4 November 2001

Contents

Chapter one - Introduction
Chapter two - Summary findings and conclusions
Chapter three - Main findings
Chapter four - Consumers' use of fixed telecoms operators
Chapter five - Impact of mobile phones on the calling behaiour from fixed home phones
Appendix one - Fixed telcoms questions

Chapter one

Introduction

1.1 This report provides an overview of the key findings of consumer behaviour in the fixed telecoms services market, taken from the sixth wave of Oftel’s quarterly residential consumer survey conducted in August 2001. Results from previous waves are used for comparison purposes where appropriate and referred to throughout this report.

1.2 The report provides 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 2063 UK adults (see note one below) during August 2001, of whom 93% claimed to have a fixed line at home. The report has been prepared by Oftel (see note two below), based on the results provided by MORI.

1.4 This report covers:

• penetration of fixed home phones;
• homes without a fixed line phone;
• satisfaction with main method of making and receiving calls;
• consumer spend on fixed telecoms services;
• awareness and use of fixed phone suppliers;
• switching supplier and number portability;
• awareness and use of BT’s inclusive call allowance;
• awareness and use of ‘In Contact Plus’;
• impact of mobiles on fixed phone use.

1.5 A copy of the questions is attached in appendix 1. Topics to be researched each quarter are requested by Oftel project teams and results feed into current investigations and reviews in individual market areas.

Notes:

1. This survey was conducted amongst a representative sample of UK adults, reflecting the UK profile of sex, age, social grade, region and employment status. Data has also been weighted to ensure the sample is representative of the UK adult population. All data shown is weighted data. Unweighted base sizes are shown on charts and tables to show the number of people who were asked the question. Because the survey was conducted amongst a sample of adults, rather than the whole population, the data may be subject to a small margin of error. The error margin for this total sample of 2063 consumers is about 1-2%, but is higher amongst smaller subgroups.

2. The report should not be seen as recommended best buys and should not therefore be relied upon when making purchase decisions. Oftel has conducted its own checks on the data in this report and whilst we consider it to be correct, Oftel accepts no liability in respect of any of the results provided to it by MORI or any decisions taken by any person in reliance on the report.

Chapter two

Summary Findings and Conclusions

Penetration of fixed phones remains stable, but recent drop in level of ‘unphoned’ is sustained

2.1 There has been little change since May 2000 in the proportion of UK homes with a fixed line phone service at 93%. During May 2001 there was a slight drop in the proportion of homes which had neither a fixed nor mobile phone. Although this drop was not statistically significant, it has been sustained this quarter – currently 6% of homes use mobiles only, and 1% of homes have neither fixed nor mobile phones.

2.2 78% of UK adults consider a fixed phone at home their main means of making and receiving calls; 16% consider mobiles their main method; 4% their work phone; and 1% public payphones.

2.3 Overall, 95% of consumers were satisfied with the main method of making and receiving calls. Satisfaction was lowest for the small proportion of payphone users, at 84%. Overall, 4% of consumers were dissatisfied with their main telephony method – equivalent to about 1.8 million adults.

Fall in fixed telecoms spend may indicate savings from bundled packages introduced earlier this year

2.4 Average quarterly spend on fixed telecoms fell in August (by about £5), for the first time since May 2000. This might be the first indication of savings from bundled packages (where customers pay additional line rental and in return receive unlimited voice calls to certain types of numbers eg local calls, or unmetered Internet use) introduced in at the end of 2000. Although it is too early to confirm this, other Oftel data appears to support this finding.

Previous drop in use of BT-only has been sustained

2.5 In May 2001, the proportion of fixed phone customers using only BT for their home services fell (from 72% to 69%), with a corresponding rise in homes using a sole alternative or additional supplier to BT. These changes have been sustained since May.

2.6 Just over half (53%) of fixed phone customers said they were aware of companies offering ‘indirect’ telephone services using the line already in their home. The key groups of consumers who would benefit from greater information, (such as Oftel’s consumer guides or the industry www.phonebills.org.uk website), to assist raise their awareness of the alternatives, include older consumers (over the age of 55); DE social grades; and lower income groups.

Some consumers are making good use of indirect access suppliers

2.7 About 2 in 5 indirect access customers used this supplier for all their calls, slightly lower than reported in previous months, which perhaps indicates that consumers are becoming more selective about which supplier they use for which calls. Although the remainder used their indirect supplier for only some calls, this covered all types of calls, including international; local and national; Internet use; and calls to mobiles. A small proportion of consumers would therefore appear to be making good use of the choices available.

Just over half of fixed phone customers were aware of BT’s inclusive call allowance, and about 2% actively used their allowance before switching to another supplier

2.8 3 in 5 indirect access customers were aware of BT’s inclusive call allowance. Of those who were aware of the allowance and used their indirect operator for some (rather than all) of their calls, less than half said they consciously made use of the allowance before switching to their indirect supplier for some or all of the rest of their calls. This equates to just less than 2% of residential fixed phone customers consciously making use of call allowance before switching to another supplier.

Switching supplier is easy, but number portability still not working for some

2.9 Altogether, about a quarter of fixed phone customers had switched suppliers – 8% in the last year, and 16% more than a year ago. The vast majority (9 in 10) said the switching process was easy, although there would still appear to be some difficulties with number portability. 57% of customers who switched in the last year kept their original number, compared with 39% who switched more than a year ago. Whilst this clearly represents a significant improvement, 42% of customers who switched in the last year changed their number – half of whom were told incorrectly by their new supplier that they had to.

2.10 For the majority of consumers there were few barriers to switching supplier – satisfaction with their current supplier was the main reasons for not switching. Barriers for some customers however, included the perceived hassle involved; concerns over the reliability of other suppliers and the level of savings that could be achieved; and a lack of awareness of alternative suppliers.

In summary:

2.11 Some consumers are making good use of the choices available in an attempt to get a better deal on their telecoms services. Behaviours include:

• use of a range of alternative suppliers, and thinking about which supplier to use for which calls;
• switching between suppliers, with the added advantage of retaining their original phone number;
• complimentary use of fixed and mobile phones, selecting mobile rather than fixed phones in some instances, for savings as well as convenience;
• use of bundled call and Internet packages, which preliminary evidence tentatively suggests may already be resulting in savings.

2.12 Others are making less varied use of the choices available, but the vast majority are satisfied with their main telephony service.

2.13 Areas where there is still scope for improvement by the industry and consumer groups include:

• raising awareness of the choices available, particularly via indirect access, and improving the reputation and image of these options to encourage consumer confidence in them;
• raising awareness of schemes such as In Contact Plus, amongst the appropriate customer groups;
• ensuring that consumers can keep their existing phone number when they switch supplier, and that comparable information such as www.cpi.org.uk and www.phonebills.org.uk continues to be promoted and improved to assist consumers with the choices available.

 Main Findings

Chapter three

Penetration and use of fixed telecoms in UK homes

3.1 During August, 93% of UK homes interviewed claimed to have a fixed line phone. Of the remaining 7% without a fixed phone, the majority (over 8 in 10) were using mobiles instead, which equates to 6% mobile-only homes in the UK, and 1% with neither fixed nor mobile phones. This can be seen in figure 3a below. There has been little change in the proportion of homes with fixed lines over the last year, although an increasing number of homes now also use mobiles.

3.2 The slight drop seen last quarter in the proportion of homes with neither fixed nor mobile phones, although not statistically significant, has been sustained this quarter.

Homes without a fixed line phone

3.3 The proportion of consumers without a fixed line phone at home, across different segments of the population is shown in figure 3b. There has been little change in these figures since last quarter. Absence of fixed line phones was most common among younger consumers, particularly those in the 15-34 age group who are likely to be setting up home for the first time or living in rented accommodation. Level of income and employment status is also a key factor in absence of fixed line phones, although the vast majority of these groups have mobile phones.

3.4 Combined data from May and August is shown for individual geographic regions to ensure more robust base sizes of at least 200 in each region.

Main method of making and receiving calls

3.5 Consumers were asked what they considered to be their main method of making and receiving calls, and how satisfied they were with this main method. The results are shown in figure 3c.

3.6 Almost 8 in 10 residential consumers considered a fixed phone at home to be their main method of making and receiving calls. 16% of all residential consumers consider their mobile to be their main method of making and receiving calls. 7 in 10 of these consumers who considered mobiles their main telephony service also had a fixed phone at home.

3.7 Overall 95% of adults said they were satisfied with their main telephony service and 4% were dissatisfied. This equates to about 1.8 million adults dissatisfied with their main method of making and receiving calls, of whom c.860,000 were dissatisfied with a fixed phone at home; c.720,000 with a mobile phone; c.72,000 with a public payphone; and c.90,000 with a work phone. Although caution should be applied due to the small number of consumers using payphones as their main phone, satisfaction with this method rose significantly between May and August from 57% to 84%.

Average spend on fixed telecoms services

3.8 There has been a slight drop since May in the average fixed line quarterly spend from £81 to £76. This might be the first indication of savings from packages that have recently been introduced, such as Internet and voice call bundles. However, based only on one quarter’s data it really is too soon to confirm this theory, although other Oftel data appears to support these findings. We shall continue to monitor this in future quarters. The average consumers’ spend is slightly inflated by a small number of high spenders and quarterly spends are shown in figure 3d.

3.9 Spend was related to the obvious consumer characteristics including income, household size, and use of additional telecoms such as Internet. Average quarterly spend amongst different customers is shown in figure 3e.

Incoming calls only, and awareness of ‘In-Contact Plus’

3.10 BT customers have the option of an incoming calls only service, with a low joining fee and reduced line rental. BT introduced its ‘In Contact Plus’ service in March 2001, which allows customers with an ‘incoming calls only service’ to make outgoing calls. It is also aimed at consumers who don’t have a fixed phone. Customers buy call time on pre-paid cards (much like the mobile phone voucher concept), and can make outgoing calls from any fixed line phone by entering a multi-digit code before dialling.

3.11 In August, 1% of fixed phone customers said they have an ‘incoming calls only’ service. Of these, a third were aware of BT’s In-Contact Plus scheme. Of the 7% consumers who don’t have a fixed phone, 13% were aware of In-Contact Plus.

3.12 2% of fixed phone customers said they were using In-Contact Plus, although this is thought to be an overestimate, possibly a result of consumers confusing knowledge of the scheme with awareness of indirect access pre-paid calling cards. In reality, less than 0.5% of fixed phone customers are currently thought to be using this service which has yet to be widely marketed beyond the existing In Contact customer base.

3.13 This survey did not attempt to examine the success of In-Contact Plus in getting consumers (who did not previously have a fixed phone) onto the phone at home. This may be examined in future surveys.

Chapter four

Consumers’ use of fixed telecoms operators

4.1 9% of fixed line homes claim to be using more than one operator for their calls and other home telecoms services. The drop last quarter in the proportion of homes using only BT to 69%, has been sustained this quarter, while 21% were using a sole alternative to BT – also consistent with last quarter (figure 4a).

4.2 Dual-supplied homes were more likely than average to be middle-aged; ABC1 social grades / higher income groups; and have home Internet access.

Awareness and use of indirect operators

4.3 Consumers with a fixed phone at home were asked whether they were aware of companies which offer telecoms services using the line already in their home, by entering a short code before you dial the number or by using a box attached to the phone which does this automatically (indirect access operators). Just over half (53%) of fixed line customers said they were aware of these alternatives. There has been no change in this figure since last quarter.

4.4 12% of fixed phone customers said they use indirect operators (again no change since last quarter), which is slightly higher than the proportion who said they are currently dual-supplied (figure 4a above). During May, almost half of these customers said they currently use just one supplier which suggests that use of indirect suppliers by some consumers is occasional rather than continual, for example when they need to make an international call they may use an indirect operator. This is broadly in line with findings below which report that less than half of customers using indirect suppliers use them for all of their calls.

How are consumers using indirect access?

4.5 In February 2001, almost half of indirect access customers said they used their indirect operator for all of their calls. By August 2001, this had fallen slightly to 38%, which might be an indication that consumers are becoming more thoughtful about how their make use of the choices available in order to get a better deal.

4.6 In line with previous findings, indirect access operators are not solely used for savings on international calls. Customers are using them for a variety of call types including Internet access and calls to mobiles, as shown in figure 4b.

4.7 Of the 3 in 5 residential customers using indirect access for some (rather than all) of their calls, half have a box attached to their phone which dials the access code for them. Slightly fewer enter the access (or PIN) code manually before each call they make. This is shown in figure 4c below.

Awareness and use of BT’s inclusive call allowance

4.8 BT’s line rental includes a certain amount of inclusive or ‘free’ calls ranging from about £1.80 to £2.40 depending on the level of line rental paid. Just over half (56%) of fixed phone customers were aware of this inclusive call allowance. Similarly, 56% of BT customers were aware of this allowance, as were 60% of customers using indirect access operators.

4.9 Customers who used an indirect access operator for some (rather than all) of their calls, and who were aware of BT’s inclusive call allowance, were asked how they made use of this allowance. Caution should be applied to the following results as the base size is less than 100, and accounts for only 4% of the total survey sample.

4.10 Just over a quarter (28%) of these customers said they used the inclusive call allowance and then switched to their indirect access operator for some or all of their calls. 16% said they sometimes used the inclusive allowance but sometimes forgot. 25% said they didn’t take the allowance into account when choosing whether to use BT or their indirect access operator. The remainder either said they didn’t use BT, or weren’t sure whether they used the call allowance. This equates to about 16% of indirect access customers (or just less than 2% of all fixed phone customers) consciously using the inclusive call allowance, at least sometimes.

4.11 When asked how they knew when they had used their inclusive call allowance, about half (of those who had taken the allowance into account when deciding which supplier to use) said they estimated the amount used themselves, or checked with BT. The other half said they didn’t bother calculating the amount of allowance used/left.

Switching supplier

4.12 Consumers were asked whether, apart from when they moved house, they had ever changed the company that provides their home fixed phone service, and if so, when this switch took place.

4.13 Altogether, 26% of residential consumers said they had changed their fixed phone supplier – 8% in the last year, and 18% more than a year ago. 72% were definite that they had never changed their supplier.

4.14 There has been little change in these figures over recent months. In March 2000 (see note three), a quarter of consumers said they had ‘ever’ switched supplier, and in February 2001 (see note four), 10% of consumers said they had switched fixed supplier in the last year.

4.15 Recent switchers tended to be younger (15-34) than average, and come from the middle income groups. Non-switchers tended to be older (55+) than average; more likely to live in smaller households (1-2 people); and come from the AB social grades.

The switching experience

4.16 The vast majority (92%) of consumers who had changed their fixed phone supplier said the process had been easy. This is similar to figures reported in March 2000 (see note five).

4.17 There was no reported difference in ease of switching between those who switched in last 12 months, and those who had switched more than a year ago.

Number portability

4.18 Just over half (55%) of those who had switched said they kept their original phone number when they changed companies, while 45% had changed their number. This equates to about 12% of residential fixed phone customers who have ever ported their number.

4.19 57% of customers who had switched in the last 12 months kept their original number, compared with 39% of those who switched more than a year ago. This indicates an improvement in take-up of fixed number portability during the last year in particular. However, 42% of customers who changed supplier in the last 12 months also changed their number.

4.20 Reasons for changing phone number when switching supplier are shown in figure 4d, and compare customers who switched in the last year, with those who switched longer than a year ago. The latter group may include a proportion of consumers who switched prior to January 2000, when operators were not obliged to port numbers.

4.21 Caution should be applied to the small base of recent switchers who changed their phone number – results should be treated as indicative only. However, about half of those who switched in the last year were told by their new supplier that they had to change their number – these were primarily customers moving to cable. Clearly there are still issues for some customers regarding their ability to port their number.

Figure 4d Reasons for changing number when switched supplier
Base: Residential fixed phone customers who switched supplier and had to change their phone number, Aug 01

Satisfaction with information available to assist choice of fixed phone supplier

4.22 The March 2000 (see note six below) switching survey reported that consumers were aware of literature provided by suppliers and general advertising, but few actually used these, relying instead on advice from friends and family or company sales staff. Awareness and use of independent information sources was low, but there was significant demand for sources such as price, quality and service availability comparisons.

4.23 During August 2001, 58% of residential fixed phone customers said they were satisfied with the information available for comparing and choosing between fixed phone suppliers. Satisfaction was considerably higher however, amongst customers who had switched (76%), both recently and more than a year ago.

4.24 This could indicate that until customers come to switch supplier, they are not fully aware of the information available to assist their choice. Or perhaps these customers have considered switching but were not able to make their choice with the information available, and decided not to switch.

4.25 Evidence from previous Oftel surveys tends not to support this latter theory however – insufficient savings and inertia were the main reasons for not switching, amongst people who had considered it but decided not to.

Reasons for not switching supplier

4.26 During August, consumers who had never switched supplier were asked why. Reasons for not switching supplier were mostly positive – ie satisfaction with the cost and/or service of current supplier. There has been little change in the main reasons during the last 18 months.

4.27 Barriers for a small proportion of consumers included perceptions that the switching would be too much hassle; concerns about the reliability of other suppliers and the level of savings that could be achieved; and lack of awareness alternatives. These findings, shown in figure 4e, are consistent with previous Oftel research.

Reasons for not making greater use of the choices available

4.28 During May 2001, insufficient savings or not making international calls were the main reasons given for not using indirect operators, highlighting consumers’ perceptions that these companies are primarily for international calls. Whilst this was traditionally the case, many now compete on a range of call types. Familiarity with brand names, and trusting a company were issues for some consumers, particularly older customers.

4.29 Qualitative research conducted for Oftel by Conway Smith Rose during August 2001, offers a more detailed examination of consumers’ awareness and perceptions of choices in the fixed telecoms market, particularly indirect access options. The report highlights the importance of brand image in the telecoms market. Whilst some consumers believed that it was worth switching suppliers for a reduced price, few were prepared to switch to an unknown supplier. This research will be published before the end of 2001.

3. Consumer switching behaviour in fixed and mobile markets, Mar '00
4. Consumers' use of fixed telecoms services, Feb '01
5. Consumer switching behaviour in fixed and mobile markets, Mar '00
6. Consumer switching behaviour in fixed and mobile markets, Mar '00

Chapter five

Impact of mobile phones on the calling behaviour from fixed home phones

5.1 Two-thirds of UK adults claimed to personally have both a fixed and mobile phone (dual-users). Some examples of the various ways in which mobile communications are impacting on fixed line usage are shown below in figure 5a. There has been little change in these figures over the last year.

5.2 Convenience was unsurprisingly the main reason for selecting mobiles rather than fixed phones, and almost a quarter of customers said they use their mobile when their fixed phone is being used by someone else. A significant minority of customers were selecting their mobile rather than fixed phone for perceived cost savings on a range of call types.

5.3 A third of dual-users said they were not substituting fixed phone usage with mobile in any of the listed circumstances. These tended to be lower spending fixed and mobile customers, and those over the age of 55.

5.4 Despite indications that some consumers are choosing one means of calling over another to get the best deal, previous Oftel research (Feb 01) reported evidence of consumer confusion over identification of mobile numbers; awareness of call costs; and concern over price of calls to mobiles from fixed line phones.

5.5 This data is also shown in the August report on ‘Consumers’ use of mobile telecoms services’.

 Appendix 1

Q6 August 2001 Residential Questionnaire – Fixed Telecoms questions

ASK ONLY THOSE ON THE TELEPHONE

Q How many companies provide your household with telephone services? Please do not count mobile phone companies.

ASK ONLY THOSE ON THE TELEPHONE

Q Which of these types of companies on this card do you/your household use for your home fixed line telephone services? If you use more than one fixed line supplier, please let me know what type of company each supplier is. Please do not count mobile phone companies. MULTICODE

BT

Cable

Someone else (not BT or Cable)

Don’t know/No answer

ASK ONLY THOSE ON THE TELEPHONE

Q3a. Are you aware of Indirect Access Operators? These are companies which offer telecoms services using the line already in your home. You usually enter a short code before you dial the number you wish to call. Alternatively, you may have a box attached to your phone, which does this for you.

ASK IF YES AT Q3A

Q3b And do you use any of these companies?

ASK ONLY THOSE USING AN INDIRECT ACCESS OPERATOR AT Q3b

Q4 Which types of calls do you use your Indirect Access operator for? MULTICODE

International calls

National calls

Local calls

Mobile calls

Internet calls/usage

Business/work-related calls

All call

Other (PLEASE SPECIFY)

ASK ALL USING INDIRECT ACCESS BUT NOT FOR ALL CALLS

Q5 Which of these statements best describes how you use your Indirect Access supplier? SINGLE CODE

I plug it in when I need to use it and unplug it when I want to use my other supplier

I leave it plugged in constantly and enter a code when I want to use my other supplier

I do not use any equipment and just dial a PIN number/short code, each time I want to use my Indirect Access supplier

Other

ASK ALL ON THE TELEPHONE

Q6 Are you aware that BT’s line rental includes a certain amount of free calls?

ASK ONLY THOSE USING INDIRECT ACCESS AND AWARE OF BT’S FREE CALLS AND WHO DO NOT USE INDIRECT ACCESS FOR ALL CALLS

Q7 Which of the following best describes how you use your indirect supplier and the free calls included with BT’s line rental? SINGLE CODE

I use the BT free-call allowance then switch to an Indirect Access operator for all other calls TO Q8

I use the BT free-call allowance then switch to an Indirect Access operator for certain calls TO Q8

I do not take the BT free-call allowance into account when I choose to use BT or an Indirect Access Operator

I sometimes use BT to make use of free calls and forget at other times

I never use BT

ASK ONLY THOSE WHO USE BT’S FREE CALLS

Q8 How do you know when you have used your free calls?

ASK ONLY THOSE ON THE TELEPHONE

Q9 Apart from when you have moved house, have you ever changed the company which provides your home fixed-line telephone service? IF YES, ASK: Was this in the last twelve months or more than a year ago?

ASK ONLY THOSE WHO HAVE CHANGED SUPPLIER

Q10 Overall, how easy was it to change your fixed-line supplier?

ASK ONLY THOSE WHO HAVE CHANGED SUPPLIER

Q11 And when you changed the company which provides your fixed-line home telephone service, did you change your phone number or did you keep your original number?

ASK ONLY THOSE WHO CHANGED PHONE NUMBER

Q12 Why did you change your home telephone number?

ASK ONLY THOSE NEVER CHANGED SUPPLIER

Q13 Why have you never changed to another fixed-line telephone supplier?

ASK ONLY THOSE ON THE TELEPHONE

Q14 How satisfied are you with the information available for comparing and choosing between fixed-line telephone suppliers?

ASK ONLY THOSE ON THE TELEPHONE

Q15 Does your fixed-line telephone allow you to receive calls only or both make and receive calls?

ASK ALL

Q16 Are you aware of the service "In Contact Plus?" It allows you to buy telephone call time on pre-paid cards. You use this call time by entering a code before dialling from your fixed-line telephone. IF YES, ASK: And do you use this service?

ASK ONLY THOSE ON THE TELEPHONE

Q17 Approximately how much would you estimate your TOTAL household spend per quarter on telecoms services for all telecoms suppliers used (including line rental and VAT) but EXCLUDING mobile phone costs?

ASK ALL

Q18 Which of these do you consider to be your MAIN method of making and receiving telephone calls?

Public payphone

Mobile phone

Fixed line phone at home

Fixed line phone at work

Other

ASK ALL

Q19 And how satisfied are you with [insert method from Q18] as your main method of making and receiving calls? SINGLE CODE

Very satisfied

Fairly satisfied

Not very satisfied

Not at all satisfied

Don’t know/no answer

ASK ONLY MOBILE PHONE USERS WHO ALSO HAVE A TELEPHONE

Q20 Thinking about when you use your mobile rather than your fixed phone, which, if any, of the following statements apply? Please just read out the letters that apply. MULTICODE

Use mobile instead of fixed to use up free mobile minutes/vouchers before expires

Use mobile instead of fixed at certain times of the day because cheaper

Use mobile instead of fixed for certain numbers because cheaper

Use mobile instead of fixed to call mobiles on same network because cheaper

Use mobile instead of fixed to call mobiles on different networks because cheaper

Use mobile even when more expensive than fixed because the convenience is more important than the cost

Use mobile when home phone being used by someone else

Use mobile when home phone line is connected to the Internet

None of these