Chapter 1 Introduction

Chapter 2 Summary

Chapter 3 Penetration and use of fixed telecoms in UK homes

Chapter 4 Use of, and satisfaction with, fixed telecoms operators

Chapter 5 Calls to mobiles and fixed / mobile substitution

Chapter 6 Awareness of forthcoming changes to DQ services

Annex 1 Details of changes to quarterly survey sample

Annex 2 Q10 August 2002 residential questionnaire: fixed telecoms questions

Chapter 1

Introduction

1.1 This report provides an overview of the key findings of consumer behaviour in the fixed telecoms services market, taken from the tenth wave of Oftel’s quarterly residential consumer survey, conducted in August 2002. Results from previous waves are used for comparison purposes where appropriate and referred to throughout this report.

1.2 The report provides trend information and examines differences between consumers with different social characteristics. The sample and methodology were changed last quarter. It is important to understand these changes and the effect this has on the results. Please see annex 1 for further details.

1.3 The survey was conducted for Oftel by Recom (Research into Communications) amongst 2312 UK adults (footnote 1) during August 2002, of whom 91% claimed to have a fixed line at home. The report has been prepared by Oftel (footnote 2), based on the results provided by Recom.

1.4 This report covers:

• penetration of fixed home phones
• homes without a fixed line phone
• use of fixed phone suppliers
• spend on fixed telecoms and satisfaction with service received
• switching telecoms and utility suppliers
• awareness of forthcoming changes to DQ services

1.5 A copy of the questions is attached in annex 2. 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: 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 2312 consumers is about 1-2%, but is higher amongst smaller 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.

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

Chapter 2

Summary findings

Headline figures

• 91% of UK homes have a fixed line phone
• 23% of fixed line homes use an alternative or additional fixed supplier to BT
• £75 was the average quarterly spend on fixed telecoms (inc. calls, rental, VAT)
• 96% of adults were satisfied with their fixed telecoms service overall

2.1 Since the apparent rise in fixed penetration during the last 6 months – August experienced a significant drop to 91%. Primarily this has been caused by younger and lower income groups, reverting from fixed ownership to mobile only usage. The greater representation of lower income groups and areas of higher deprivation in the survey will affect fixed penetration as these groups have a greater propensity to debt and suffer disconnection.

Use of alternative fixed line suppliers has remained broadly unchanged over last 2 years

2.2 Around 8 out of 10 fixed line customers use BT for access and some if not all of their calls. BT penetration is significantly lower in cabled areas where a third (35%) of fixed line customers use the cable alternative available to them. Cable customers generally tend to be younger and those living in urban areas where cable is more prevalent.

Switching levels in the fixed and mobile markets are broadly similar but lower than for gas and electricity

2.3 Despite the absence of significant barriers, switching in the fixed and mobile markets remains lower than for gas and electricity. Almost 3 in 10 fixed line customers claim to have ever switched supplier compared to 40% having switched their gas or electricity supplier. However, the proportion of fixed switchers does not include all consumers who currently use an indirect operator for their fixed line calls and who may not consider use of this alternative to be a "switch" or use it insufficiently frequently to consider it an alternative. Therefore the proportion of fixed switchers may be slightly higher.

Sustained rise in levels of satisfaction with fixed line services

2.4 Satisfaction rose from 91% to 96% in May ’02, which has been sustained this quarter. Value for money with home fixed phone services remains the least satisfactory aspect at 82% and heavy spenders remain least satisfied with this aspect as would be expected.

Little change in awareness and satisfaction with cost of calling mobiles

2.5 Half (46%) of fixed line customers usually know whether they are calling a mobile number and a fifth (17%) said they knew roughly how much this would cost. Around 2 in 5 fixed line customers said they were less likely to call a mobile due to the cost and a similar proportion tended to keep the call shorter than if it were a fixed number. There has been little change in these figures over the last 18 months.

2.6 Satisfaction with the cost of calling mobiles from fixed lines remains low (56%) in comparison to satisfaction with the overall value for money of fixed services (82%).

Slight but significant rise in awareness of the introduction of new DQ numbers

2.7 In total 14% of UK adults were aware of one or both forthcoming changes to DQ services (introduction and withdrawal of numbers), but not of the specific details. This is a slight but significant rise since last quarter (10%). As reported in May ’02 awareness was only slightly higher amongst current users of DQ services. We shall continue to track awareness of these changes over coming months.

Main findings

Chapter 3

Penetration and use of fixed telecoms in UK homes

3.1 During February 2002, 95% of UK homes claimed to have a fixed phone, a small but statistically significant rise of 2% for the first time since May 2000 (when this survey began).

3.2 Evidence suggested this rise was due to a conversion amongst previously mobile-only customers, to fixed phone ownership. Fixed phone penetration rose most notably amongst DE (semi and unskilled manual workers, and those reliant on state income) and lower income groups – these groups were traditionally more likely than average to be mobile-only customers.

3.3 Since this apparent rise however, penetration has experienced a significant decline, falling to 91% by the end of August 2002. This has been caused primarily by younger and lower income groups reverting from fixed ownership to mobile only usage. This fluctuation should be expected following the changes to the survey sample now providing greater representation of lower income groups in areas of higher deprivation. These groups have a greater propensity to debt and / or disconnection issues, hence affecting fixed penetration.

3.4 The proportion of different groups of consumers without a fixed phone can be seen in figure 3b.

3.5 Compared with last quarter, mobile-only usage has risen most notably amongst the 15-34 age groups, the unemployed and those with annual household incomes of less than £17.5k. Previous qualitative Oftel research identified that these groups suffered greatest disconnection (voluntary or involuntary) for financial reasons and were attracted to the flexibility and greater ability to control costs offered by prepay mobiles.

Average spend on fixed telecoms services

3.6 Consumers spend on average £75 per quarter on their home fixed phone services - there has been little change in this figure in recent quarters. The average is inflated however, by the small proportion of customers spending over £150 per quarter - about 3 in 5 customers spend less than £70 per quarter (figure 3c).

3.7 Average quarterly spend on fixed telecoms amongst different consumer groups is shown in figure 3d, and is related to the obvious characteristics including income, household size, and use of additional services such as Internet. There has been little change in expenditure amongst any of the groups since last quarter. Spend was slightly higher in rural than urban areas, most probably due to rural areas tending to have wealthier occupants on average (see May 2002 report for further details) and greater use of Internet services, both of which are associated with heavier telecoms spend as shown below.

Calls to mobiles

3.8 The high penetration of mobiles in UK households (8 in 10) means a significant proportion of calls are made not just from mobiles, but also to mobiles. Oftel’s Market Information shows a 4% rise in the volume of fixed to mobile residential calls in the year to March 2002 – greater growth than both local and national fixed call volumes which have fallen in recent months. The impact of mobiles on use of fixed phones is discussed in more detail in chapter 5.

3.9 In previous reports, the majority of fixed phone homes (about 8 in 10) said they made calls to mobiles from their fixed phones, and on average estimated that about a fifth of their calls were to mobile numbers.

3.10 Despite the high penetration of mobiles and the similar proportion who make calls to mobiles from their fixed phone, there has been little change over the last couple of years in the level of consumer confusion over identification of mobile numbers, awareness of call costs, and some concern over the price of calls to mobiles from fixed line phones.

3.11 About half (46%) of fixed phone customers said they usually know whether or not they were calling a mobile number, a fifth (17%) said they knew roughly how much it cost to call a mobile from their fixed phone, and only 15% said the cost didn’t matter to them. Previous Oftel research however, found that consumers generally perceived calls to mobiles to be more expensive than other types of calls.

3.12 Just over half (56%) of fixed phone customers were satisfied with the cost of calls to mobiles, which is low in comparison to over 8 in 10 satisfied with overall value for money of fixed services.

3.13 In line with this dissatisfaction, a significant minority said they were less likely to call a mobile because of the cost (39%) or tended to keep the call shorter than if they were calling a fixed number (43%). There has been little change in the figures during the last 18 months.

Chapter 4

Consumers’ use of fixed telecoms operators

4.1 Supplier usage has remained broadly unchanged over the last couple of years, as shown in figure 4a. The only small variation tends to be in use of ‘other’ suppliers, mostly indirect access operators, which some customers use on an infrequent basis eg when they need to make international calls etc, rather than for all their calls. British Gas (including Onetel) was the most

commonly mentioned alternative supplier (used by 1% of fixed homes), others included Kingston, Powergen, Npower and Sky.

4.2 In total, almost 8 in 10 fixed phone customers use BT for access and some, if not all, of their calls. The remaining 20% use cable - broadly consistent with market shares shown in Oftel’s Market Information based on the number of lines.

4.3 Looking specifically at areas where cable is available as an alternative, BT penetration is significantly lower than average at 64% and cable penetration stands at around a third (35%).

4.4 Cable customers are generally younger to middle age groups and those living in urban areas where cable is more prevalent. Consumers with home Internet access are significantly more likely than average to use cable.

Switching supplier

4.5 Previous Oftel surveys have reported little change in the proportion of customers who have ever changed their fixed supplier, at just over quarter (28%). This is consistent with the largely unchanged proportion of customers using cable / BT / other suppliers, reported both above, and in Oftel’s quarterly Market Information publications http://www.oftel.gov.uk/publications/market_info/index.htm

4.6 The vast majority (92%) of consumers who had changed their fixed phone supplier said the process had been easy, and reasons for not switching were mainly positive eg satisfaction with current supplier, rather than tangible barriers such as lack of awareness of alternatives or difficulties switching etc.

4.7 Despite the apparent absence of significant barriers, switching in fixed telecoms remains lower than in gas and electricity as shown in figure 4c below. This is be partly due to aggressive marketing techniques in the energy markets, and the figures do not show what proportion of these customers have switched back to their original supplier. Additionally, the proportion of fixed telecoms switchers does not necessarily include all of the 10% of fixed line customers who currently use an Indirect Access operator in addition to their main fixed line supplier. Figure 4c shows the proportion of Indirect Access customers (8%) who did not consider their additional or alternative use of Indirect Access to be a "switch".

4.8 Mobile switching also remains largely unchanged in recent quarters, at a similar level to fixed, indicating a greater propensity to switch mobile supplier than fixed, given the relatively more recent length of time most consumers have had their mobile in comparison to their fixed phone.

4.9 Customers who have switched in either the fixed, gas or electricity markets tend to be middle aged, higher income groups, and those living in urban or more affluent areas. Heavy Internet users, cable customers and higher spending fixed line customers are also amongst those most likely to have switched in the fixed market.

4.10 Mobile switchers have slightly different characteristics relative to the profile of mobile owners – they tend to be younger, higher income groups again living in more affluent areas (mobile penetration is less prevalent in high deprivation areas). These switchers also tend to be higher monthly mobile spenders and more likely to be using a monthly subscription package.

4.11 25% of consumers claim to have changed their gas and / or electricity supplier but not their fixed telecoms supplier.

Satisfaction with fixed telecoms

4.12 Satisfaction with fixed telecoms services remained unchanged this quarter as shown in figure 4d. Overall, 96% of residential customers were satisfied with their fixed telecoms service, 98% with its reliability, and 82% with the value for money it provided. The slight drop in February was not sustained.

Figure 4d Satisfaction with home fixed phone service
Base: UK residential fixed phone customers aged 15+, May '02 (Base: 2125, don't knows have been excluded)

4.13 Overall satisfaction levels remain broadly similar to those in the mobile market (94%), and slightly higher than for the Internet (91%). Satisfaction with overall value for money is significantly lower in the fixed market (82%) compared to mobiles (87%).

4.14 Cable customers were more satisfied with value for money at 88%, compared with 80% of BT customers, despite spending only marginally less than BT customers. Users of other suppliers, the majority likely to be Indirect Access customers, were generally slightly less satisfied than average with each aspect of their fixed line service (90% with overall service, 94% reliability) and in particular with the value for money (74%). As mentioned in the May report two possible reasons for this are (i) they tend to be heavier spending customers who as a result tend to be less satisfied with value for money or (ii) they may not have achieved the savings they had expected to make which could result in lower levels of satisfaction amongst these customers.

Chapter 5

Impact of mobiles on use of fixed phones

5.1 Compared with two years ago, the proportion of consumers with both fixed and mobiles phones claiming to select their mobile rather than fixed phone in a range of circumstances, remains virtually unchanged at around two-thirds (figure 5a). In terms of actual numbers of consumers this represents a rise of almost one million due to the growth in mobile penetration during this period.

5.2 The figures do not convey whether the volume of calls (in terms of call minutes) in which mobile is displacing fixed is also rising. Oftel’s Market Information however, does indicate an increase in mobile minutes and a corresponding fall in the proportion of fixed voice calls.

5.3 Convenience remains the main reason for selecting mobiles rather than fixed phones, and about a fifth 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.

5.4 Mobile customers with Internet access at home tend to spend more on their monthly bill as their Internet usage increases. Although this may reflect heavier telecoms usage in general, a fifth of mobile customers with Internet said they used their mobile to make calls when the fixed phone was connected to the Internet.

Figure 5a Examples of consumer preference for mobile over fixed phone usage

Base: UK residential consumers aged 15+ with both fixed and mobile phone, Aug ’02 (Base: 1372)

Chapter 6

Awareness of forthcoming changes to Directory Enquiries services

6.1 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.

6.2 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.

6.3 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.

6.4 Oftel conducted research amongst residential consumers prior to deciding these changes, the majority of whom claimed they would not be concerned about the replacement of the current 192 DQ service with a range of new services.

6.5 These changes will affect at least the 7 in 10 UK adults who claim to ever call directory enquiries services from a fixed or mobile phone. And potentially cheaper prices and a wider range of services may encourage the remainder to use DQ services.

6.6 By the end of August 2002, 13% of UK adults were aware of the forthcoming introduction of new DQ numbers, a rise from 8% in May. The vast majority however remain unaware of what the new numbers will be (only 1% of all adults claimed to be aware, and only half of these correctly mentioned the 118 xxx format).

6.7 8% of UK adults were aware that the current 192 and 153 DQ numbers would be withdrawn from service (up slightly from 6% in May), and the majority of these did not know when this would happen. These were largely, although not exclusively the same group of people as those aware of the new number introduction, as shown in figure 6a.

6.8 In total, 14% of UK adults were aware of one or both of the forthcoming changes to DQ services, although the majority of these were not familiar with the specific details of the changes including when they would take place and what the new numbers would be.

6.9 As reported in May, awareness of the changes was only slightly higher amongst current users of DQ services than non-users, and there was little difference by frequency of use. Further details of frequent DQ users to assist targeting information initiatives regarding the forthcoming DQ changes can be found in the May 2002 report.

  Appendix 1

Details of changes to Oftel’s quarterly residential survey, May 2002

In April 2002, Oftel changed the market research agency we use to conduct the fieldwork for our UK quarterly residential surveys. At the same time we took the opportunity to refine the sample and methodology used to conduct these surveys.

The changes are as follows:

Methodology

Our surveys were previously carried on a national in home, face-to-face, CAPI omnibus survey. They are now conducted as a stand-alone Oftel survey (ie not on a shared omnibus), conducted on paper rather than CAPI, and remain in home and face-to-face.

The advantages of this new methodology include:

• giving us more flexibility in terms of who and where we interview (see below for further details).
• shorter interview for respondents (reducing potential respondent fatigue) as it is now a stand-alone Oftel survey, and is not combined with a variety of other topics on an omnibus survey
• enabling respondents to focus on telecoms issues specifically (and hence provide potentially better quality answers) rather than thinking about the variety of diverse topics that can appear on an omnibus

Sample

The sample remains a representative sample of UK adults aged 15+, representative in terms of age, gender, social grade, working status, and region.

The changes include:

• Greater representation of rural and deprived areas (due to the limitations of an omnibus in reaching some of these areas).
• Controls are now set on the proportion of interviews conducted in cabled and non-cabled areas to ensure they are included in their natural proportions. Since the omnibus is not telecoms-specific, cabled status was left to fall out naturally, and no quotas were set on the number of interviews in cabled vs non-cabled areas.

These refinements enable us to control for or investigate in greater detail issues that are particularly likely to influence telecoms usage. The implications of these changes are that some of the results will be affected. To understand what changes are due to these sample and methodology changes, and what changes are real changes in the market, the key tracking questions were repeated on the omnibus in May, in parallel to the first wave of new survey as a control sample.

The main measures affected are take-up of mobile and Internet. These are lower amongst the new sample as would be expected given the higher proportion of deprived areas now included in the sample – respondents who traditionally are less likely to have these technologies. Results from both May surveys were discussed in the report (and continue be shown in this report) to distinguish changes resulting from the sample and real changes in consumer behaviour. This should enable the reader to place the new figures (from which subsequent quarters’ trend data continue) in the context of the previous trend data.

Appendix 2

Q10 August 2002 Residential questionnaire: fixed telecoms questions

Do you have a fixed line phone in your home? SINGLE CODE

Yes
No

ASK ONLY THOSE ON THE TELEPHONE

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 (WRITE IN)

ASK ONLY THOSE ON THE TELEPHONE

How satisfied are you with the following? SINGLE CODE

Very satisfied
Fairly satisfied
Not very satisfied
Not at all satisfied

a) Your fixed line telephone service overall

b) Reliability of your fixed line telephone service

c) Overall value for money from your fixed line telephone service

d) Price of calls from your fixed line telephone to mobile phones

ASK ONLY THOSE ON THE TELEPHONE

Approximately how much would you estimate your TOTAL household spend per quarter on telecoms services is for all telecoms suppliers used (including line rental, any other charges and VAT) but EXCLUDING mobile phone costs? SINGLE CODE – PROMPT IF NECESSARY

Up to £30
£31-£50
£51-£70
£71-£100
£101-£150
£151-£200
£201-£300
More than £300

ASK ONLY THOSE ON THE TELEPHONE

Which, if any, of these statements apply to the calls you make from your fixed phone at home to mobile phones?

I usually know whether or not it is a mobile number I am calling
It doesn’t really matter to me how much it costs to call a mobile number
I am less likely to call a mobile number because of the cost
If I know it’s a mobile number I’m calling I tend to keep the call shorter than if I was calling a fixed phone

ASK ALL

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

Yes
No
ASK IF AWARE THAT NEW DIRECTORY ENQUIRIES NUMBERS ARE BEING INTRODUCED

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

DO NOT PROMPT, SINGLE CODE

Yes – 118 (xxx) any mention of this
Yes – Other number mentioned
No
ASK ALL

Once these new numbers are introduced, the national 192 and international 153 Directory Enquiries numbers will be withdrawn from service. Before now, were you aware of this? SINGLE CODE

Yes
No
Don’t know/no answer

ASK ONLY IF AWARE THAT 192/153 WILL BE WITHDRAWN

Do you know when these numbers (192/153) will be withdrawn from service?

DO NOT PROMPT SINGLE CODE

Autumn / October 2002
Summer / August 2003
This year
Next year
In 2 years time
Other (WRITE IN)
Don’t know/no answer

ASK ALL WITH MOBILE AND FIXED

Thinking about when you use your mobile rather than your fixed phone, which if any of the following statement apply

Use mobile even when more expensive than fixed because convenience is more important than cost
Use mobile when home phone is being use by someone else
Use mobile instead of fixed to call mobiles on same network because cheaper
Use mobile instead of fixed to use up free mobile minutes vouchers before expires
Use mobile when home phone line is connected to the Internet

ASK ALL

Have you ever switched supplier or used a different or additional supplier for any of the following?

Fixed telecoms services
Mobile network/operator
Gas supplier
Electricity supplier