Oftel market research report - Towards better telecoms for customers, 1998 progress report

February 1999

Please note that this document refers to diagrams held in separate files

Contents

Why report progress?

Part 1 -Overview of developments in UK telecoms markets

Increasing revenues and volumes

Expanding choice

Price trends

Quality of service

Trends in customer complaints and enquiries

Part 2 - How have different customers fared?

Case study 1 - Low usage, low income
Case study 2 - Home teleworker
Case study 3 - High spend family
Case study 4 - No phone household
Case study 5 - Small business
Case study 6 - Urban and rural primary schools
Case study 7 - Regional medium sized business
Case study 8 - Large conglomerate business
Case study 9 - City of London – financial trading institution

Implications of case studies

Appendix - Sources of data

Glossary

Why report progress?

1. Telecommunications – from basic voice telephony to fax, mobile, Internet, and more advanced telecoms services – increasingly underpin the UK economy and provide key links in society. These communications markets are fast moving, dynamic and converging, increasingly carrying text, images, financial and other data in addition to voice messages.

2. But how successfully are customer demands for the expanding range of services being met? And how does this vary across different types of customers given the increasing numbers of suppliers? Is competition working for all?

3. The report is based on a review by Oftel, the UK telecoms regulator, of published information from industry and other sources and is in two parts. First it gives an overview of developments for customers in terms of choice, prices and quality. Secondly this report gives a snapshot of how a range of different customers – in both residential and business sectors – are doing in getting the ‘best deal’ from telecoms with each type described in terms of:

• telecoms services usage and spend
• customer concerns over telecoms
• what existing and forthcoming opportunities exist to get a better deal.

4. This document is therefore a view from the regulator of progress in the UK market based on available data. It will be one of the elements influencing the planning of Oftel’s work in 1999/2000. Oftel would like to hear from ‘stakeholders’ in the telecoms market whether this picture reflects their own views of how customers have fared and if they differ markedly to Oftel’s in what ways and, what implications this should have for Oftel’s work in 1999/2000 and beyond.

5. The two previous Oftel reports in the Towards better telecoms for customers series were published at the same time as Oftel’s annual management plan publication with the most recent report being published in March 1998. This report, in contrast, is being published with the draft plan, to help inform the final management plan for 1999/2000 to be published subsequently in March 1999.

Part 1

Overview of developments in UK telecoms markets

Increasing revenues and volumes

6. Revenue from the UK telecoms market (including fixed and mobile networks and telecoms equipment companies) grew by 7.2% between 1996/7 and 1997/8 from £22.2 billion to £23.8 billion. Telecoms revenues account for some 2% of GDP. BT, as the largest UK telecoms company, has a declining share of these revenues – down by around 1% to 64% in the year to March 1998. BT’s share of individual telecoms markets in 1997/8 varies from around 87% of fixed telephone lines to under 40% of revenues from international business calls, and a 22% share in mobile market revenues via its holding in Cellnet.

7. While telecoms company revenues are increasing so is the underlying the volume of activity in fixed, mobile and other markets. Volumes of activity can be gauged in terms of the numbers of telecoms connections and the extent to which these connections are used. Table 1 shows increases in terms of number of lines or subscribers:

Table 2 below shows volume increases in terms of call minutes for fixed and mobile telecoms only:

8. More customers are using more networks and services creating an incentive to competitors to provide in these markets. Customers will benefit from competition in the telecoms market as this should lead to better value for money through:

• expanding choice, leading to
• falling prices and
• improved quality of service
• addressing causes of consumer complaints.

Developments in each of these areas are described below.

Expanding choice

9. Where customers have an effective choice of suppliers they are likely to obtain the benefits of competition. Choice has increased over the past year.

Choice of fixed link telecoms

10. By October 1998, cable companies had laid cable in roads passing nearly 12 million households offering direct-to-the-home telecoms connections. This represents a 15% increase in one year in the number of homes with access to cable telephony: around 50% of households in the UK now have the choice of a cable operator to provide telecoms services.

11. Take up of cable telephone lines by residential customers was 3.4 million at October 1998, a 23% increase over October 1997. Cable companies are due to have passed 60% of households by the end of 2001.

12. Greater choice for residential and business customers has arisen from growth in the range and type of services provided by:

• long distance and regional players
• indirect service providers
• fixed radio access suppliers.

13. The map in Figure 1, shows those areas where households have a choice of two or more telecoms companies who provide direct connections to the home. However, all areas including those where residential customers only have a choice of a direct connection from BT, also have in total a range of some 50 plus indirect access suppliers. These suppliers are offering specific call packages or more wide ranging choices particularly on long distance calls.

Click here to see Figure 1: Choice for residential customers of telecoms companies providing local or indirect access in addition to BT (data provided by telecoms companies to Oftel) as at June 1998

Choice of mobile telecoms

14. Mobile telecoms services are provided by four network players. Between them these networks, had, as at December 1998, some 13 million customers, an increase of 50% over the previous year. All four mobile networks claim UK population coverage of 96% or more. Cellnet also claimed an 85% geographic coverage level in 1998, although the three other operators did not make any widely publicised geographic coverage claims.

15. The two more recently established networks (Orange and One 2 One) had around 30% of total revenues for period January to March 98 which represents a considerable increase in choice from 1994 when the new mobile systems from the ‘PCN’ operators had only just started.

Choice of Internet providers

16. The service provided over telecoms networks with the highest visibility for customers in 1998 is the Internet. Surveys towards the end of 1998 indicated around 2.5m UK residential and business subscribers.

17. The number of people who use the Internet is greater than those who subscribe to it – estimates have been made of around 10 million UK users in 1998, eg through multi-user company and education establishment subscriptions.

18. Choice of internet service providers for customers is wide with several emerging mass market players – as well as many smaller niche players.

Choice of pay TV suppliers

19. There are more choices for customers in terms of broadcast services. As well as the ‘free to air’ channels (BBC1 and 2, ITV, Channel 4 and Channel 5) customers can now receive further TV channels through cable and satellite and terrestrial systems by paying a subscription or, in certain instances, on a ‘pay per view’ basis.

20. By August 1998 there were 6.9m satellite and cable UK households (split 60 : 40 between satellite and cable). The last quarter of 1998 saw the launch of digital broadcasting services (by Sky Digital and On Digital) which are estimated to have gained, in total, a couple of hundred thousand subscribers by end of 1998. These are likely to supersede existing analogue broadcasting services over time. Access to these services will be via ‘set top boxes’ which will also be able to encompass traditional telecoms connections and services.

21. Choice of suppliers in these markets is only just emerging with further launches of digital broadcasting ventures planned for 1999.

Summary of choice

22. In summary the numbers of households and subscribers taking the various telecoms services described above are as shown in Figure 2. Increasingly the different methods of delivering telecoms service will be able to carry a wider range of overlapping services.

Click here to view Figure 2: Main residential customer uses of telecoms services

Price trends

23. Competition, and price controls on dominant operators where competition is not fully effective, have driven prices down in real terms. Between 1984 and 1998 prices for the main fixed link BT services have fallen, in real terms, by about 50%.

24. Prices for mobile services have fallen on average, across customer types, by 17% in real terms since 1997 and by some 70% since 1990.

25. Trend information in Internet services and converging broadcasting services is less readily calculated due to the wide range of tariff types and the rapid changes in the underlying services they relate to.

Quality of service

26. As competition develops, price is not the only basis on which telecoms companies compete. Customers will also get a better deal where telecoms suppliers compete on the basis of the quality of service provided and the range of services available.

27. For fixed link services the main telecoms companies are reporting their quality of service in a comparable way so that customers can take quality factors into account when making purchasing decisions (see www.telco-cpi.org.uk). Those telecoms companies reporting in 1998 across the majority of comparable quality of service measures, as defined and agreed by industry and consumer groups, accounted for 98% of residential and 93% of business market retail revenues.

28. Mobile quality of service information is not currently reported by mobile operators on a comparable basis. In the absence of such data a one-off illustrative limited survey commissioned by Oftel and published on 2 February 1999 showed a wider variation in call success rates between networks on rail routes with results ranging from 73% to 89%. In contrast in the cities surveyed (London, Cardiff, Edinburgh) the variation was smaller, on average over the three cities, the worst performing network had 91% compared to 97% for the best performing network. The mobile operators are being encouraged by Oftel to provide quality of service information on a more comprehensive and regular basis in response to the Oftel ‘snapshot’ survey.

Trends in customer complaints and enquiries

29. Customer complaints and enquiries received by Oftel about telecoms companies and others give an overview of key aspects of market developments. The trend in total numbers of complaints and enquiries is upward in recent years:

30. This increasing trend may reflect customers who are more aware of choice and are more demanding and critical of services they receive.

31. The changing subject matter of complaints is also an indicator of developments in the use of networks. What customers complain about is changing away from concerns over the basic reliability of fixed networks towards services delivered over networks and in relation to new types of networks.

32. The subjects of most complaints to Oftel in 1998 have been:

• unsolicited fax messages (the ‘number one’ complaint every month from February to December 1998) – before 1998 this issue had not been of such prominence
• failure or the time taken to repair faults
• contract terms for mobile contracts.

33. Other consistently high levels of complaints in 1998 were in relation to:

• difficulties contacting and correspondence not answered by the telecoms company
• how customer claims for redress are dealt with by telecoms companies.

34. Customer concerns about Internet services are beginning to register in greater volume during 1998 reflecting the increase in activity in this sector and confirming the dynamic nature of the telecoms market illustrated in the overview section above.

Part 2

How have different customers fared?

35. How UK telecoms customers fared in terms of quality, choice and value for money from telecoms services in 1997, was described in a report by Oftel published in March 1998 that looked at what different customer types get from fixed link telecoms services, mobile telecoms, services provided over telecoms networks and converging telecoms/broadcasting services.

36. These case studies of different customer types have been reviewed and updated to reflect developments in 1998 and are set out on the following pages. They comprise the following:

Residential

• Low telecoms usage, low income, retired couple
• Home teleworker
• High telecoms spend, executive family
• Household with no phone.

Business/other

• Small business
• Urban and rural primary schools
• Regional medium size business
• Large conglomerate business
• City institution.

37. Taken together with the market information and survey statistics above, these examples provide Oftel with an assessment of how far its goal of ‘best possible deal for the customer’ is being achieved and show where there is scope for improvement. Equally importantly they give others, outside the regulatory process, a basis on which to assess progress.

Case study 1

Low spending residential customer household – low income retired couple

Usage of telecoms:

• They have a phone – in common with some 94% of households in the UK – but see 'no need' for, and can't afford, mobile or Internet services or any more than the basic telephone services.

• Spend on telecoms:

Spend on telecoms at just over ,30 a quarter (including line rental) is in the bottom 20% of bills. They are now on BT's Light User Scheme (LUS) – along with nearly 2.6m other low spending customers. BT estimates a further 1.4m are eligible but have not taken up the scheme.

• Because of their low income, they have problems paying bills. They are also worried about being cut off and then potentially needing to pay some ,38 to be reconnected after a temporary service disconnection, or ,56 (both prices including VAT) if their line is fully disconnected. Some 700,000 (3.5% of total BT residential lines) a year are cut off by BT of which around 1 in 4 are subsequently reconnected within the same quarter.

• They live in an urban area but are unclear if there is an alternative telco to BT in their area.

Issues of concern

• Problems of affordability of telephone services – they see telephone bills as being difficult to predict given the complicated pricing schemes involved.

• Calls from telesales companies cause annoyance.

Opportunities for a better deal

• To pay less either

• through continuing with BT's Light User Scheme – given their level of spend they qualify for a reduced rental price offered by BT for low users. At their current level of spend this saves them around ,7 a quarter on their bill. Payment by direct debit could save a further ,1 on each bill.
• or by changing to their local cable company or fixed link radio telecoms supplier who, if they cover their area, may offer low cost or free connection, competitive rates on rentals (eg most companies, including BT, are under £10 per month) and calls (eg free or discounted calls to other local cable numbers) and monthly billing to help manage bills.
• To make sure they stay connected – disconnection policies adopted by telecoms companies in late 1997 are reducing the likelihood of being cut off as customers with debts are being given more time to pay through individually arranged repayment plans combined with incoming calls only service. (See also case study 4 details of In Contact scheme). BT residential disconnections for the period Oct 97 to September 98 fell by over a quarter compared to the same period in the previous year (27%).
• To obtain a telephone that is easier to use for people who are partially sighted, a 'big button' phone can be obtained for under £10 which would include a number memory facility to enable important numbers to be dialled at the touch of a button.
• To reduce the nuisance of unwanted sales calls, they could currently register, at no cost, with a voluntary Telephone Preference Scheme which should prevent calls from those telesales companies registered under the scheme (some 200,000 people are now registered with the scheme). New regulations from start of May 1999 give legal backing to consumer wishes as they will enable residential callers to opt out of receiving telemarketing telephone calls.
• To benefit from comparative testing in 1999 of ordinary telephones due to be carried out by the Research Institute for Consumer Affairs (RICA) aimed at helping elderly and disabled customers make more informed choices and for manufacturers to design more suitable equipment.

Case study 2

Medium/high spending residential household, single person – self-employed teleworker

Usage of telecoms:

• Needs a fixed line phone and a fax machine for social and customer contacts. Also, has an ISDN link and a mobile phone. Most out-going calls are in peak periods.
• Spend on telecoms – £120 per quarter on ISDN rental from BT £42 on calls after a £45 free call allowance; £98 a month for a commercial account with an internet server and a spend of £50 a quarter on internet calls. Pays his mobile service provider £51 a month for calls and rental.
• Lives on the edge of an urban area but works with clients in more remote areas. To demonstrate work, requires a lap-top computer with docking capabilities.

Issues of concern

• Is interested in whether calls would be cheaper with an indirect access operator or an alternative direct access telecoms company, but unclear if such companies will reach less densely populated areas. Worried about the reliability of these companies and whether they offer suitable services, such as ISDN.
• Limited mobile coverage in some more remote areas.
• On going cost of receiving junk faxes – tying up fixed line, wasting paper and inviting faxback calls at extortionate rates – are seen as a nuisance
• Concerned by the high cost of internet access.
• Concerned about the possibility that internet server may go off-line.
• Would like to be able to afford/use better quality equipment.

Opportunities for a Better Deal

• To check out the quality of service of fixed line rivals to BT, a publication called Comparable Performance Indicators summarising the performance of telecommunication companies is issued every six months and available free of charge from Lorien PE (tel. 01932-577 800) and on the Internet through www.telco-cpi.org.uk.
• From a study of advanced service availability in the UK in 1997/98 for Oftel, ISDN access services are available from most telecommunication companies directly connecting to the customer. This service is also available from indirect service providers (ie not directly connecting to the customer’s house), although in general, these offer a rather more limited set of service features.
• Increasing competition in international calls, following the opening up of this market in 1996, has led to the average price of an international call falling from 32p in 1996/7 to 26p in 1997/8. A wide range of telecoms companies, including indirect access providers, serve this market.
• Geographic coverage by mobile operators of remote areas is likely to improve as they extend their networks. In areas of poor mobile coverage Teleworker could use a telephone chargecard available from most major telephone companies, usable in public card phones and on any private telephone, allowing the cost of the call to be charged to the callers’ own account with the cost of the call usually cheaper than a peak-period mobile call.
• New regulations from May 1999 will protect individuals, sole traders or partnerships in England and Wales from unsolicited faxes as they will have to opt in (ie give their consent in writing) to receive such faxes. Small businesses wanting to stop these faxes can currently join the Fax Preference Service but can join a legally enforceable opt out list to be established after the introduction of the regulations in May 1999.
• 1998 saw a major expansion in Internet access price packages including ‘no subscription’ services supported by higher rate call charge advice lines.
• Publications such as Internet Magazine carry out monthly Internet Service Provider (ISP) tests which measure the quality of each service provider. To minimise the impact of internet service provider failure Teleworker could consider having a contract with more than one internet service provider. Given the increasing range of packages on offer this could be achieved at minimal cost.
• A visit to a local tele-cottage will normally allow the consumer the use of photocopiers, laser printers and fax machines. For high volume tasks, these machines may be better suited. Some cottages also offer services such as typing, foreign language translation, desk-top publishing and accounts. All tele-cottages offer some form of IT training.

Case Study 3

High spend residential household – the executive family

Usage of telecoms:

Issues of concern

Opportunities for a better deal

• To change mobile (or fixed) telecoms suppliers without changing telephone number. Mobile number portability is now available from January 1999.
• To benefit from price reductions in mobile sector. Mobile bills trends show a fall between 1997 and 1998 of 22% for the high residential user and this trend should continue as competition grows. The number of subscribers for the two newer mobile operators, Orange and One2One has increased from around a quarter of all mobile subscribers at September 97 to just over 30% by end of 1998.
• A Monopoly and Mergers Commission report in December 98 recommended the costs of calls to GSM mobiles phone from fixed phones should reduce by over a quarter. Price reductions will come into force from April 1999 onwards.
• To get better Internet access by using a faster modem or a basic rate ISDN connection, to check on performance measures in magazines about Internet use and use newsgroups on the Internet itself.
• To obtain quality of service data about fixed link telcos from the Internet Web site www.telco-cpi.org.uk.
• To help customers make sense of the wide range of different prices available, 12 of the leading fixed link telecoms companies are working with consumer groups and Oftel to develop regular, relevant and reliable price comparisons. Where successfully developed these should be published in mid 1999.
• To check out results from the four mobile network operator surveys of quality of service once available – should be by second half of 1999.
• To have choice about the form of their entry in a phone book or CD Rom version should they decide to stop being ex directory, eg by having no reference to gender or only a postal address included, to offer greater privacy while still being contactable.
• A wider choice of cheaper directories and directory enquiry services is likely to become available following recent regulatory changes, with potential for cheaper CD Rom, on line access and wider range of directory enquiry service providers.
• Legal safeguards in the UK, resulting from European telecoms data protection legislation, will help to stop unwanted telemarketing calls.
• Software is now available to Internet users to enable them to ‘filter’ adverts, animations and music, and to block data gathering ‘cookie’ downloads which pass user details on to other sites.

Case Study 4

Unemployed household living in rented accommodation with no phone

Usage of telecoms:

• Short-term renting of accommodation inhibits phone ownership due to perception of need to pay a lump sum connection fee and of penalties if do not keep line for a minimum 12 month rental.
• Accommodation in a multi tenanted building with a landlord provided payphone that doesn’t display call charges.
• Now uses local public call box and relatives and friends' phones for calls – makes mainly local calls.
• Makes calls from local Job Centre regarding employment.

Issues of concern

• Being without a phone inhibits the search for employment – Family Spending survey indicates 10% of homes with retired or unemployed people are without a phone.
• Concern about falling into debt if did have their own phone – a Policy Studies Institute survey reports that the main reasons for households being without phones is concern over managing telephone bills and the initial costs of installing a phone.

Opportunities for a better deal

• To get connected and stay on the network at a low price:

• BT's' 'In Contact' scheme launched in Feb 98 allows a reduced rate installation (joining fee) of ,9.99 and quarterly rental of ,9.25. The service is restricted to incoming calls and outgoing calls to a limited set of numbers eg emergency services, 150 and 151 numbers.

• some cable companies and radio fixed access operators offer free or low cost connection, reduced rentals and cheap or free local calls to other customers of the same cable company (see case study 1).

• prepaid mobile. At the lower end of the scale one of the cheapest prepaid mobile phone deals in 1998, based on use for incoming calls only, is about £110 a year. The cheapest option for light residential usage is about £230. This compares to under £50 a year for the cheapest fixed phone option. Customers seeking low cost telecoms need to consider carefully how much they value mobility.

• New rules covering the display of charges on payphones, including both public and private call boxes, will be issued in 1999 by Oftel.
• To help customers control their phone bills, BT have introduced a no fee ‘Dial a Bill Service’ where a registered user can check their bill to date via freephone number. Other telcos may offer similar services.
• Monthly rather than quarterly billing is now an option most telecoms companies offer – those on low incomes often prefer to pay bills regularly in smaller amounts.
• Where connected, to make use of the Paypoint scheme which allows customers to pay cash amounts to be credited against their BT account free of any cash handling charges. This scheme can be used to pay a range of bills.
• For customers who wish to stop their BT telephone line inside the minimum rental period, BT introduced new cancellation charges, from July1998, whereby customers pay a single cancellation fee which is less than the previous arrangement which levied the outstanding rental charges.

Case study 5

Light engineering small business

Usage of telecoms:

• Light engineering company, telecoms spend £8000 a year.
• 20 employees, 10 internal phone extensions, 5 external lines.
• Uses a simple private branch exchange that needs updating.
• One fax machine mainly used to place orders with two key suppliers and receive orders from one main customer.

Issues of concern

• Wants to relocate to more rural area to reduce premises costs.
• Wants to reduce trading position reliance on main customer.
• Little time to compare complicated telecoms prices and discount schemes of different operators.
• Wants advice on how to get best buy when purchasing telecoms equipment and getting it installed and maintained.
• Wants advice on best use of the Internet from an independent, up to date, practical source.

Opportunities for a better deal

• To identify locations served by ISDN2 through accessing BT, NTL, Telewest websites which should be available from early in 1999 – as Light Engineering has no current Internet access, this can be done through the network of government sponsored Business Link companies (Local Enterprise Companies in Scotland).
• Explore the business price comparison packages available from a range of telecoms pricing consultants.
• To specify a requirement for quality assured Telecoms equipment installers and maintainers in tender invitation (eg Telecoms Industry Association Quality, TIAQ scheme members – for details telephone TIA on 01908 645000).
• ... and look out for those suppliers signing up to Code of Conduct between network operators, installers and maintainers being developed by suppliers on Oftel’s Small Business Task Force (see draft Buyers Guide and draft Code on Communications for Business website www.acts.org.uk/cfb).
• To get Internet access to send e-mails, use Internet as a business research and marketing tool, find back up suppliers, find additional customers to lessen risk from dependence on single large customer. Advice on use of the Internet can be obtained through the Information Society Initiative website (www.isi.gov.uk).

Case study 6

Small /medium sized organisation – two primary schools – one urban, one rural

Usage of telecoms:

• Urban Primary school – 200 pupils, 9 teaching staff, with dial up Internet access

Rural Primary school – 30 pupils, 3 teaching staff, no Internet access.

• Urban: Learning gains from use of Internet access. Pupils and teachers who have used the connection found it helped learning and developed skills.

          Rural spend: only choice is from BT. Current offer is £544 for PSTN access and £790 for ISDN access for 8 am to 6 pm. They cannot afford either of these             but would welcome lower cost deal with only 3 to 4 hours access per day.

• Nationally almost all secondary schools have Internet access with 80% having networked computers. The number of primary schools connected is growing but still small. Many schools only have Internet access for teachers not pupils.

Issues of concern

• Urban primary – the number of pupils who can access the Internet, and benefit from access, at any one time is limited to one computer terminal. A Department for Education and Employment (DfEE) study highlighted the benefits of greater access to the Internet for pupils: improvements in subject learning; network literacy; vocational training; motivation and attitudes to learning; independent learning and research skills; and social development.
• Rural primary – concern pupils will be disadvanged if continue to be an Internet-less school.

Opportunities for a better deal

• To obtain a grant from DfEE, via the Local Education Authority, to develop a local area network to allow simultaneous access to Internet for a small group of children – to do this needs the urban primary school upgrade its Internet connection to ISDN or equivalent or higher bandwidth so that the time taken to access and download files does not slow unreasonably. Information on where ISDN available can be obtained from leading telco websites from early 1999 (see Case Study 5). Beyond ISDN, the cost of a leased line or other local access technology such as cable modems could be considered.
• Rural school to lobby telcos locally and through national representative structures for affordable, limited time period Internet access.
• To make use of in-service teacher training initiatives aimed at training to use on line resources in teaching the curriculum.
• To install a cache (a computer store of local copies of the most frequently accessed pages) to allow high speed access to most common sites.
• To participate in a government backed scheme to improve computer: pupil ratios by purchasing second hand computers from businesses.

Case study 7

Regional medium sized business

Usage of telecoms:

• Regionally based company in distribution and consumer services, uses telecoms to connect up its branches for both voice and data traffic and for taking customer calls regarding sales and for providing after sales support.
• Spends ,160,000 a year in total on telecoms services, 80% of which is accounted for by roughly equal proportions of PSTN and private circuits.
• Several departments and sites have had Internet e-mail addresses for a couple of years and the company now has its own Website – in common with 60% of Internet enabled small to medium size enterprises surveyed.

Issues of concern

• Exploring use of freephone and other specially tariffed numbers for generating sales and improving after sales customer service but wants to integrate with development of web approach.
• Considers cost to competitors to BT 'digging the last quarter mile to the customers' premises’ is a significant factor in limiting extent of direct access competition – and is unsure about how much can be obtained from indirect access suppliers.
• Wants telecoms suppliers to tailor their service standards (eg time to fix a fault) to Regional Medium's business requirements. BT claims its licence limits the flexibility of service standards and other telecoms companies claim this has a knock on effect where they are reliant on using parts of BT's network.
• Disappointed at level of use of its website by existing and potential customers – wonders if length of time it takes to download home page (up to 2 minutes) is at fault.

Opportunities for a better deal

• To explore further offers from regionally based competitors to BT – a TMA survey shows that in 1997/8, regional telecoms companies are finding a niche market with medium/large sized companies. Its level of spend is likely to interest suppliers in offering a competitively priced basket of services.
• To maximise the benefits obtainable from indirect access suppliers both in terms of low prices especially for longer distance calls for those services they are able to supply.
• To utilise the increasing portability of freephone, local or national rate numbers facilitating customers ability to switch between telecoms suppliers – and to recognise the likely development of call centres with Internet Protocol (IP) telephony enabling a wider range of customer supplier interactions eg text, video as well as voice.
• Developers have had some recent successes in getting telcos to share on site facilities (eg trenches and ducts) with each other and the client – so more opportunities should be forthcoming.
• To pressure telecoms companies to adopt more flexible service standards including those from BT, providing BT does so in a way which does not involve unduly favouring particular classes of customer.
• To make better use of its website through more usable, more useful content, regularly updated with more interactive activities such as taking customer orders and allowing customers to check order status.
• ... and maximise use of company information within the company through an intranet.

Case study 8

Large conglomerate business

Usage of telecoms:

• Uses: Telecoms is a key strategic resource of the business and while the company uses a wide range of services – PSTN, ISDN, leased lines, VPNs, freephone and local call numbers, frame relay, mobiles – it considers these in terms of how they can meet key business applications of communicating internally between sites both in terms of voice and data, and, externally with its customers, through its sales force and via the Internet. Increasing use of video and audio conferencing.
• Spend: ,10,5 million of which ,5m on internal voice network connecting dispersed company sites across the UK and internationally, ,2.4m on call centres, ,1.6m on connecting its local and wide area computer networks together and remaining ,1.5m on mobile phones and Internet access.
• Has a website now run by the Marketing manager having originally been the responsibility of the company’s public relations department.
• Has started to purchase some services from regional supplier to achieve savings and has participated with some other purchasers in small buying consortium.

Issues of concern

Opportunities for a better deal

• To further explore potential to buy from regional or national telecoms companies in competition with BT and to assess if any benefits available outweigh any additional oneoff and ongoing purchasing costs of managing multiple telecoms suppliers.
• To engage in the debate over how best to encourage higher bandwidth services in the local loop – responding to Oftel’s consultation document on this issue published in December 1998 – particularly relevant to Large Conglomerate with its extensive branch network.
• To encourage alliances of competitors to BT to provide national one stop alternatives. There are now an increasing number of telecoms companies with a national licence (eg BT, the main cable company groupings, the four mobile operators plus other business focussed operators) and several have obtained wide ranging number allocations across the UK, from Oftel, so as to be able to offer a national service.
• To further encourage users to form suitably recognised ‘buying consortia’ to put pressure on telcos and IT companies to provide new services and to develop new applications specific to consortia needs ie mobile access to virtual private networks, Intelligent Network services interoperability, and maximising unit cost reduction through volume purchases.
• Work with suppliers to use an extranet to streamline ordering, delivering, invoicing and payments, eventually leading to more standardized supply chain systems that more small suppliers can use.
• To enable customers to order and pay for goods via its website.
• To explore the benefits of a managed service approach.
• To put a recorded announcement on its call queuing system to ensure customers are aware that calls charges are incurred while held in a queue.

Case study 9

City of London – large financial trading institution

Usage of telecoms:

• Large Financial Institution has a major presence in the City of London involved in high volume electronic financial trading with significant traffic to USA.
• Carries out a monthly auction of calls traffic at its main site with four telecoms suppliers submitting bids electronically to carry calls.
• Spend: ,6 million of which ,2m on international voice calls, ,3.0 m on data networks connecting its local and wide area computer networks together and remaining ,1m on mobile phones and Internet access. Uses five different carriers at any one time.
• Has own Internet website, and well developed and intensively used intranet and web server. All employees have e-mail access, which is the most common communications method.
• Have extended secure, high speed intranet to its US sister company.

Issues of concern

Opportunities for a better deal

• 'Buyers club' opportunities in Europe and elsewhere such as those being achieved by the European VPN Users' Association (EVUA) to purchase different capacity telecoms links (bandwidth) that are compatible with existing technology and on a heavily discounted basis (based on high volumes of committed minutes).
• Further driving down of international call prices as competition increases.
• To present single, global face through providing fast access to mirror image of its Internet site in all global financial markets through a series of web servers.
• To provide an extranet facility for key clients for better, faster flows of key market analyses and to reduce transactions costs of money transfers.

Implications of the case studies

38. The case studies illustrate the wide range of customer uses, concerns and opportunities with regard to telecommunications services.

Promoting competition and preventing anti competitive practices

39. For an increasing number of customer types competition is a reality and they are making use of it to an ever greater extent – although given the dynamic nature of telecoms markets there are new opportunities which customers have yet to take. The implication for Oftel is in promoting competition through a wide range of means and ensuring compliance by suppliers with conditions and statutes preventing anti-competitive practice.

Promoting consumer interests

40. For a still substantial number of customers, however, competition has yet to have an impact and where regulatory consumer protection measures have an important role to play preventing social exclusion and preventing the abuse of monopoly power.

41. Across all customer types the issue of customer awareness of choice, awareness and the exercise of rights to access services, to privacy of personal data and to obtain redress in regard to telecoms services are critical to the effective working of the telecoms market – and to the delivery of telecoms services to the benefit of customers. More informed customers make better purchasers which encourages more effective competition.

42. Oftel’s action in promoting consumer interests must therefore take a range of forms to take account of the special nature of telecoms.

43. Oftel is currently preparing its strategy and related projects and programmes for 1999/2000 – which are the subject of a separate management plan consultation document issued at the same time as this document. The draft plan has been drawn up having regard to the experience of consumers set out here. In considering responses to the consultation document, consultees are asked to consider if the view of progress made towards better telecoms for customers in 1998 as set out above reflects their own views and whether the plan sufficiently addresses the concerns of different customer groups.

Appendix

Oftel Market Information 1997/8

ITC News Release – Cable sector statistics

BARB – Satellite/cable statistics

Fintech – Mobile Communications

Durlacher Quarterly Internet Reports

NERA – Advanced Telecoms Services: Availability and Take-up 1998

Analysys – Cutting the Cost

BT – Price trend data supplied to Oftel under licence conditions

CWC – price of schools connections to Internet

Lorien PE International– Comparable Performance Indicators

Freshfield Communications Limited – Mobile Quality of Service Study (Feb 1999)

Office for National Statistics – Family Expenditure Survey

WHICH? – Price Comparison of Fixed Line Operators – September 1998

Policy Studies Institute – Barriers to Telephone Ownership

DfEE – Use of Internet in schools

OVUM – Benchmarking studies 1998

TMA survey of members 1998

BESA – % of secondary schools with networked computers

Oftel – consumer representation section complaints analysis

Feedback from Oftel’s Large Business User Panel and Small Business Task Force members

DIEL Advisory Committee Secretariat – RICA initiative

Glossary

Gross Domestic Product (GDP) – GDP measures total domestic activity. It can be defined as the sum of final uses of goods and services by resident institutional units (actual final consumption and gross capital formation), plus exports and minus imports of goods and services.

Integrated Services Digital Network (ISDN) – a digital network capable of supporting a range of applications over a single line eg voice, image, text, video and data.

Indirect access – telecoms company carrying calls for customers using the local network and connection of other telecoms companies but not providing a direct connection to the customers premises.

To obtain copies of this report contact Oftel’s Research and Intelligence Unit (tel: 0171 634 8617/fax: 0171 634 8946 or e-mail)

For enquiries about the report contents please contact at Oftel:

Geoff Delamere (tel: 0171-634 8745/fax: 0171-634 8893/email)
Chris Woolford (tel: 0171-634 8973/email)