Summary of Oftel SME survey Q3 November 2000

Contents

Introduction

Summary

Main findings

1. Introduction

1.1 This report contains a summary of the findings on Internet use from the third quarter of Oftel’s survey among small and medium enterprises (SMEs).

1.2 The survey was conducted among some 701 SMEs comprising 401 small (1-50 employees) and 300 medium (51-500 employees)¹ businesses located across the UK with a minimum turnover of £50,000. Quotas and weighting were applied to small and medium businesses separately so that the sample was representative of SMEs in the UK as a whole in terms of business size, industry sector and region.² The fieldwork was conducted on behalf of Oftel by Continental Research during November 2000.

1.3 This report has been prepared by Oftel³ based on the results provided by Continental Research.

1.4   The report covers:

 

• Internet penetration among SMEs

• Sources of information used when getting connected

• Switching Internet service provider (ISP)

• Internet packages used

• Internet connection methods used including DSL (digital subscriber line) services and other non-PSTN/dial-up connection methods

• Satisfaction with Internet services and with choice in Internet services

Notes

1  Some sources of data (including the DTI SME Statistics) define SMEs as employing between 1-249  staff thought the definition o f medium businesses is arbitary, defined sometimes by number of employees, sometimes by turnover.  The current survey included businesses with up to 500 employees in order that the survey was as inclusive as possible.  It was felt that, from the point of view of telecoms purchasing, little difference existed between businesses with 249 employees and those with 500.

2 The survey was conducted amongst a representative sample of small and medium enterprises (SMEs) in the UK, reflecting the UK profile in terms of business size, sector and region.  As small businesses (1-50 employees) make up around 99% of businesses in the UK, medium businesses wer oversampled in the survey to produce a sufficiently robust sample to allow analysis of the results among medium businesses.  The combined results were re-weighted to be representative of UK SMEs as a whole (99% small businesses; 1% medium businesses), consequently the results for small businesses closely resemble for those as a whole.

3 The report should not be seen as recommended best buys and should not therefore be relied upon when making purchase decisions.  Oftel accepts no liability in respect of any of the results provided to it by Continental Research or any decisions taken by any person in reliance on the report.

2.    Summary

Internet penetration among SMEs

2.1 49% of SMEs were connected to the Internet at November 2000, with 11% in the process of connecting and a further 6% likely to get connected over the next 12 months. Small businesses (at 48% connected) were less likely to be connected to the Internet compared with medium businesses (86% connected).

Sources of information used when getting connected

2.2 The most common sources of information on getting connected to the Internet was advice from family/friends/colleagues/other acquaintances, particularly for small businesses. Independent websites were another relatively popular source of information for medium businesses.

Switching Internet service provider (ISP)

2.3 Approaching a third of SMEs had switched Internet service provider, the majority of these businesses had found the process easy.

Internet packages used

2.4 A fifth of SMEs were using an unmetered package, either fully unmetered or partly (with free usage at certain times or for a certain amount of time).

Internet connection methods

2.5 Approaching three-quarters of SMEs connected to the Internet were using PSTN/dial-up connection to access the Internet. Two-fifths of SMEs connected were aware of DSL although less than 0.5% were currently using the service. However, 35% of SMEs said that they would be likely to use DSL in the future. Just over two-fifths of SMEs said that they would not consider any of the alternatives to PSTN/dial-up connection.

Satisfaction with Internet services and with choice in Internet services

2.6 At least three-quarters of SMEs connected were satisfied with the various aspects of Internet service, the highest rating being for quality of service (89%).

2.7 Similarly at least three-quarters of SMEs connected were satisfied with the amount of choice available, particularly with the number of ISPs available and the quality of service offered by providers.

3.    Main Findings

Internet penetration among small and medium businesses

3.1 Some 49% of SMEs in the survey were connected to the Internet at November 2000, the same level as was found in the September 2000 survey. In addition, 11% of SMEs in the November survey were in the process of getting connected and 6% likely to get connected in the next 12 months.

3.2 By business size, 48% of small businesses were connected at November 2000 and 86% of medium businesses.

Figure 1: Internet penetration among small and medium businesses (base: all businesses)

Sources of information used when getting connected

3.3 Businesses were asked what sources of information they had used to find out about Internet Service Providers, packages available, equipment needed and costs when they were getting connected. Figure 2 shows the sources of information used by business size.

Figure 2: Sources of information used when getting connected to the Internet (base: businesses connected to the Internet)

3.4 Other sources used (by less than 2% of SMEs connected) included TV and radio programmes, advertising, trade associations and training courses.

3.5 By business size, small businesses were more likely to have been advised on Internet connection by family/friends/ colleagues/other acquaintances compared with medium businesses. A third of small businesses had been advised in this way compared with 18% of medium businesses. Small businesses’ reliance on informal advice such as this has been found in separate research conducted recently by Oftel into Internet use among SMEs.⁴

3.6 The use of independent websites, perhaps accessed through business advisors, was more common among medium businesses than small businesses. This is relevant to small business initiatives such as the industry-sponsored TelecomsAdvice, an independent website which provides advice on Internet and other telecoms issues, and underlines the need for further promotion to raise awareness of these sources of advice.

Satisfaction with information available on Internet

3.7 Around four-fifths of SMEs connected to the Internet were satisfied with the information available on getting connected (82%) and on Internet Service Providers (80%), though businesses were slightly less satisfied (at 73%) with the amount of information available on Internet packages.

Figure 3: Satisfaction with information available on Internet (base: all businesses connected to the Internet)

3.8 By business size, small businesses appeared to be slightly less satisfied than medium businesses with the amount of information available on the Internet (Figure 4).

Figure 4: Satisfaction with information available on Internet by business size (base: all businesses connected to the Internet)

Switching Internet Service Providers (ISPs)

Proportion switching ISP

3.9 Approaching a third (31%) of SMEs connected to the Internet had previously used different ISPs to those they were currently using. This matches with the proportion found to have switched in the September survey (29%). Little difference emerged in switching rates between small (31%) and medium businesses (33%).

Ease of switching process

3.10  Just over four-fifths (83%) of businesses that had switched ISP had found the process easy, with again little difference between small and medium businesses.

Likelihood to switch in future

3.11 Both businesses that had already switched their ISP and those that had not switched were asked how likely they would be in the future to cancel their subscription with their current provider and switch to a new one. A fifth said that they would be likely to switch ISP in the future, a roughly equal proportion among small and medium businesses.

Type of Internet package used

3.12 A fifth of SMEs were using a form of unmetered Internet package, with 18% using a fully unmetered package (subscription+unlimited free usage+no call costs) and 2% a partly unmetered package (subscription+free usage at certain times/for a certain amount of time+call costs at other time). In contrast, partly unmetered packages were more common among businesses in the September survey than fully unmetered packages. This may reflect greater availability of fully unmetered packages since September.

Figure 5: Internet packages used at November and September 2000 (base: businesses connected to the Internet)

3.13 SMEs, in particular small businesses, also appeared to be moving away from free subscription with cost of calls packages towards paying both subscription and call costs. The proportion of businesses using free subscription packages (at 24%) was lower in November compared with September’s figures (37% at September) with a corresponding rise in businesses using subscription and call costs packages (up to 40% from 28% at September). The switch from subscription free to subscription packages may be due to possible quality of service issues such as congestion among providers offering free subscription leading to longer connection times, failed connections and slow downloading times, problems which might not be acceptable to businesses.

3.14 Please note that these changes may result from differences in samples between quarters. Use of Internet packages will be covered in future surveys to establish any change in use of packages.

3.15 Figure 6 compares the Internet packages used by small and medium businesses. This shows lower use of subscription-free packages by medium businesses compared with their use by small businesses.

figure 6: Internet packages used(base: businesses connected to the internet)

Connecting to the Internet

Awareness of DSL (digital subscriber line)

3.16 Some 41% of businesses were aware of DSL, ranging from 41% of small businesses to 51% of medium businesses.

Connection methods used

3.17 Overall, approaching three-quarters (72%) of SMEs connected were using a PSTN/dial up connection to access the Internet. Another 34% were using ISDN and 5% were using leased lines.

3.18 Around 14% of SMEs claimed to be using more than one connection method.

Figure 7: Type of Internet connection (base: businesses connected to the Internet)

3.19 Approaching three-quarters (73%) of small businesses were accessing the Internet using a PSTN/dial up connection and a third using ISDN. In comparison, a slightly higher proportion of medium businesses were using ISDN (52%) than PSTN/dial up (48%). Another 17% of medium businesses were using leased lines.

Use of DSL and other non PSTN/dial up connection methods

Current and future use of DSL

3.20 As Figure 7 shows, few businesses in the survey were using DSL reflecting the relatively recent availability of the service. Overall, less than 0.5% of SMEs were using DSL, ranging from less than 0.5% of small businesses to 3% of medium businesses.

3.21 However, likelihood to use DSL in the future was relatively high. Some 35% of SMEs said that they would be likely to use DSL in the future, ranging from 34% of small businesses to 51% of medium businesses.

Reasons for not using DSL among businesses using other non-PSTN/dial-up connection methods (ISDN, leased lines, high-speed cable access)

3.22 The most common reasons for these businesses being unlikely to use DSL in the future was that they did not know enough about DSL (mentioned by 28% of this small group of SMEs), that the business did not use the Internet enough (20%) and because they believed their current method to be more reliable (14%). Around one in ten said that they had no need for DSL or were not interested, that their current method was faster and that DSL was not available in their area. Due to the small sample size, it was not possible to analyse these reasons by business size.

Likelihood to consider non-PSTN/dial-up connection alternatives to DSL among businesses using PSTN/dial-up connection (and not likely to use DSL)

3.23 Figure 8 shows that ISDN was the most popular non-PSTN/dial-up alternative to DSL and would be considered by half of this group of businesses, a fifth said that they would consider high-speed access from a cable company. Medium businesses were more likely to consider leased lines than small businesses (8%).

Figure 8: Businesses considering non-PSTN/dial-up connection alternatives to DSL (base: businesses connected to the Internet, currently using PSTN/dial-up connection and unlikely to use DSL)

3.24 Overall, 43% of this group said that they would not consider any of the high-speed or always on alternatives to PSTN/dial-up connection. This equates to a fifth of SMEs connected to the Internet, ranging from 21% of small businesses down to just 5% of medium businesses.

3.25 As to reasons why businesses would not consider the high-speed or always-on alternatives to PSTN/dial-up connection, around half said that their business did not use the Internet enough, a fifth said that they were too expensive, another fifth that they had no need or were not interested, and one in ten that they did not know enough about them. Please note that these results are based on a small sample size (156 businesses).

3.26 One area which may be covered in future surveys, once use of DSL becomes more widespread, will be businesses’ reasons for using DSL over other non-PSTN/dial-up connection methods.

Satisfaction with Internet service

3.27 Internet Service Providers received a high rating (89% satisfied) for the quality of service they offered SMEs (Figure 9). Other aspects of Internet service, call costs, customer care, speed of access and subscription charges, received lower ratings although over three-quarters of businesses connected were satisfied with each of the aspects of service.

Figure 9: Satisfaction with Internet service (base: all businesses connected to the Internet)

3.28 No significant differences emerged in satisfaction with Internet service between small and medium businesses.

Satisfaction with choice in Internet services

3.29 Figure 10 shows satisfaction with the amount of choice available in Internet services.

3.30 Satisfaction was highest with the choice of ISPs available and the quality of service they offered. Satisfaction was also relatively high with choice in connection methods available. Less satisfactory was choice in packages available (81%), in access speeds (79%) and in different levels of customer care offered (75%).

Figure 10: Satisfaction with choice in Internet service (base: all businesses connected to the Internet)

3.31 By business size, the only significant difference in satisfaction among small and medium businesses was with choice in access speeds on offer with which small businesses were less satisfied (at 78%) than medium businesses (at 88%).

4. Conclusion

Lower Internet use among small businesses

4.1 Following on from the findings of the first and second quarters of the survey (June and September 2000) which showed that small businesses were clearly less likely to be connected to the Internet than medium businesses, Oftel commissioned a series of individual interviews with small and medium businesses to investigate their use of the Internet and e-commerce. One of the findings of this research was that small businesses in particular felt that there was a shortage of appropriate information for them on using the Internet leading them to rely on informal sources of information such as friends and family for advice on the Internet. This is repeated by the current survey which found that a third of businesses were using advice from friends/family and acquaintances when getting connected. Another finding from the individual interviews was that businesses were lacking Internet strategies (using the Internet mainly for e-mail/static company websites) which more innovative businesses felt was hindering their own development.

4.2 Initiatives such as UK online for business (http://www.ukonlineforbusiness.gov.uk) - an industry/Government partnership geared to help British business, particularly SMEs, to get the full benefit of new technologies, and TelecomsAdvice (http://www.telecomsadvice.org.uk/) - an industry-sponsored, independent advice site for small businesses, are aimed at improving businesses’ awareness and understanding of the Internet and e-commerce and the benefits of incorporating these into their business.

Internet packages

4.3  With around a fifth of SMEs connected using an unmetered package, and an apparent increase in the proportion using fully unmetered packages this quarter, future surveys will continue to monitor the uptake of unmetered packages, looking in particular at whether any increase in use of these packages leads to increased Internet use among businesses.

DSL and other non-PSTN/dial up connection methods

4.4 With the recent introduction of DSL and current limits on its availability around the country, awareness of the service was relatively low at two-fifths of SMEs and actual use was minimal (less than 0.5% of SMEs connected). However, around a third of SMEs said that they were likely to use DSL in the future.

4.5 Taking DSL and other non-PSTN/dial-up connection methods together, interest in high-speed or always-on Internet connection was high. Just a fifth of SMEs connected were not interested in any of the alternatives to PSTN/dial-up connection.

4.6 Future surveys will monitor use of non-PSTN/dial-up connection methods. This will include use of DSL as availability and presumably awareness of the service increases.

Use of competition

4.7 A third of SMEs connected had switched Internet Service Provider, this is relatively high given that it equals switching levels in the more established fixed telecoms market. The majority of SMEs claimed to be satisfied with the amount of choice available in Internet services, satisfaction with choice in terms of customer care, access speeds and packages available receiving the lowest ratings.