting broadband saying they don’t need it the ability to reduce this number further is going to get harder. This essentially means that what was once a supply constrained market has now become a demand constrained one.
The number of households without access to the internet that are now saying “they do not need it” are around 34 percent while those that say “they do not want it” stands at 24 percent. This means that the remaining households that do not wish to take up an internet connection because they either have no desire for or need of access to the internet is almost half.

There is also the cost implication, either for the equipment or the access costs which accounts for 26 percent. And those that have no idea how the internet works totals 15 percent. Based on the continuing increase in those wanting access over broadband to the internet it would be a fair assumption that there would be no rise in those resisting it.

Figure, however, have shown an increase in those resisting and saying they don’t want to use the internet to 24 percent in 2008 compared to 2006 figures of 3 percent even though there has been growth in both internet usage and penetration of broadband.

This means that according to the survey there are still a large number of households that could potentially get access but do not feel enough need for either the internet of broadband access. The fact that a third of UK homes feel that they have no desire or need for broadband is something to consider even though, over time, this will change.