Consumers’ use of Internet:
Summary of Oftel residential survey

Q3 November 2000

Contents

Intoduction

Summary Findings

Main Findings

Are consumers making use of the range of connections and ISP packages available?

Satisfaction with Internet service and the choices available

Conclusions

Introduction

1.1 This report provides an overview of the key findings in the Internet market, taken from the third quarter 2000/01 of Oftel’s quarterly residential consumer survey conducted in November 2000. Results from previous quarters (conducted in May and August 2000) are used for comparison purposes and referred to throughout this report.

1.2 The report provides a base for trend information on which subsequent quarterly results can be compared and examines differences between consumers with different social characteristics.

1.3 The survey was conducted for OFTEL by MORI amongst 2133 UK adults during November 2000, of whom 30% claimed to have Internet at home. This report has been prepared by Oftel, based on the results provided by MORI.

1.4 The report covers:

• how many, and which consumers have Internet access at home – social demographics
• average time spent on-line each week
• type of ISP package used
• satisfaction with ISP service including costs, quality, and choices available
• information and advice sources used when connecting to the Internet
• interest in ADSL Internet access options

1.5    The report addresses the following issues:

• At what pace does use of the Internet continue to grow and is the profile of users changing?
• Are consumers satisfied with their Internet service and the choices available, and are they making use of them? What, if any, advice did they seek before connecting to the Internet?
• What is the potential interest in ADSL Internet access options and what aspects of the service do consumers find most attractive?

Summary findings

2.1    Home Internet access continues to grow. During November, 30% of UK homes said they were connected, up from 28% in August. With just over two users per household on average, a conservative estimate indicates at least 16 million (c. 25%) of the population using the Internet at home.

2.2    Home Internet access rose amongst most subgroups of the population between August and November, and although access remains highest amongst younger and middle aged groups, higher income and large households, there was a slight shift towards DE homes.

2.3    Use of unmetered packages continues to grow, with almost a third of homes claiming to use fully or partially unmetered packages, up from a quarter in August. Average time spent on-line has increased with use of these packages. During November, households spent an average 7 hours on-line each week, and whilst this was inflated by a small number of heavy users, customers with unmetered packages spent about twice as long on-line as those on pay per use packages.

2.4    Customers on the whole were satisfied with their home Internet service, and the choices available to them in the Internet market, in particular, the number of ISPs, and the choice of connection methods and packages available. Fewer were satisfied the speed of their service, and with the choice of speeds available for accessing and using the Internet although this may partly reflect lack of awareness of alternatives available.

2.5    Almost 60% of Internet customers said they were satisfied with the information available to assist them in their choice of ISP package, and about 75% said they were satisfied that their particular package and ISP were best suited to their individual needs. The most popular source of information used to assist their selections however, was advice from friends and family (which is similar in other markets eg mobile), which is not necessarily independent or impartial.

2.6    Interest in ADSL remained quite high with at least 3 in 4 customers considering each of the individual features of the service ‘attractive’. The most popular features were the higher speeds and the ability to make voice calls at the same time as using the Internet, moreso than the ‘always-on’ and unmetered aspects of the service. Despite significant expressions of interest in ADSL, potential take-up of ADSL was lower - 1 in 4 Internet homes thought they would be likely to get it in the next 12 months at a cost of about £40 per month. This may be partly due to the cost - in May customers were asked how much they would be prepared to pay for ADSL in general (including fast Internet access and video on demand) – the average amount that consumers said they would be prepared to pay for ADSL was £13 per month.

Main Findings

The extent of UK Internet usage at home

3.1    Across the UK, an average 30% of homes (7.5 million) claimed to be connected to the Internet during August 2000, up from 28% in August. Figure 3a shows home Internet connection trends since January ’99.

3.2    PC ownership had remained fairly unchanged around the 40% mark since January 1999. During August 2000 however, it reached 45%, its highest level during this period. This level has been maintained since August and is currently at 46%. Until recently, PCs have been the main means of home Internet access and we will continue to track these levels in subsequent surveys as the uptake and expansion of alternative means of access such as digital TV continues. During August 10% of digital TV homes claimed to be accessing the Internet via this medium.

Figure 3a % UK homes with PC and Internet access

Source: MORI Technology tracker

3.3    On average there were just over two Internet users per household. This equates to a conservative estimate of at least 25% (16 million) of the population using the Internet at home. A further 5% of adults who do not have home Internet access said they use the Internet at work / place of study, or elsewhere.

Which consumers have Internet access at home?

3.4    Figure 3b shows growth in the proportion of UK consumers who have Internet at home between August and November. There was an increase in Internet uptake across almost all consumer groups, although usage remains highest amongst AB social grades and higher income groups, over half of whom said they have home Internet access. Usage remains lowest amongst the lowest income groups and consumers over the age of 55, fewer than 1 in 5 of whom had Internet at home. Consumers in rented accommodation were also considerably less likely than home-owners to have Internet (16% vs 36% respectively).

3.5    All regions experienced some increase in the proportion of homes with Internet access between May and November. Figure 3c shows combined quarterly rolling data from the May and August, and August and November surveys for individual geographic regions, to provide more robust sample sizes (minimum of 200 for each area) on which to base conclusions.

Figure 3b % adult population with home Internet Figure 3c% UK homes with Internet

Base: UK adults Base: UK homes *

3.6    Home Internet users were also more likely than average to have other technologies including mobile phones and pay TV, particularly digital. This can be seen in figure 3d.

3.7    There has been little change in the proportion of Internet homes who have second lines at almost 3 in 10. The August survey reported that two-thirds of these were specifically for Internet use, equating to about a fifth of Internet homes with second lines specifically for their Internet use. These were most popular amongst the higher income groups, larger households and cable supplied homes.

3.8    However, home Internet users do not confine their usage exclusively to the home, but are also more likely than average to use the Internet at work or their place of study.

Figure 3d Telecoms usage in UK Internet homes (November 2000)

How has the profile of Internet homes changed?

3.9 Between January ’99 and May ’00 there was a slight shift in the profile of homes with Internet access. This is illustrated in figure 3e. Although still prevalent amongst the younger and middle age groups, and the working population and higher social classes, distribution had experienced a slight shift towards older users, lower social grades, and those not working. Between August and November 2000, there has been little change in the profile of home Internet users.

Figure 3e Changing profile of homes with Internet access

Base: Homes with Internet access

Are consumers making use of the range of connections and ISP packages available?

4.1    Consumers on the whole appeared to be making relatively wide use of the range of ISPs and Internet packages available, given the relatively short length of time that some of the deals have been available.

4.2    Use of unmetered packages continues to grow, with almost a third of homes now claiming to use some form of unmetered access, up from a quarter in August (which was in line with industry estimates). This is shown in figure 4a. Use of the traditional "ISP subscription and cost of calls whilst on-line" package, (which was the predominant pricing package until the end of ’98 when subscription-free packages were popularised by Freeserve) remained fairly static at 15% whilst use of subscription-free packages continues to fall, as more homes take up unmetered packages.

Figure 4a Type of package used at home

Once they are connected, how long are consumers on-line?

4.3    There has been a slight growth of about 1 hour since August, in the average weekly household time spent on-line - about 7 hours. This is inflated by a small number of heavy users and in fact the majority of homes are on-line for less than this. Just over 1 in 10 households claim to be using the Internet for more than a couple of hours each day. Further details of on-line activities can be found in the May report.

4.4    In line with previous quarters, results indicate more experienced users who had been connected for longer tended to spend slightly longer on-line than more recently connected users.

4.5    Although income has been seen to be a contributing factor in connecting to the Internet it was not a key determinant in the amount of time spent on-line. November results confirm previous findings that heavier users tend to be larger households, but also the C2DE social grades/lower income groups. Younger consumers (aged 15-34) still tend to spend longer online each week than older consumers (aged 55+).

What impact does the type of package have on levels and patterns of usage?

4.6    Despite small sample sizes in previous quarters in terms of the number of people using partially unmetered packages, early indications supported heavier use amongst these customers than those on other Internet packages. As sample sizes increase, this trend continues, seen in figure 4b. Customers using unmetered packages claimed to be using the Internet for almost twice as long each week as those on pay-per-use packages. This may partly reflect the number of users in each home, as large homes (with 5+ people) were more likely than average to use unmetered packages. Both large and medium sized homes said they were on-line each week for slightly longer than smaller homes.

Figure 4b Average weekly household hours spent on-line, by type of package used

* Caution should be exercised as base size less than 100

Base: Home Internet users

What is the potential interest in alternative Internet access and connection mediums?

• The previous surveys identified only a small minority (c. 5%) of homes who used anything other than an ordinary phoneline and PC for their Internet connection.
• The May survey reported that 68% of Internet homes said they would be interested in faster Internet access but those who were prepared to pay for this service quoted an average £13 per month. The August survey asked consumers whether they would be prepared to pay an additional £10 or £20 a month for ‘always-on’ Internet access and a similar amount for higher speed access in an attempt to determine which aspect they valued more. Only 6% of Internet homes said they would pay at least an additional £10 for faster Internet access, and at least £10 for extra ‘always-on’ availability.
• During November we examined consumer interest in ADSL (Asymmetric Digital Subscriber Line), in particular, which groups of consumers expressed greatest interest and hence might be potential early adopters of the service, and which aspects of the service they found most attractive. ADSL offers high speed Internet access up to 10 times faster than ordinary phone lines. For a set monthly fee customers are permanently connected to the Internet, so they don’t have to dial up each time they want to use it. The customer does not pay call charges for the time spent on-line, and additionally, they can continue to use the same line for voice calls at the same time as using the Internet.
• Consumers who have Internet at home were asked how attractive they considered each of the four main features of the ADSL service. Results are shown in figure 4c.

Figure 4c Interest in ADSL features

• The aspects of ADSL service that were of most interest to Internet customers, were the higher speeds it offers, enabling customers to download different information and content up to 10 times faster than with their ordinary phone line, and the dual usage it offers, enabling them to use the Internet at the same time as making ordinary voice calls. Over 4 in 5 Internet homes found these features attractive, including 3 in 5 who found them ‘very attractive’.
• The permanent connection and unmetered access (ie no additional call costs) were slightly less attractive to Internet customers, perhaps because of the increasing availability and usage of unmetered packages. However, interest was still quite high with about 4 in 5 customers claiming these aspects of ADSL service were attractive.
• Customers who said they were not attracted (or were not sure) to the various features of ADSL were asked why. Their reasons are shown in figure 4d. The most popular reason for not finding the various aspects if ADSL attractive was not using the Internet enough, mentioned in each instance by at least 1 in 3 customers. About 1 in 10 customers each felt that their current Internet speeds were sufficiently fast, that they already had second lines specifically for their Internet use, (or used mobiles to make voice calls when using the Internet), or were already using unmetered packages.
• Potential barriers to uptake of ADSL services for a small proportion of consumers however, included the price of the service, concerns about the level of security with a permanent connection, and a lack of understanding about the service, and concerns that there would be hassle involved in switching to ADSL.

Figure 4d Reasons for not finding various ADSL features attractive

Reasons not attracted by ADSL’s
… faster speed
Don’t use the Internet enough	43%
Current speed is fast enough	14%
Don’t understand ADSL / wouldn’t know where to get it	11%
Too much hassle to change to this service	5%
Too expensive / depends on the price	4%
Other reasons	5%
Don’t know	28%
…always on / permanent connection
Don’t use Internet enough	40%
Security reasons	12%
Don’t understand ADSL / wouldn’t know where to get it	7%
Don’t mind dialling up	6%
Too expensive / depends on the price	6%
Already have permanent connection	2%
Other reasons	12%
Don’t know	22%
…unlimited usage / no call costs
Don’t use Internet enough	44%
Too expensive / depends on the price	22%
Already use unmetered package	8%
Don’t understand ADSL / wouldn’t know where to get it	7%
Other	4%
Don’t know	21%
…ability to make voice and Internet calls together
Don’t use Internet enough	35%
Already have second line for Internet use	12%
Don’t understand ADSL / wouldn’t know where to get it	9%
Rarely need to make voice calls when using Internet	5%
Use mobile when Internet is being used	3%
Other reasons	10%
Don’t know	31%

* NB these tables are not designed to total 100% for each set of questions as consumers could give more than one reason as to why they did not find the service attractive.
Base: UK Internet homes who did not consider ADSL feature attractive, November 2000

• Despite significant interest in the various aspects of ADSL, with at least 3 in 4 Internet homes considering each feature attractive, only a quarter thought they would be likely to get the service in the next 12 months at a cost of £40 per month. This is in line with the May survey which reported significant levels of interest in the service but considerably lower proportions prepared to pay up to £40 per month for the service.

Figure 4e Likelihood of getting ADSL in next 12 months

Base: UK homes with Internet, November 2000

• Interest was highest amongst younger consumers (aged 15-34), the higher income groups, and larger households (5+ people) of whom 1 in 3 thought they would be likely to get ADSL in the next 12 months. Interest was also higher than average amongst heavy fixed line spenders, customers paying a subscription and calls costs for their Internet usage, and longer established Internet homes (connected for more than one year). These customers may be the potential early adopters of ADSL depending on its geographic availability and we will continue to track uptake as awareness and availability improves. Heavier Internet users in particular were most interested in the higher speeds the service offers.

Satisfaction with Internet service and the choices available

5.1    The May survey reported that the vast majority of Internet users were satisfied with their ISP service. Despite this high level of satisfaction, 9 in 10 customers said they had experienced problems with their ISP mainly to do with connection problems or dissatisfaction with the speed of the service.

5.2    In November home Internet users were asked how satisfied they were with the individual aspects of their Internet service, including the quality of service and customer care offered by their ISP, subscription and calls costs where applicable, access and download speeds once on-line. They were also asked how satisfied they were with the range of choices available to them in these areas.

5.3    Customer satisfaction with various aspects of their Internet service is shown in figure 5a. Satisfaction was highest for the quality of service offered by ISPs – 4 in 5 consumers said they were satisfied with this aspect of their Internet service. About 3 in 5 customers were satisfied with subscription and call costs, and with the customer service offered by their ISP. Satisfaction was lowest (although still more than half of customers were satisfied) with speed of service, reflecting the findings in May which identified speed and connection difficulties as problems experienced by a significant proportion of customers. Heavy Internet users tended to be slightly less satisfied with speed than lighter users.

5.4    Satisfaction was slightly higher amongst customers paying a subscription for their service than those on subscription-free or unmetered packages with both quality of service, speed of service, and the customer care offered by their ISP. Satisfaction with call costs and subscription charges was highest amongst customers using unmetered packages, presumably because they are paying few, if any call costs, depending on whether they use partial or fully unmetered packages. Younger consumers and larger households were less satisfied with the speed of service than other consumers, and hence may be potential customers for ADSL services.

Figure 5a Customer satisfaction with Internet service

Base: UK home Internet users, November 2000

5.5    74% of home Internet customers were satisfied that their particular ISP and package was best suited to their needs. The remainder were either dissatisfied (11%) or didn’t know (15%). The level of satisfaction was consistent across customers of different packages.

Satisfaction with level of choice in the Internet market

5.6    Customers on the whole were satisfied with the level and range of choices available in the Internet market. They were most satisfied with the number of ISPs available to choose from. Satisfaction was also high with the choice in terms of quality of service offered by ISPs, the choice of connection alternatives and range of packages available.

5.7    Fewer consumers were satisfied with the choice of speeds available for on-line usage, and this was also the area of Internet service which customers considered least satisfactory. Consumers can improve the speed of their Internet with a variety of methods from upgrading their modem to installing an ADSL or ISDN line. It may be that consumers are not aware of these various alternatives and hence a significant minority said they were not satisfied with the choices they were aware of. Independent advice sites such as www.TelecomsAdvice.org.uk which offer advice to small business about telecoms and Internet services, may be of use to some residential customers in highlighting the range of alternatives and services available.

Figure 5b Satisfaction with level of choice in the Internet market

Base: UK home Internet users, November 2000

5.8    The May survey found that price was the main consideration for consumers selecting their ISP, including free access, cheap calls, and free trial periods. Just over 1 in 10 home users based their choice on recommendations / word of mouth and a similar proportion used the ISP that was already pre-installed on their PC. Fewer than 1 in 10 home users said they selected their ISP on the basis of its quality of service, content provision, or customer service / helpline facilities.

5.9    It also found Internet customers making good use of the choices available to them, with 1 in 3 Internet homes (34%) claiming to use more than one ISP and half who said they have switched ISP at least once.

5.10    The November survey asked Internet customers about the sources of information they used to find out about ISPs, the types of packages available, equipment needed, and costs of connecting to and using the Internet. The most popular source of information was recommendations and advice from family/friends/colleagues, which is not unique to the Internet market. About 1 in 6 customers said they used advertising and other literature from companies, and a similar proportion referred to computer magazines. Other sources of information used are shown in figure 5c.

5.11    About 1 in 5 customers couldn’t remember or hadn’t used any information to assist them in connecting to the Internet. This was slightly lower than the mobile market where a third of customers said they hadn’t used any information to assist their choice.

5.12    Customers using unmetered packages were most likely to have sought advice when connecting to the Internet, and whilst family/friends/colleagues were the most popular source of this information, they were also more likely than average to have used a range of other sources including computer magazines and company literature.

Figure 5c Sources of information used by consumers when connecting to the Internet

Base: UK home Internet users, November 2000

5.13    The majority (59%) of home Internet customers said they were satisfied with the information available to assist them choosing an Internet package. This was lower than customer satisfaction in the mobile market, where 78% of mobile customers were satisfied with the range and quality of information to assist them select their mobile. In both markets however, family, friends and colleagues were most popular source of information which may not necessarily be independent or even accurate in all instances.

Conclusions

6.1    Returning to the questions posed at the start of this report, the results provide a fairly good indication of the current shape of the Internet market, from the perspective and behaviour of the residential consumer.

Is the Internet still a specialised consumer product or is it becoming more widespread?

6.2    Although home Internet usage continues to grow, it is still used most widely by the AB social grades and higher income groups. The profile of home Internet users remains fairly static and growth remains slow amongst the lowest income groups and consumers over the age of 55, although there was a slight shift towards the DE social grades between August and November.

Are consumers satisfied with their Internet service and the choices available, and are they making use of them? What, if any, advice did they seek before connecting to the Internet?

6.3    Customers on the whole tended to be satisfied with their home Internet service, in particular the number of ISPs and the quality of service offered, and the range of packages and connection alternatives. Previous surveys reported a significant minority of homes switching ISP or using more than one ISP to take advantage of better deals, content provision, or to cater for the personal preferences of different members of the household.

6.4    Growth in use of unmetered packages continues, and households using these packages appear to be making good use of them, claiming to be on-line for about twice as long per week as homes on metered packages. It is difficult to determine however, the extent to which it is the unmetered element which is driving the heavier use, or whether these early adopters are generally heavier Internet users. 1 in 5 customers expressed dissatisfaction with their Internet call costs, whilst the majority said they were satisfied with any charges they incurred.

6.5    The majority of customers were satisfied with the choices they had made and the information they had used to assist their choice. However, as in other markets, the most popular sources of information and advice (from family/friends, and suppliers/retailers) were not necessarily independent or impartial. Hence customers may not necessarily be aware of all the choices available, and may not necessarily be getting the best deal for their individual needs.

6.6    Areas of greatest dissatisfaction included the speed of service, and the choice of speeds available. The relatively low use of faster Internet access (fewer than 1 in 20 homes claimed to anything other than PSTN/dial up access) may be partly due to lack of awareness of these alternatives and perhaps the cost, which light Internet users in particular may not consider a cost-effective alternative.

What is the potential interest in ADSL Internet access options and what aspects of the service do consumers find most attractive?

6.7    Despite significant attraction to ADSL Internet services, in particular the faster speeds and the ability to make voice calls at the same time as using the Internet, consumers were more cautious in the predicted usage of this service. Nevertheless, 1 in 4 Internet homes thought they might get it in the next 12 months. Potential early adopters of this service include younger customers and larger households who tended to be least satisfied with their current Internet speeds and expressed greatest interest in getting ADSL.

6.8    Although interest is likely to grow as availability and awareness of ADSL improves, price may prove a potential barrier to uptake, as customers in previous surveys said they would pay on average £13 per month for this service, which is significantly lower than current retail prices. However, the majority of customers found the various features of ADSL attractive and as consumers come to realise they don’t need a second line, this might make the price more appealing. Alternative options for fast Internet access will continue to increase as the roll-out of cable modems continues and with the unbundling of the local loop.