2. How were the surveys carried out?
Residential customers
Business customers
3. What types of households and businesses use cable telephony?
4. Why are some customers taking cable telephony and others not?
5. What are the possible barriers to the exercise of choice?
6. Is lack of awareness a barrier to choice?
7. Is lack of number portability a barrier to choice?
8. Do consumers have enough information to make a choice?
Amount and content of information provided
The need for independent information
9. Is concern about number listings a barrier to choice?
This study focused on three areas of the country where consumers have a real choice of at least two fixed-link telephone operators. The study was conducted amongst residential and business customers. All residential cable customers who were interviewed had taken up the cable telephone service during the 12 months before the survey; business cable customers who were interviewed had taken this service any time since 1992.
In general, the survey showed that those who had taken up the cable telephone supply in these areas were satisfied with the choice they had made, and were happy with the amount of information they had received.
However, the survey highlighted several barriers to choice:
The survey also identified some challenges for the cable industry:-
And among the issues for both BT and the cable industry:-
BMRB was commissioned by Oftel to carry out a study to:
The results of the project are to assist Oftel in identifying any impediments to the spread of the benefits of competition to consumers, such as barriers placed by suppliers, gaps in consumer awareness and knowledge, or misleading marketing.
This report describes the methodology of the survey and key findings from it. It examines findings from two groups of consumers - residential consumers and business consumers - and discusses:
The surveys were carried out in three franchise areas chosen by Oftel:
Two separate samples of residential consumers were interviewed face-to-face between 20 April and 29 May 1995:
The sample of residential cable users was selected to be representative of all users in the three franchise areas.
The sample of non-users was not selected to be representative of all non-users of a cable telephone supply, but rather to provide as close a match as possible in terms of its socio-demographic profile to the sample of users. This was so that any differences in responses from users and non-users could not be attributed to demographic variation.
Interviews were conducted with adults at least partly responsible for the household's choice of telephone supplier.
Two separate samples of businesses were interviewed by telephone between 16 May and 25 May 1995:-
The sample of business cable users was selected to be representative of all business users in the three franchise areas.
As with the residential sample, the sample of business non-users was not selected to be representative of all non-users of a cable telephone supply, but rather to provide as close a match as possible to the sample of users, this time in terms of postcode sector and number of lines at their premises.
All interviews were conducted with the person in the business who was responsible for deciding which telecoms company the business used.
In order to assist with questionnaire development some 'in depth' interviews were conducted with residential and business customers. Some quotations from these are included in this report.
Compared with non-users, residential cable telephone users included a higher proportion of people aged between 25 and 44 (54% compared with 39%), and lower proportion of people in the older (65+) age range. The proportions of users and non-users in the 18-24 and 45-64 age ranges were similar.
Residential cable users were more likely than non-users to live in larger households with children.
Only one in five residential non-users had seriously considered taking cable. 8% were not aware that such a service existed in their area.
Cable-using businesses were more likely than non-users to operate in the retail sector, but less likely to operate in manufacturing.
Over a half (53%) of cable-using businesses also used another telecoms supplier, predominantly BT (51%). Only 3% of non-cable users did not currently use BT, but used Mercury Direct instead.
Three in ten non-cable using businesses were unaware that cable operated in their area.
Table 4a summarises the reasons why residential and business cable customers decided to take up the cable telephone service.
Table 4a Reasons for getting a cable telephone (unprompted question)
Base: All residential cable telephone users = 410
%
Cheaper/price lower than BT 82
Cable company offered better 33
service than BT
Decided to take cable TV 14
Recommended by others 13
Dissatisfied with/disconnected by 10
BT
Other 15
Don't know 1
Base: All business cable users = 172
%
Cheaper/price lower 85
More suitable billing 11
Dissatisfied with/disconnected by
BT 9
Cable co. offered better service 9
Recommended by others/had
experience of cable phone 6
Wanted to increase 5
capacity/capability
Took cable TV 3
Wanted local company 3
Other 20
Don't know -
Note: respondents could give more than one answer therefore responses do not total 100%
When asked why they had switched to cable, the overwhelming majority of customers (residential and business) mentioned cost as their main reason. 72% of residential and 80% of business customers said that the main reason they switched was because cable was cheaper than BT.
Among residential customers who switched on price grounds, the aspects of the cable companies' service expected to be cheaper than BT included cheaper calls because of per second pricing (62%), cheaper local calls (55%), cheaper installation/connection (45%), and cheaper line rental (44%). Business customers who switched because of cost expected similar aspects of service to be cheaper, although the two most frequently cited were cheaper local calls (67%) and cheaper long-distance national calls (36%).
Other factors influencing residential users' decision to switch included perceived better service (33%), the fact that they had also taken cable television (14%), recommendation by others (13%), and dissatisfaction with/disconnected by BT (10%).
Other reasons for switching given by business customers included more suitable billing (11%), dissatisfied with/disconnected by BT (9%), perceived better service (9%), and recommendation by others (6%).
Table 4b shows reasons given by residential and business non-users for not taking a cable telephone service.
Table 4b Non-users: Reasons for not getting a cable telephone service (unprompted question)
Base: All residential non-users = 370
%
Happy with what I have 55
Hassle, could not be bothered 28
Cost 16
Service provided by the cable company 10
Changing phone number 9
Haven't got round to it 8
Terms and conditions 6
Problems with number listings 5
Other reasons 36
Don't know 1
Unaware cable available 8
Base: All business non-cable users =150
%
Happy with BT 25
Loss/change of advertised number 15
Inconvenience 8
Cable co. could not cope with all
telecoms needs 7
Could not be bothered 6
Cost 6
Cable co. is unknown/ not trusted 5
Cable co.'s telecoms service 4
Put off by sales pitch 3
Not approached by cable company 3
Haven't seriously thought about it 3
Haven't decided yet 3
Cable co.'s customer service 1
Other reasons 14
No reason 1
Don't know 1
Unaware cable available 29
Note: respondents could give more than one answer therefore responses do not total 100%
Inertia was the major factor behind non-users' reasons for not switching. Just over half (55%) of residential non-users said they were happy with their present supplier, and nearly a third (28%) thought that it would be too much 'hassle' to change. The most common reasons given by business non-users were again satisfaction with their present supplier (25%), and that switching would entail a loss of or a change to their advertised number (15%). Over a third (36%) of residential non-users mentioned "other" reasons including: "I thought I would wait and see" (6%), "the cable company is unknown and not to be trusted" (5%), "I did not like the sales rep and the sales pitch" (5%) "the cable company is American" (2%) and "I wanted to try it but I couldn't afford the charge of getting reconnected to BT if it didn't work out" (2%).
The following factors were explored as potential barriers to the exercise of choice:
We now examine these factors in more detail.
Awareness of cable among residential non-users was high. When prompted, 92% were aware that cable telephony was available in their area, although only 61% knew the name of their local cable company. The majority (72%) were aware that the cable telephone could be subscribed to separately from the television service.
As shown in table 6a below, most people aware of cable had found out either through seeing the cable being laid, receiving an unsolicited visit or mail shot from their local company, or through friends/neighbours/relatives. Relatively few either had to be or were proactive in their search for information.
Table 6a Residential customers: How heard cable telephone was available
Base: All cable users and non-users aware of cable telephone service
Cable users Non-cable
users
410 341
% %
Saw cable being laid 23 44
Received unsolicited visit from cable 6 52
company
Receive unsolicited mail from cable 16 29
company
Received video from cable company 2 9
Received unsolicited phone call from 1 4
cable company
Through friends/neighbours/relatives 21 16
Phoned cable company to ask questions 21 1
Requested literature from cable company 2 3
Arranged for cable company rep to call - 2
Local press/radio 2 3
Note: responses do not total 100% as respondents could give more than one answer.
Compared with residential non-users, awareness of cable among business non-users was lower. When prompted, nearly three in ten (29%) were not aware that cable was available in their area. When those businesses aware of cable were asked how they first heard about it, they mentioned similar sources of information to the corresponding residential sample, as shown in Table 6b.
Table 6b Business customers: How found out cable was available
Base: All cable users and non-users aware cable was available to them
Cable users Non-cable
users
172 107
% %
Saw cable being laid/road being dug up 47 44
Received unsolicited visit from cable co. 31 23
Already had cable at home 10 9
Received unsolicited mailshot from cable 22 30
co.
Business contacts/other branches/head 19 14
office
Phoned cable co. to ask questions 9 1
Requested literature from cable co. 4 4
Received unsolicited telephone call from 4 5
cable co.
Local press/radio 20 11
Received video from cable co. 3 0
Other 12 10
Don't know 3 6
Note: responses do not total 100% as respondents could give more than one answer.
In concluson, lack of awareness does not appear to be a barrier to choice for residential customers in the areas studied as 92% were aware that cable telephony was available, although there was a lower level of awareness on the business side with 29% not aware.
Over four-fifths of residential customers aware of cable (users and non-users) knew of the necessity to change telephone number when switching to cable.
When prompted with a number of possible reasons for their not having a cable telecoms supply, 60% of non-users aware of cable agreed that the statement "I did not want to change phone number" was a contributory factor.
Half of non-users said that having to change their number would be a problem if they switched to cable. When non-users were asked what factors would make them consider taking cable in the future, the ability to retain their existing phone number was the single most important factor following price. A third (33%) said that retaining their existing number would affect their choice, and one in seven (14%) said that it would be a necessity. A quotation from the depth interviews conducted illustrates this point:
"The most important criterion for me at the time was that it was a change of telephone number. We've only got the one phone. I was using it partly on a business basis and partly on a domestic basis and it would have been very inconvenient at the time to change the telephone number. We rejected it on that basis."
Not all business cable users had needed to change their number when they took a cable telephone supply. Some businesses were new, and did not have a telephone beforehand; others kept their BT line and number for incoming calls and used cable for outgoing calls. Overall, two-thirds (65%) had changed their number. Just over half of these said that this had caused some disruption, although only 15% said that it had caused either quite a lot or a great deal of disruption.
A fifth (21%) of business non-users aware of cable mentioned change of telephone number as a reason for not taking cable. This was generally because of customers' familiarity with their existing number.
Others mentioned the cost of changing as a reason for not taking cable telephony - for example producing new letterheads and advertisements.
To conclude, in accordance with other research (e.g. Cullum P & Meek C, (1995), Barriers to Utility Competition, Consumer Policy Review, 5 (4), July/August 1995, Consumers' Association), lack of number portability was a significant factor in both residential and business users' decision not to take up a cable telephone supply.
Respondents were asked about the amount and content of information received and the value of having independent information on telecoms companies.
Residential Customers
In general, most residential cable customers were happy with the amount and content of information received, although 10% felt they had not received enough on the cost of installation, 11% on the cost of line rental and 14% on the cost of calls. 13% of cable users felt that they were not given enough information about what would be involved with the installation, and 16% would have liked more information about the service they could expect. The non-users who had seriously considered taking a cable telephone service were more likely to be dissatisfied with the amount of information they had received on various aspects, such as what would be involved with the installation, all aspects of cost, and level of service, as shown in Table 8a.
Table 8a: Residential customers: Rating of amount of information received
Total Cable Non
users users:
serious
considerers
437 361 76
% % %
Information on what would be involved with the
installation
Right amount 65 68 50
Not enough 17 13 36
Don't know/not stated 18 18 14
Information on the price of the installation
Right amount 73 75 63
Not enough 10 7 20
Don't know 17 18 17
Information on the service that could be
expected
Right amount 62 66 42
Not enough 20 16 38
Don't know/not stated 18 18 19
Information on the price of the line rental
Right amount 71 75 57
Not enough 11 8 28
Don't know 18 17 15
Information on the price of calls
Right amount 69 72 54
Not enough 14 10 30
Don't know 17 18 16
Had enough information overall 71 78 38
Base: All residential users who considered information and non-users seriously considering a cable service
62% of users agreed that written information had helped them decide to take a cable telephone. 85% rated information on the cost of calls as accurate, 80% said this about information on the cost of installation, and 78% about information on the cost of line rental. Three-quarters (75%) rated information received on what would be involved with the installation as accurate, and 69% said this of the information on service. On the other hand, 30% of serious considerers agreed with the statement "I did not have enough information about the phone service offered by the cable company".
Business Customers
The great majority of business cable users felt they had received enough information from the cable company (92%), and that this information was accurate (90%).
Non-cable using businesses were more sceptical about the reliability of information provided by the cable company: two-fifths (40%) lacked confidence in the accuracy of this information. In addition, a significant minority of non-users (28%) felt that they had not received enough information to make an informed choice. Most demand was for more information on prices. Clearly, some improvement could be made in this area.
There was a clear demand for independent information which would allow customers to compare the performance of all the different telephone companies on a number of factors.
Telecoms companies and consumer organisations are working with Oftel to publish a set of comparable indicators that will help customers compare the performance of different companies. Five indicators are being published initially -
All of these five indicators were perceived by residential respondents to be useful. Independent information on the accuracy of bills, time taken to repair faults and deal with complaints were the most popular of the five indicators being collected. Over four-fifths of residential respondents said that these indicators would be useful. In addition, respondents were asked about several other possible measures, of which independent information on prices, and schemes to help people control their bills were the most popular. Indeed, comparable information on the prices charged by the different telecoms companies was the most widely cited need.
The importance of independent price comparison information is borne out in the finding that a fifth (22%) of residential non-users said that one of the reasons they did not switch was because they were unsure whether or not they would save money.
Four-fifths of business respondents said that independent comparable information on the performance of different telecoms companies would be useful. Non-users were slightly less likely to want this information than users.
Therefore, lack of information was a barrier to choice for some non-users, with some feeling they needed more information from the cable company. There is also a demand for the supply of independent information particularly on price comparisons between companies.
The need to change telephone number when switching to a cable telecoms company could cause concern about number listings in phone books and Directory Enquiries.
When asked, however, few residential users had experienced problems of this type, although one in ten (11%) had had problems receiving a phone directory, and 7% complained that their new number was not listed in the phone book. Negligible proportions reported other types of problem.
Few residential non-users expected number listing problems if they switched to cable. Only 5% of non-users mentioned this as a reason for not switching to cable and so it was not a significant barrier to changing supplier.
Business cable users were more likely to have experienced problems of this nature, which is of concern given that many businesses are dependent on their customers being able to get in touch. A fifth (19%) said that they were aware of customers having problems getting their number from Directory Enquiries, 9% said that they had had problems getting hold of directories, and a similar number said that they had had difficulties getting listed in the telephone directories.
However, only two business non-users mentioned number listing as a factor in their decision not to switch.
To summarise, amongst residential customers, number listing problems were neither widely expected nor experienced apart from receiving and being listed in the phone book. However, some business users' experiences indicate that there is some need for improvement by the telecoms industry in this area.
Customers were asked whether they had any experience of telephone suppliers giving misleading information or denigrating competitors.
Although the majority of respondents did not report any denigration the survey found some limited evidence of residential and business customers who reported hearing statements by BT about other operators some of which could be considered anti-competitive. This is of concern to Oftel because it has taken place at a crucial moment when the customer is making the decision to switch. Oftel will undertake further monitoring on this and will look further at the issue of special deals.
Residential Customers
Cable users were asked whether BT had made any of a number of statements both since becoming aware that cable was available and at the time they took up the cable telephone service. Non-users were asked whether BT had made any of these statements since they became aware of cable. As shown in Table 10a, most commonly BT mentioned their forthcoming offers and deals, but only one in ten said BT mentioned even these. Table 10a divides the statements asked about into those which could be considered statements of fact (top section), those which are more misleading or could be considered dubious or anti-competitive (middle section) and those which are not factually correct (bottom section).
Table 10a: Residential Customers: Statements made by BT
Base: All residential respondents
Total Cable Non-users Serious
telephone considerers
users
780 410 370 76
% % % %
In future, BT offering cheaper prices/special 11 13 8 14
deals
In future, BT bringing in new services 10 13 6 8
Will lose old phone number 7 10 4 9
BT offers discount schemes that are not 4
available from cable companies 3 4 2
Cable company's prices will go up 4 5 2 7
Cable company's savings would be less than 3 4 2 5
expected
Cable company's service is poor 2 3 1 3
Cable company has more faults on the line than 2 3 1 -
BT/less reliable
Cable companies' bills inaccurate 2 2 1 3
Cable company will not last long 1 2 1 1
Will have to buy new phone 3 4 1 3
BT prices cheaper than cable companies' 3 5 1 4
New number will not be listed in phone book 3 5 2 4
New number will not be available through 3 4 2 5
Directory Enquiries
Will not get phone books 2 3 1 3
Cable telephone does not allow you to make 999 1 1 1 1
calls
Cable telephone does not allow you to make 1 1 - -
international calls
None of these/don't know 79 73 86 75
Note: responses do not total 100% as respondents could give more than one answer.
Business Customers
At the time they were making their decision about whether or not to take cable, less than 1% of business users remembered receiving any contact from BT which mentioned cable. Since their decision to switch, one in ten (11%) said that they had received contact from BT of this nature. Table 10b shows what BT compared with the cable telephone service at this time, and what they said. Again the statements have been divided into those which are true (top section) and those which are more misleading or could be considered dubious or anti-competitive (middle section) and those which are not factually correct (bottom section).
Table 10b Business customers: Statements made by BT about the cable company since the decision to take cable was made.
Base: All cable users to whom BT had mentioned the cable telecoms service since the decision to take cable was made.
Cable users
19
n
Compared price 6
Compared quality of telecoms service 6
Compared quality of customer service 3
Compared something else 1
Did not compare anything 5
Don't know if compared anything 1
What said:
You have to change number when getting a cable phone 12
BT has more option/discount schemes 10
BT's service is better than the cable company's 11
BT's prices are cheaper than the cable company's 7
The cable company will push prices up 7
The cable company has more faults on the line/less 6
reliable
Only BT could meet all your telecoms needs 4
Using a different maintainer will cause problems 3
The cable company is financially unstable 3
The cable company cannot supply equipment or offer a 3
maintenance contract
You will not receive telephone directories if you get a 3
cable phone
The cable number will not be listed in the telephone 3
directory or the Yellow Pages
You will not be able to make 999 calls with cable 1
The cable number will not be available through 1
Directory Enquiries
None of these 3
Note: % are not used because of the small base
Most commonly, BT had mentioned the need to change telephone number. BT also often mentioned service and price issues to this group. In response to a different interview question, 2% of business cable users said they had had their lines cut off too quickly by BT or Mercury but this may have been the result of a genuine mistake rather than anything deliberately anti-competitive.
Residential Customers
8% of residential customers said that the cable company had claimed to offer more services than BT and 12% said that the cable company had said their service was better than BT's. A similar number reported the cable company as comparing favourably the reliability of their lines. Just 4% said they had been told BT's bills were inaccurate (but this could be interpreted as referring to their then policy of per unit rather than per second charging). Table 10c provides full figures, dividing the statements into those which are or may be true (top section) and more subjective claims (bottom section).
Table 10c Residential customers: Statements made by cable company
Base: All residential customers who had read information received or received a telephone call/personal visit from the cable company.
Total Cable Non-users
users
640 361 279
% % %
Cable prices cheaper than BT's 59 66 50
Cable company bill monthly 56 71 37
Cable company charge for calls per second/do not 49 59 35
round up
Cable company installation cheaper than BT 40 48 31
Will need to get a new phone number 41 53 25
Cable has more services than BT 8 8 7
Cable company's service better than BT 12 13 10
Cable company's lines more reliable/less faults 11 12 9
than BT
BT's bills are inaccurate 4 5 2
Other 2 4 -
None of these/don't know 13 9 17
Business Customers
5% of business respondents said that the cable company had told them that BT's bills were inaccurate. The cable companies told just over one in five (21%) respondents that their service was better than BT's, and a smaller proportion (14%) that their lines were more reliable and had fewer faults than BT's, and that they had more services than BT (10%)- Table 10d.
Again, only the statement "BT's bills are inaccurate" is defamatory, yet even this could be said to refer to the comparative accuracy of the cable companies' bills in relation to their charging by second rather than by the unit which BT did at the time of the survey. Just over one in twenty (6%) cable users and 5% of non-users who had received some information from the cable companies said that the cable company said this to them. The other statements referred to in Table 10d reflect the cable companies' opinion of the service they offer.
Table 10d Business customers: Statements made by the cable company
Total Cable Non-users
users
220 155 65
% % %
The cable company's service is better than BT's 21 21 23
The cable company's lines are more reliable/have less 14 16 8
faults than BT's
Cable has more services than BT 10 11 6
BT's bills are inaccurate 5 6 5
Base: All who received information from the cable company
Just under one in five businesses (18%) interviewed said that they had been offered a special deal on the purchase of equipment if they took a telephone service. BT was most likely to have offered a special deal, followed by the cable companies, as shown in Table 10e. BT's licence and cable licences require the licensee to obtain the Director General of Telecommunication's consent for such linked sales. Oftel is investigating further the indication that BT is offering combined equipment and service deals.
Table 10e Who offered the special deal?
Base: All who have been offered a special deal in the past 12 months
All Cable users Non-users
57 26 32
n n n
BT 19 8 11
Cable company 14 8 6
Mercury 10 3 7
Equipment Manufacturer/supplier 1 1 -
Other 7 3 4
Don't know 10 6 4
Note: % are not used because of the small base