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| Business use of fixed telephony, Oftel small and medium business survey, Q7 November 2001 | |
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10
February 2002 
Contents Chapter 1 – Introduction Chapter 2 – Summary and conclusions Chapter 3 – Main findings Chapter 4 – Use of fixed telecoms suppliers Chapter 5 – Satisfaction with fixed telecoms suppliers Chapter 6 – Telephone equipment rental Appendix 1 – Changes to the Oftel quarterly business survey Appendix 2 – November business questions on fixed telephony Chapter 1 – Introduction1.1 This report provides an overview of the key findings of business behaviour in the fixed telecoms market, taken from the seventh wave of Oftel’s quarterly business survey, conducted in November 2001 amongst 815 UK businesses. 1.2 The survey sample changed from wave five onwards, and hence results are not directly comparable with waves one to four. Details and implications of the changes can be found in Appendix 1. 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 (see note one below). 1.3 The survey was conducted on behalf of Oftel by Continental Research during November 2001. This report has been prepared by Oftel (see note two below) based on the results provided by Continental Research. 1.4 The report covers:
1.5 A copy of the questions is attached in Appendix 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. Notes: 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 and £50,000 annual turnover) 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 815 businesses is about 2-4%, but is higher among subgroups. 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. 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 and conclusions Headline figures
2.1 Consistent with previous quarters, small businesses have more fixed lines per employee, and spend more per employee than medium businesses. But medium businesses have more advanced services (such as Internet, IDSN, leased lines) and a more expensive call mix (eg more international calls) than smaller businesses, and hence tend to spend more per fixed line than small businesses. This said, fixed telecoms expenditure in both small and medium businesses accounts for less than 1% of annual business turnover. 2.2 In total 5% of SMEs claimed to have leased lines, ranging from 4% of small businesses to 37% of medium businesses. A quarter of those with leased lines have digital lines of at least two megabits. Generally, the higher the bandwidth of the line, the greater the incidence of dual-purpose usage for data and voice calls. Lower bandwidth tended to be used primarily for data. More smaller businesses are making use the choices available 2.3 Multi-supplier usage has rose between August and November from 31% to 36%, driven primarily by smaller businesses with up to 5 employees. In line with this, use of indirect access operators rose from 25% to 27%. The rise reported last quarter in awareness of indirect access was sustained during November, currently 85% of small businesses and 92% of medium businesses were aware of these options. 2.4 In total, 64% of UK SMEs had used or actively considered using an indirect access operator and hence have shopped around to try and better their deal with the range of choices available in the market. Equally, the most popular reason for not using indirect access was satisfaction with current supplier. 2.5 Barriers for some businesses, particularly those no longer using indirect access, included having to dial the access codes (which will largely be overcome with carrier pre-selection, as businesses will not have to dial the access code before each call); insufficient savings on calls; and some perceptions that the quality of the service was poor. 2.6 Medium businesses were almost twice as likely as small businesses to have switched supplier (46% and 25% respectively), and the majority (89%) said it had been easy to switch. These figures tend to under-estimate businesses use of ‘additional’ suppliers however (which they may not consider a ‘change’ despite the fact they are moving at least some of their calls from some supplier to another). Hence they should be viewed along with use of additional suppliers to give a more realistic estimate of business use of choices in the fixed telecoms market. Drop in overall satisfaction, and no improvement in satisfaction with complaint handling by telcos 2.7 Overall satisfaction with fixed telecoms fell between August and November from 95% to 88%. With no change in satisfaction with service reliability and value for money, there was no immediately obvious reason for this drop. It is possibly a delayed reaction to the drop in satisfaction with value for money reported in August, or caused by one of the many other aspects of service which comprise overall satisfaction such as customer service, or fault repairs etc. We shall continue to track this in future surveys. 2.8 A third of businesses had complained to one of their telecoms providers (fixed or mobile) and less than half (44%) were satisfied with the way in which their complaint had been handled. There has been no improvement in these figures since August 2001. Almost a fifth of businesses renting telephones from their fixed supplier, a third of whom (c.6% all SMEs) feel it is important they can continue to do so in future 2.9 Almost half (46%) of all SMEs rented at least some of their telephone equipment (handsets, fax machines etc) – less than half of these (18% of SMEs in total) rented telephones from their fixed telecoms supplier. 2.10 Inertia and tradition (ie they’d always done so) was the most popular reason for this rental – mentioned by about a third of businesses, and a similar proportion were unsure why they rented. The remainder (just over a third) said it was cheaper to rent than buy, or mentioned ease or cost of maintaining, upgrading or replacing rented phones. 2.11 In total 13% of SMEs felt it important that they were able to rent equipment from their telecoms supplier in future. Half of these however, did not currently rent from their supplier. Of businesses who did currently rent telephones from their fixed supplier, a third felt it was important that they could continue to do so in future – this equates to about 6% of all SMEs.
Chapter 3 – Main findingsBusiness use of fixed telephonyNumber of lines 3.1 Small businesses in the UK had on average six separate lines for their fixed telecoms services (including voice, faxes, and data lines), while medium businesses had on average 32 lines. Use of fixed lines by business size is shown in figure 3a. Small businesses had on average 0.9 lines per employee, compared with 0.3 lines per employee in medium businesses. 3.2 As reported in previous quarters, there was a positive relationship between use (and likely use) of Internet, and the number of fixed lines. Businesses connected to the Internet had on average four times as many lines as those not connected nor intending to in the near future. Figure 3a
– UK SME business use of fixed lines, by business size
Fixed telecoms spend 3.3 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 was £329. This ranges from an average £257 amongst small businesses to £2796 amongst medium businesses. There has been little change in these figures since August. The median spend for small businesses was in the region of £125 per month and £2000 for medium businesses. Figure 3b shows the spread of monthly business spends. Figure 3b
– Spread of business monthly spend on fixed telecoms services
3.4 Average spend levels by business size, per fixed line, per employee, and as a proportion of businesses’ annual turnover, are shown in figure 3c. 3.5 Small businesses have more fixed lines per employee and hence spend more on fixed telecoms services per employee, than medium businesses. Small businesses however, spend less per fixed line than medium businesses as they tend to have fewer advanced services, such as Internet, ISDN, and leased lines. These findings have been consistent over recent quarters. Additionally, medium businesses were found in previous Oftel research to have a more expensive call mix, making more international calls etc. 3.6 Amongst all SMEs, annual spend on fixed telecoms services accounts for less than 1% of annual turnover. There was little difference between small and medium businesses at 0.5% and 0.4% respectively.
Figure 3c
– Average monthly spend on fixed telecoms services, by business size 
NB. Due to rounding of figures, the following example calculations will not provide the exact results Use of leased lines 3.7 Leased lines, are dedicated telephone lines between two specific points where the user pays a one-off charge to rent the line and any calls (these can be voice or data) between the two locations are not charged for regardless of the number of calls made. 3.8 Overall 5% of SMEs said they had a leased line, ranging from 4% of small businesses to 37% of medium businesses. They were most popular in the transport and financial sectors. 3.9 Leased lines are available in a variety of speeds or bandwidths. Smaller businesses were less likely than medium to have analogue lines, and more likely to use the higher (2+ megabit) lines, however these results should be treated cautiously and treated as indicative as only 4% of small businesses had a leased line, equating to a sample size of 36. Additionally, a significant proportion of small businesses were unsure of their leased line capacity. Again the transport and financial sectors were most likely to use higher speed lines. 3.10 Less than a fifth of businesses used leased lines mainly for voice calls, while half of businesses used the line primarily for data. Medium business were more likely to use their lines primarily for data, compared with smaller businesses a third of whom used the line equally for voice and data. 3.11 Lower speed digital lines were used almost exclusively for data, and generally, the higher the bandwidth, the more likely the line was used for both data and voice calls. This is shown in figure 3d although caution should be applied as some of the results are based on less than 100 businesses. Figure 3d
– Type and use of leased lines by business size 
Chapter 4 – Use of fixed telecoms suppliers 4.1 By November, 36% of SMEs said they used more than one supplier for their fixed telecoms service. This figure has risen slightly since August, up from 31%. Although medium businesses are more likely to use more than one supplier (59%), the rise between August and November has been driven primarily by small businesses, 36% of whom now use more than one supplier. 4.2 As in previous quarters, figure 4a shows multi-supplier usage increasing with business size, fixed telecoms spend, and use of additional technologies such as Internet. Figure
4a –% UK SME businesses using more than one supplier for fixed telecoms
services
4.3 As shown in figure 4b, overall 94% of SMEs use BT for some or all of their fixed telecoms services – there has been little change in this figure in recent quarters. Where change has occurred however, is in the proportion of businesses using an additional supplier to BT, up from 30% to 36% in the last quarter. This is consistent with figure 4a showing a rise in multi-supplier use. 4.4 This change has been driven primarily by smaller businesses, although medium businesses remain almost twice as likely as small businesses to use an additional supplier to BT.
Figure
4b – UK SME business use of fixed telecoms suppliers
Awareness and use of indirect access operators 4.5 There has been no change since August in awareness of indirect access operators (who offer telecoms services using the existing business lines, by entering a short code before dialling, or attaching a special box to the phone which does this for them). 85% of small businesses and 92% of medium businesses said they were aware of indirect access operators. Equally, there has been no change in awareness amongst the smallest businesses (1-5 employees), at 84%. 4.6 There has been a small rise since August in the proportion of all SMEs claiming to use an indirect access supplier, up from 25% to 27%. This is consistent with the rise reported above in multi-supplier usage. A further 5% were currently considering an indirect supplier. 44% of medium businesses were using indirect access compared with 26% of small businesses. 4.7 A breakdown of current and previous use of indirect suppliers amongst all SMEs is shown in figure 4c. In summary, 64% of businesses had either used/were using, or considered/considering using indirect access, and hence are shopping around and making use of the choices available in the market. 36% either hadn’t considered or were not aware of indirect access, which is lower than in previous months (42% in May and 38% in August). This was slightly lower amongst medium (21%) than small (37%) businesses. Figure 4c
– Business situation with regard to use of indirect access operators
4.8 Reasons for not using indirect access are shown in figure 4d. Satisfaction with current supplier was the most popular reason, and smaller proportions of businesses mentioned barriers such as having to dial access codes, perceptions of insufficient savings, complicated billing, and lack of information about the service. Little change in these figures since May 2001. 4.9 Businesses who had used indirect access in the past mentioned poor quality and insufficient savings as reasons for not using it now, while those who had considered but decided against using it had decided they were happy with their current provider. Similarly, businesses who were aware of the service but had not considered using it were also satisfied with their existing service and therefore felt they had no need to use indirect access. Figure 4d
– Reasons for not using indirect access operators
Switching supplier 4.10 A quarter of SMEs said they had ever changed their fixed-line supplier – 7% had done so in the last 12 months, and 18% had done so over a year ago. Medium businesses were almost twice as likely to have changed supplier, with 46% ever having changed, compared to 25% of small businesses. There has been little change in these figures since August. 4.11 These proportions somewhat under-represent the extent to which business are making use of competition. 37% of businesses said they were currently or previously using indirect access and as such could be considered to have switched as they have moved at least some of their calls from one supplier to another. These businesses however, may not have considered this additional supplier to be a ‘switch’. Both switching behaviour and use of additional suppliers should be considered therefore when assessing business use of competition. 4.12 The majority (89%) of SMEs that had switched said they found it easy to do so, although this was slightly lower than reported in August (94%). There was little difference between those who had switched in the last 12 months (87%) and those who switched more than a year ago (90%), although smaller businesses found the process slightly easier (89%) than medium businesses (82%). 4.13 August reported that 91% of businesses who had switched kept their existing phone numbers. There was no significant difference between small and medium sized businesses in this aspect. 4.14 The most popular reasons given by businesses for not changing supplier (reported in August) were simply that they did not need to or were satisfied with their current service. Barriers for a small proportion of businesses (less than one in 10) included perceptions that it would cause disruption; concerns about the quality and reliability of alternative providers; perceptions of insufficient savings to warrant changing; and lack of awareness of alternatives in their area.
Chapter 5 – Satisfaction with fixed telecoms services5.1 Overall satisfaction with fixed telecoms services has fallen to 88% compared with 95% in August. There is no apparent reason for this decline as satisfaction with both service reliability and value for money remains unchanged. The drop could be a delayed effect of the decline in satisfaction with value for money reported last quarter. Equally, overall satisfaction is obviously driven by more than just reliability and value for money, and some other factor, for example customer service or repairs, may have contributed to this decline. The drop was driven by small rather than medium businesses as shown in figure 5a. 5.2 Overall satisfaction with fixed telecoms however, remains comparable to overall satisfaction with Internet (89%) and mobile services (88%). Figure 5a
– % UK SME businesses satisfied with various aspects of their fixed
telecoms services 
Satisfaction with complaint handling 5.3 Almost a third of businesses (32%) had complained to their telecoms company (either fixed or mobile) – there has been no change in this figure since last quarter. This was significantly higher amongst medium (54% had complained) than smaller businesses (31% had complained). 5.4 Complaints were higher amongst businesses with more than one fixed supplier (43% had complained); those using additional technologies such as Internet (41% had complained); and doubled amongst heavier spenders, over 60% of whom had made a complaint. 5.5 Overall, just less than half (44%) were satisfied with the way in which their complaint had been handled – again similar to last quarter. There was only a small difference in satisfaction between small and medium businesses (43% and 48% respectively were satisfied).
Chapter 6 – Telephone equipment rental6.1 Almost half of SMEs rented at least some of the telephone equipment – there was no difference between small and medium businesses. However, half of these rented their equipment from someone other than their fixed telephone supplier as shown in figure 6a. Small businesses rented on average six telephones from their fixed telecoms suppliers compared with medium businesses who rented on average 17 telephones. Figure 6a
– Rental of telephone equipment
Cost of renting telephones 6.2 Just over half (55%) of businesses were unsure how much their company spent each year on renting telephones from its fixed telecoms provider. Of the remainder, the average estimated spend was about £630 per year (c.£540 in small businesses, and £3330 in medium businesses). Caution should be applied to these results which should only be regarded as indicative as they are based on a sample of less than 100 businesses. Reasons for renting telephones 6.3 Reasons for renting telephones from fixed telecoms suppliers are shown in figure 6b. The main reason was that the business had always rented its phones and hadn’t really thought about buying them – this applied to about a third of businesses. Smaller proportions felt it was cheaper to rent than to buy, and similar proportions felt it was easier or cheaper to maintain, replace or update rented phones. A significant minority of both small and medium were unsure why they rented their phones. Figure 6b
– Reasons for renting telephones 
Importance of future renting options 6.4 Almost a third (31%) of businesses renting phones from their fixed telecoms supplier felt it was important that they were able to do so in future. This equates to about 6% of all SME businesses. A further 6% of businesses renting from another source, and 9% of those not renting any phones felt this was important. This totals 13% of all businesses who considered it important that they could rent from their fixed telecoms supplier in future – with no notable difference between small (13%) and medium (17%) businesses. 6.5 Businesses who had rented for maintenance and replacement reasons felt more strongly than businesses who had rented for other reasons, but comprised a small proportion of businesses. Businesses who rented because they had always done and hadn’t considered buying comprised a significantly higher proportion of renters (see figure 6b) – and a considerably smaller proportion of these businesses (16%) felt it was important that they could rent from their fixed telecoms supplier in the future.
Appendix 1 – Changes to Oftel’s Quarterly Business SurveyBackground A.1 Oftel’s quarterly business surveys began in May 2000. The purpose of these surveys is to provide better information for Oftel decision making and to assist stakeholders in their response to Oftel documents and policy decisions. A.2 The surveys focus on small and medium sized businesses and exclude large businesses for a number of reasons:
A.3 Oftel’s business surveys are conducted among a representative sample of UK small and medium businesses (with a minimum turnover of £50,000), reflecting the UK profile in terms of number of employees, business sector, and geographic region. As small businesses (with up to 50 employees and over £50,000 annual turnover) account for around 97% of UK businesses, the surveys over-sample medium businesses in order to produce a sufficiently robust sample to allow analysis of results among medium businesses. A.4 Quotas are set for small and medium businesses separately to ensure each sample is representative of businesses of these different sizes, in terms of number of employees, business sector, and geographic region. After interviewing, the results are combined and weighted to be representative of UK small and medium businesses as a whole. This enables us to present representative results for small and medium businesses separately, each based on sufficiently robust samples, and representative results for the combined small and medium business sector. Details of changes to the sample A.5 A review of the first four surveys was conducted in March 2001, and a segmentation study conducted enabling the data to be examined in greater detail than was possible during each separate wave. As a result of this work, three key changes have been made to the surveys between waves four (February 2001) and five (May 2001): a) larger quarterly sample
b) change to definition of ‘medium’ businesses
c) more detailed sampling of small businesses
Implications of changes, for comparison between surveys A.6 The changes to the sampling methodology (employee categories) as described above, mean that the results of wave five are not directly comparable with those from waves one to four. This does not however mean that the results from waves one to four are inaccurate or invalid. Waves one to four are representative of businesses with up to 500 employees, whereas waves five, and onwards, are representative of businesses with up to 250 employees, and provide a greater focus on businesses with up to five employees than waves one to four. A.7 Whilst this unfortunately results in a discontinuity of trend information between waves four and five, the re-focus on smaller businesses following the review of the first four waves of data, was felt to be of greater benefit in assisting Oftel’s policy development and assessment, and other work in respect of small businesses.
Appendix 2 – November business questions on fixed telephonyIn total how many individual fixed telephone lines does your company have? Please include all lines such as voice, faxes and data lines but do not include extensions? 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. How many telecom suppliers does your business use? Please exclude mobile suppliers. You said you use ..... (INSERT NUMBER) suppliers. 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. (MULTI CODE) BT 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 Yes – fixed Overall how satisfied were you with the way the company handled your complaint? Very satisfied Have you ever changed the company which provides your fixed line telecoms service? Was it in the last 12 months or longer ago? Yes – in the last
12 months Overall how easy was it to change your fixed line suppliers? Very easy Is your company aware of indirect access operators? These are companies which offer telecoms services using your existing lines. 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. Which of these best describes your company's situation on the use of an Indirect Access Operator service? We are currently
using this service Do you have any leased lines? IF NECESSARY This is a dedicated telephone line between two specific points whereby you pay a one-off charge to rent it, and then any calls made between these two specific points are not charged for, regardless of how many calls are made. Which of the following types of leased line do you have...READ OUT. MULTICODE Analogue Do you use your leased lines primarily for voice calls, data services, or both equally? Which, if any, of the following telephone equipment does your company rent from your fixed line telephone company? Please note that I am only talking about equipment rental costs, *not* line rental costs READ OUT. MULTICODE Any fixed telephone,
including individual handsets and the switchboard equipment How many fixed line telephones does your company rent from your fixed line telephone company? Why did your company decide to rent rather than buy your telephones? How much does your company pay per year to rent your telephones? How important is it for your company to be able to rent telephone equipment from a fixed line supplier in the future? READ OUT Very important
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