Chapter 1 – Introduction

Chapter 2 – Summary

Chapter 3 – Main findings

Chapter 4 – Use of fixed telecoms suppliers

Chapter 5 – Telephone rental

Chapter 6 – Satisfaction with fixed telecoms suppliers

Chapter 7 – New Directory Enquiries numbers

Annex 1 – Q10 business questions on fixed telephony

Introduction

1.1 This report provides an overview of the key findings of business behaviour in the fixed telecoms market, taken from the tenth wave of Oftel’s quarterly business survey, conducted in August 2002 amongst 831 UK businesses. The results are subject to an error margin of about 2-4%, this is slightly higher amongst smaller subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence, please see footnote for further sample details.

1.2 Quotas and weighting were applied to small and medium businesses separately so that the sample was representative of SMEs (Small and Medium Enterprises) in the UK in terms of business size, industry sector and region.

1.3 In some cases throughout the report, data on a rolling basis is shown. This combining of two periods increases the sample size and allows trends in the data to be analysed and interpreted with greater confidence. For example, where identical questions have been asked over the past two waves (May and August 2002), combined data have been used.

1.4 The survey was conducted on behalf of Oftel by Continental Research during August 2002. This report has been prepared by Continental Research based on the results (footnote 2).

1.5 The report covers:

• fixed line telecoms spend;
• suppliers used;
• rental of fixed line telephones;
• satisfaction with fixed telecoms service;
• familiarity with changes to Directory Enquiries numbers.

1.6 A copy of the questions is attached in Annex 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.

Footnotes:

footnote 1 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 97% of businesses in the UK, medium businesses (51-250 employees) were over-sampled 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 (97% small businesses; 3% medium businesses), consequently the results for small businesses closely resemble those for SMEs as a whole. The error margin for this survey of 831 businesses is about 2-4%, but is higher amongst small subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence and hence are outside of the error margins and therefore can be considered real changes. All data shown is weighted data. Unweighted base sizes are shown on charts and tables to show the number of businesses who were asked the question.

footnote 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 Continental or any decisions taken by any person in reliance on the report.

Chapter 2

Summary findings

Headline figures

• Average monthly fixed telecoms spend: small - £288, medium - £3,086
• Overall satisfaction with fixed telecoms service is currently 93%
• 30% of SMEs rent fixed line telephones
• 11% of SMEs are aware that new Directory Enquiries numbers are being introduced and that the old numbers are being withdrawn

Little change in overall fixed line market since last quarter

2.1 Average spend remains broadly unchanged at £367, small businesses continue to spend more per employee (£42) than medium (£26). Medium businesses continue to be more likely to use other suppliers in addition or as an alternative to BT (42%) than small businesses (15%).

2.2 The current satisfaction level with fixed services stands at 93% unchanged since the last wave. This figure is slightly higher than satisfaction in the Internet market (88%) and the mobile market (89%).

2.3 Satisfaction with value for money (77% at this wave) has remained stable.

Slightly more than a third (37%) of businesses currently renting claim they will buy phones within 2 years

2.4 30% of SMEs rent fixed line telephone handsets, on average small businesses rent 4 phones, whilst medium sized businesses rent 33. Businesses claim to replace their rented handsets on average every 4 years. Over one-third of these businesses claim they are likely to stop renting and buy telephone handsets within the next two years.

Significant rise in awareness of the introduction of new numbers for Directory Enquiries

2.5 One in five (19%) businesses are aware of the plans to introduce new numbers for Directory Enquiries, a rise from 13% in May.

2.6 Over one in ten (13%) SMEs are aware that the old numbers will be withdrawn, but only 1% know this is happening in 2003.

2.7 In total, 21% of SMEs are aware that new numbers are being introduced, or that the old numbers are being withdrawn. 11% of are aware of both, but the majority are not aware of the precise details.

Main findings

Business use of fixed telephony

Fixed telecoms spend

3.1 The average monthly spend on fixed telecoms services (which includes call costs, rental, maintenance and VAT for all voice, fax, Internet and data services) amongst all SMEs for May/August is £367 (a rise from £318 in February 2002). This ranges from an average £288 amongst small businesses to £3,086 amongst medium businesses. Figure 3a shows the spread of monthly business spends and figure 3b shows the trend over time.

3.2 Monthly spend amongst companies connected to the Internet has risen slightly from £465 in Feb ‘02 to £499 in May/August ’02. This could be linked to the slight increase in usage of faster Internet access such as broadband and leased lines, which are generally more expensive than other methods, or it could be due to the seasonal effect discussed in section 3.3, however it is not a statistically significant rise, so Oftel will continue to monitor these issues.

3.3 As shown below, the average amount spent on telecoms continues to fluctuate. However, the figure is close to what it was at this point last year, and the higher spend reported in May ’01 and May ’02 may be seasonal. Please note though that it has not changed significantly since August ’01. Oftel will continue to monitor business fixed spend to establish whether seasonal variations are a contributory factor.

Figure 3b: Average spend on fixed telecoms services
Base: UK SME businesses, May/ Aug ’02 (Base: 1641, ‘don’t knows’ have been excluded)

* combined data from May/Aug ’02 used to calculate average monthly spend - see 1.3

3.4 Average spend levels by business size, per employee, and as a proportion of businesses’ annual turnover, are shown in figure 3c.

3.5 As reported in previous quarters, small businesses spend slightly more on fixed telecoms services per employee than medium businesses.

3.6 Amongst all SMEs, annual spend on fixed telecoms services accounts for less than 1% of annual turnover. There is no difference between small and medium businesses, at 0.4%.

Figure 3c: Average monthly spend on fixed telecoms services, by business size
Base: UK SME businesses, May/Aug ’02 (Base: 1641, ‘don’t knows’ have been excluded)

NB. Due to rounding of figures, the following example calculations will not provide the exact results

Chapter 4

Use of fixed telecoms suppliers

4.1 Overall 92% of SMEs use BT for some or all of their fixed telecoms services broadly similar to recent quarters.

4.2 Medium businesses are more than twice as likely as small businesses to use suppliers other than BT or cable (42% and 15% respectively) – similar findings were observed in previous waves.

Chapter 5

Telephone rental

5.1 30% of SMEs rent fixed line telephones. Amongst companies that rent telephones, small businesses rent an average of 4, while medium businesses rent on average 33 telephones (see figure 5a).

Figure 5a: UK SME business rental of fixed line telephones, by business size
Base: UK SME businesses, August ’02 (Base: 831)

Rental Company

5.2 As can be seen in figure 5b, 86% of SMEs renting telephones rent from BT, and 14% rent from an alternative company. Of those who claimed to rent from another supplier the majority were unable to name this supplier – it is possible that some of these actually rent from BT (about 3 in 4 of these businesses have their line supplied by BT). Small businesses were significantly more likely to have rented their telephone handsets from BT (87%), than medium sized businesses (67%) as shown in figure 5b. This is perhaps unsurprising as they are also more likely to use BT for their fixed line services than medium sized businesses.

Figure 5b: Companies used by UK SME business to rent fixed line telephones
Base: UK SME businesses renting fixed line telephones, August ’02 (Base: 214)

NB. Adds to more than 100% as some businesses rent from more than one supplier.

Reasons for rental

5.3 The main reasons given by businesses renting some or all of their phones were for overall ease of use and costs. A fifth (21%) mentioned at least one aspect relating to ease of use (easier to maintain, replace or update) and 13% mentioned a cost aspect – perceptions that it is cheaper to rent/cost of purchasing equipment. There are no significant differences between small and medium companies. 32% mentioned reasons that indicate ‘inertia’ (don’t know, historical reasons/habit) rather than positive reasons for renting.

Fixed line telephone rental spend

5.4 The average quarterly spend on renting telephones (amongst all SMEs that rent any telephones) was £92. This ranges from an average £83 amongst small businesses to £553 amongst medium businesses. Although businesses were specifically asked not to include line rental costs (see annex 1) in their estimate, some may have had difficulty distinguishing between different telephone charges and estimates may have included the cost of renting additional telephone equipment. This may contribute to some degree of overestimation in rental costs. The actual rental cost per phone from BT is around £4-£8 per quarter including maintenance.

Replacement time

5.5 On average, SMEs replace their telephones every 4 years. There is no difference between small and medium businesses and little difference according to who phones are rented from.

5.6 Just over a third (37%) of businesses that currently rent some or all of their telephone handsets claim they are likely to stop renting and buy phones in the next two years. There was little difference in likelihood to stop renting according to business size or who businesses are renting from. Businesses were not asked why they would stop renting.

Figure 5d: Likelihood to stop renting telephone handsets and buy phones in next two years

Chapter 6

Satisfaction with fixed telecoms services

6.1 The current level of overall satisfaction with fixed telecoms is unchanged since that reported in May ‘02, at 93%, and it is up five percentage points since November 2001 (a statistically significant rise). Small businesses are again slightly more satisfied (93%) with their overall service than medium sized businesses (88%), as shown in figure 5a.

6.2 Overall satisfaction with fixed telecoms remains comparable to overall

satisfaction with Internet (88%) and mobile services (89%), although satisfaction with these two areas has dropped slightly since the last wave.

6.3 Those with an Internet connection are again significantly less satisfied (92%) with their overall fixed line service than those without (97%). This lower satisfaction is more likely to be related to the higher monthly spend amongst this group (where satisfaction is generally lower), than a reflection on their Internet service.

Figure 6a: % UK SME businesses satisfied with various aspects of their fixed telecoms services
Base: UK SME businesses, May/Aug ’02, (Base: 1641, ‘don’t knows’ have been excluded)

6.4 Satisfaction with the overall value for money with fixed line services has remained fairly consistent in recent months.

Chapter 7

New Directory Enquiries numbers

7.1 At the end of 2001, Oftel announced plans to replace the existing national (192) and international (153) directory enquiries (DQ) services with a range of new numbers. Currently consumers can only access the DQ service provided by their network operator. The new arrangements will mean that consumers will have a choice of DQ service provider no matter what network they use.

7.2 These changes are expected to lead to the introduction of a range of new services, such as call completion facilities where the operator can connect people directly to the number they have requested, or services in a range of languages for people whose first language is not English and visitors from overseas. The presence of new firms in the market should promote competition in quality of service and on price, encouraging better customer service and lower prices.

7.3 In late 2002, new numbers in the range 118XXX will be introduced for directory enquiries services. These will be available in conjunction with the exiting 192 and 153 DQ services until August 2003, when 192 and 153 will cease to exist.

Awareness of plans to introduce new numbers

7.4 One in five (19%) of all UK SMEs state they are already aware that new numbers for Directory Enquiries (192) and International Directory Enquiries (153) were being introduced. This is a significant rise from 13% aware in May. As observed in May, there was no significant difference between small and medium businesses.

Awareness of what the new numbers will be

7.5 Of those that are aware the numbers are changing, less than 1% know that the 118 prefix is going to be used for the new directory enquiries services

Awareness of the old numbers being withdrawn

7.6 13% of companies know that the old 192 and 153 numbers are going to be withdrawn, up from 9% in May. Of these companies, the majority (83%) were unsure when it was happening. 7% think it is happening in 2002, and 4% think it is happening in 2003.

7.7 Overall 21% of SMEs are aware that new numbers are being introduced or the old numbers are being withdrawn. 11% of SMEs are aware of both, but the majority are unclear as to what the numbers are changing to and when the change is happening.

Annex 1

Q10 business questions on fixed telephony

Q1. What is the approximate MONTHLY telecoms bill of your company for all your voice, fax, Internet and data requirements. Please include all call costs, rental, maintenance costs and VAT. Please exclude any bills from mobile companies.

Q2. Which of the following does your business use for its fixed line telephone services? Please include all you use but do not include mobile phone companies.

BT
Any Cable company eg NTL, Telewest, Cable and Wireless
Colt
Energis
MCI Worldcom
Any other supplier(s) SPECIFY

Q3. Thinking about all your fixed line telecoms services and suppliers, are you satisfied with them on the following attributes? Firstly .....

The overall service they provide
The reliability of their service
Providing value for money

Q4. How many fixed line telephones does your company rent? Please note I am only talking about equipment rental not line rental.

Q5. Who do you rent your fixed line telephones from?

BT
Other telecommunications company
Other WRITE IN

Q6. Why did your company decide to rent rather than buy your telephones?

Cost of purchasing equipment
Cheaper to rent
Easier/cheaper to maintain
Easier/cheaper to replace
Easier/cheaper to change/update
Easier/less hassle generally
Buying did not occur/we've always rented/not aware of buying option
Get cheaper line rental/ calls with rented phone
Get other discounts with rented phone
Other
Don't know

Q7 How much does your company pay per quarter to rent your telephones? Please do not include any line rental charges, just the cost for renting the telephone equipment.

Q8 What would be the most you would be prepared to pay per quarter before you would stop renting and *buy* telephone handsets?

Q9. How likely is your company to stop renting its telephone handsets and buy phones in the next 2 years?

Very likely
Fairly likely
Not very likely
Not at all likely
Don't know

Q10. How often, on average has your company changed or replaced it's rented telephone handsets?

Q11 Recently, plans have been announced to introduce new numbers for directory enquiry services. Before now, were you aware of this?

Q12 Do you know what the new numbers will be for directory enquiries?

Q13 Directory Enquiries will be introducing new numbers, and the national 192 and international 153 directory enquires numbers will be withdrawn from service. Before now, were you aware of this?

Q14 Do you know when these numbers - 192 and 153 - will be withdrawn from service?

Winter/ November 2002
This year (no mention of Winter or November)
Summer/ August 2003
Next year (no mention of Summer or August)
In 2 years time/ the year after next/2004
Other WRITE IN
Don't know