In the UK, the leading telcos have mostly eschewed expansion into the broader digital services market. That reflects the strong position of the leading global Internet platforms in the UK, as well as the quality of free-to-air television, and the highly competitive nature of the UK telecoms market – UK operators have relatively low margins, giving them little leeway to invest in the development of other digital services.
This chart summarises where the five main network operators (and broadband/TV provider Sky) are positioned on a matrix mapping degree of vertical integration against the breadth of the proposition.
Unlike their peers in some other markets, UK telcos don’t offer any form of financial services or digital health/wellness propositions. In most cases, they re-sell a limited range of entertainment offerings, with the exception of BT, Virgin Media and Sky, which all have broad video and TV portfolios that complement their residential broadband offerings. One of the remaining connectivity providers – O2 UK – is now joining this fray. The Telefónica subsidiary is entering into a joint venture with Virgin Media, underlining the growing consensus that telcos need to be able combine mobile, fixed and Wi-Fi connectivity into a package, supported by some kind of digital entertainment offering.
BT stands alone in trying to be a full-service platform that is developing its own digital propositions in-house to complement its vertically-integrated and broad connectivity platform. The long-standing telecoms incumbent in the UK, BT has attempted to become a major force in digital entertainment, challenging the pay TV leader Sky, which also offers broadband and mobile connectivity using its own core fibre network and third party infrastructure.