Contents

Chapter 1 Introduction

Chapter 2 Summary

Chapter 3 Penetration and use of fixed telecoms in UK homes

Chapter 4 Consumers’ use of fixed telecoms operators

Chapter 5 Satisfaction with fixed telecoms and complaint handling

Chapter 6 Impact of mobiles on use of fixed phones

Annex 1 Q8 February 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 eighth wave of Oftel’s quarterly residential consumer survey conducted in February 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 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 2138 UK adults {footnote 1} during February 2002, of whom 95% claimed to have a fixed line at home. The report has been prepared by Oftel, {footnote 2} 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 service
• consumer spend on fixed telecoms services
• calls to mobiles
• awareness and use of fixed phone suppliers
• switching supplier and number portability
• awareness and use of BT’s inclusive call time
• impact of mobiles on fixed phone use

1.5 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.

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 2138 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 MORI or any decisions taken by any person in reliance on the report.

Chapter 2

Summary findings

Headline figures

• 95% of UK homes have a fixed line phone
• 29% use an alternative or additional fixed supplier to BT
• £81 was the average quarterly spend on fixed telecoms (inc. calls, rental, VAT)
• 91% of adults were satisfied with their fixed telecoms service overall

Proportion of homes with a fixed phone rises for the first time since May 2000, apparently driven by take-up amongst mobile-only homes

2.1 Having remained virtually unchanged at about 93% for two years (when this survey began), fixed phone penetration rose by a small but significant 2% between November and February. Currently 95% have a fixed phone, and in line with this, the proportion of mobile-only homes fell (from 6% to 4%).

2.2 Previous Oftel research reported that mobile-only homes spent more than average on their mobile, and whilst one of the main attractions was convenience and the ability to control costs via prepay, it could be the case that these consumers have decided that in the longer term it would be more cost-effective to have a fixed phone. Fixed phone penetration rose most notably amongst DE socio-economic and lower income groups – traditionally more likely than average to be mobile-only customers. It is too early to confirm this based on only one quarter’s data, particularly as there is no evidence of any major price changes that may have driven this change. We will continue to track this in future quarters.

Some consumers making good use of the choices available, although little change in awareness and use of competition, and still scope for further improvement

2.3 Some consumers are making good use of the choices available, evidenced by:

• About 3 in 10 (29%) fixed phone customers using an alternative or additional supplier to BT.
• Just over half (52%) aware of indirect access operators and 11% claiming to use them. And a falling proportion of customers using indirect access for all their calls, indicating greater choice between suppliers on a call by call basis to get a better deal. There was no explicit evidence that BT’s inclusive call allowance was a barrier to greater use of indirect access. Almost 3 in 5 were aware of the allowance, and 3% of customers consciously made use of it (although not always) before switching to an alternative supplier for the remainder of their calls.
• Just over a fifth (22%) of fixed phone customers have ever changed their fixed supplier. Previous Oftel research reported that the vast majority of customers who switched supplier found the process easy, and a recent Oftel mystery shopping exercise found that the majority of consumers were given mostly accurate advice with regard to the ability to keep their number when switching supplier.
• Complimentary use of fixed and mobile phones, selecting mobile rather than fixed phones in some instances, for savings as well as convenience.

2.4 It is encouraging that heavy spenders (who potentially have most to gain financially from using the cheapest service) are more likely than average to be aware of, and using a range of suppliers. However, there is still some scope for improvement as even amongst this group, a third are not yet fully aware of all the choices available to them.

2.5 More generally, there has been little change over the last year in the proportion of consumers aware of and making use of choices available. Awareness and use of choices remains particularly low amongst older customers and lower income groups, although these groups are less interested in making use of the choices and services available, and tend to be fairly light telecoms spenders.

2.6 Consumers who seem to be most receptive to raised awareness of their rights and choices, in terms of their propensity to make use of them, include AB/higher income groups and younger customers. This suggests that any information initiatives, such as Oftel’s consumer guides, could usefully be initially targeted at these consumers as they appear to be more likely to action the information.

Generally satisfaction remains high, although there is still evidence of confusion and concern over price of calls to mobiles

2.7 The majority (91%) of customers remain satisfied with their fixed phone service, although this has fallen slightly in the last quarter (from 93%) apparently driven by a fall in satisfaction with value for money. There have been no major price changes however that would explain this drop.

2.8 Customers estimate that on average, about a fifth of the calls from their fixed phone were to mobiles. 46% were satisfied with the cost of calling mobiles, which is low in comparison to 78% satisfied with the overall value for money of their fixed telecoms service. A significant minority (30%) were less likely to call a mobile because of the cost, or tended to keep the call shorter than if they were calling a fixed number (40%). However, only half of fixed phone customers said they usually know whether or not they are calling a mobile number, so in some instances consumers may not be able to employ these cost-reduction measures.

Chapter 3

Penetration and use of fixed telecoms in UK homes

3.1 For the first time since May 2000 (when this survey began), fixed phone penetration has experienced a significant change. During February 2002, 95% of UK homes claimed to have a fixed phone, a small but statistically significant rise of 2% since November 2001. In line with this rise, the proportion of mobile-only homes fell from 6% to 4%. There has been no change in the proportion of homes without any telephony at 1%. This can be seen in figure 3a below.

3.2 Although it is too early to draw any firm conclusions on just one quarter’s data, evidence suggests that a significant proportion of mobile-only homes have decided to get a fixed phone. Previous Oftel research reported that mobile-only customers spent more than average on their mobile which is unsurprising given that it is their main method of telephony. Whilst one of the main reasons for having a mobile instead of the fixed phone was convenience and the ability to control costs via prepay, these consumers may have decided that in the longer term it would be more cost-effective to have a fixed phone. The results indicate that about half got a fixed phone in addition to their mobile, and the other half replaced their mobile with a fixed phone – however, neither of these individual changes are statistically significant and hence should be treated as indicative only. Introduction of unmetered call packages by both BT and ntl in recent months may have contributed to this behaviour, given the attraction that unmetered call packages offer in terms of the ability to control costs.

Figure 3a: Penetration of fixed and mobile telephony in UK homes

Base: UK homes, Feb ‘02 (Base: 2138, 1% ‘don’t knows’ have been excluded)

Note – rounding of data results in occasional months showing totals of more or less than 100%

3.3 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. The proportion of different groups of consumers without a fixed phone can be seen in figure 3b. Combined data from November 2001 and February 2002 is shown for individual geographic regions to ensure more robust base sizes of at least 200 in each region.

Figure 3b: % UK consumers without a fixed line phone

Base: UK residential consumers aged 15+, Feb ‘02 (Base: 2138)

Main method of making and receiving calls

3.4 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.

3.5 Despite the apparent rise in fixed phone penetration, there has been no change in the proportion of consumers who consider their fixed phone at home their main method of telephony. Similarly, there has been no change in use of the other methods, nor in satisfaction with each method used.

Figure 3c: % UK consumers using and satisfied with their main method of telephony

Base: UK residential consumers aged 15+, Feb ‘02 (Base: 2138)

3.6 Consumers using mobiles as their main method of telephony were more likely than average to be young males, living in larger and heavy Internet-usage households, indicating the importance of mobiles as a convenient alternative to fixed phones for some groups of consumers.

3.7 Consumers using payphones as their main means of telephony were also more likely than average to be under the age of 34. However, unlike the other groups they had considerably lower than average household incomes and the majority were DE socio-economic group and were not working. About a quarter had a prepay mobile but were very light spenders, and the majority did not have a fixed phone at home.

3.8 Overall, 95% of adults said they were satisfied with their main telephony service and 5% were dissatisfied - equivalent to just over 2 million adults. The majority of those dissatisfied used a fixed phone at home as their main method (c.1.4 million adults). A quarter used mobiles (equivalent to just over half a million adults), and 1 in 10 of those dissatisfied used a payphone as their main method (equivalent to c.200,000).

Average spend on fixed telecoms services

3.9 Consumers spend on average £81 per quarter on their home fixed phone services - there has been no change in this figure since November 2001. This average is inflated however, by 5% of customers with a bill of over £200 per quarter, and indeed just over half of customers spend less than £70 per quarter (figure 3d).

Figure 3d: Quarterly fixed telecoms spend, including rental, calls, metered Internet usage & VAT

Base: UK residential fixed phone customers aged 15+, Feb ‘02 (Base: 1981, 11% ‘don’t knows’ have been excluded)

3.10 Average quarterly spend on fixed telecoms amongst different consumer groups is shown in figure 3e, and is related to the obvious characteristics including income, household size, and use of additional services such as Internet.

3.11 Heavier spenders include larger households, those with higher annual incomes, and heavy Internet users. 

Figure 3e: Average quarterly fixed telecoms spend, including rental, calls, metered Internet usage & VAT

Base: UK residential fixed phone customers aged 15+, Feb ‘02 (Base: 1981, ‘don’t knows’ have been excluded)

Calls to mobiles from fixed phones

3.12 The high penetration of mobiles in UK households (80%) means a significant proportion of calls are made not just from mobiles, but also to mobiles. Oftel’s Market Information publication shows a 13% rise in the volume of fixed to mobile residential calls in the year to September 2001 – greater growth than both local and national fixed call volumes.

3.13 Fixed phone customers estimated that about a fifth of their calls on average were to mobile numbers. This was higher amongst younger rather the older customers, amongst larger households, and rose from 15% amongst those with a quarterly fixed bill of £50 to 30% amongst those with a quarterly bill of more than £100. Households without mobiles estimated that about 10% of their fixed calls were to mobiles, compared with 23% amongst homes with mobiles.

3.14 Less than a fifth (17%) of fixed phone homes said they didn’t make any calls to mobiles from their fixed phone. These were predominantly older consumers, smaller households, and lower income groups.

3.15 Despite the high penetration of mobiles and the similar proportion who make calls to mobiles from their fixed phone, there is still evidence 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.

3.16 Half (53%) of fixed phone customers said they usually know whether or not they were calling a mobile number – there has been no change in this figure since August 2000 (55%). A fifth (18%) said they knew roughly how much it costs to call a mobile from their fixed phone, and only 15% said the cost didn’t matter to them. Previous Oftel research found that consumers generally perceived calls to mobiles to be more expensive than other types of calls. Only 46% of fixed phone customers were satisfied with the cost of calls to mobiles, which is low in comparison to 78% satisfaction with overall value for money of fixed services.

3.17 Despite these concerns, the majority were not deterred from calling mobile numbers, although a significant minority said they were less likely to call a mobile because of the cost (30%) or tended to keep the call shorter than if they were calling a fixed number (40%). There has been no change in the figures since February 2001.

Consumers’ use of fixed telecoms operators

Figure 4a: Residential supplier usage

Base: UK residential fixed phone customers aged 15+, Feb ‘02 (Base: 1981, 2% ‘don’t knows’ have been excluded)

4.2 Consumers aged 55+ and to a lesser extent smaller households and lower income groups were more likely than average to use BT. BT was also more widely used in Scotland, Wales and Northern Ireland, than in England.

4.3 Consumers using additional or alternative suppliers to BT tended to be younger rather than older, were more likely to be AB social grades / higher income groups, and had Internet access at home.

Awareness and use of indirect access

4.4 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 dialling the number or by using a box attached to the phone which does this automatically (indirect access operators).

4.5 Just over half (52%) of fixed phone customers said they were aware of these alternatives – there has been little change in this figure over recent quarters. 54% of BT customers and 48% of cable customers were aware of this alternative.

4.6 Awareness of indirect suppliers was higher than average amongst middle age groups, higher income groups and AB socio-economic groups, homes with Internet, those with large quarterly fixed telecoms bills, and men more than women. This is broadly consistent with the groups most likely to use an alternative supplier to BT. Whilst it is encouraging that heavier spenders (who could potentially make greatest savings from moving to a cheaper supplier) are more aware of the choices available, there is still scope for improvement as a third of even this group are not aware of these alternatives.

4.7 Groups where awareness was particularly low included those over the age of 55 (and to a lesser extent those under the age of 34), DE socio-economic groups, and those on lower incomes. Whilst these groups tend to spend less than average on their fixed telecoms services, those on lower incomes in particular might benefit from the savings to be gained from shopping around and greater awareness of the choices available. Awareness was particularly low in Northern Ireland at only 23%.

Figure 4b: Awareness and use of indirect access

Base: UK residential fixed phone customers aged 15+, Feb ’02 (Base: 1981)

4.8 Just over 1 in 10 (11%) fixed phone customers said they use indirect operators – which equates to just over a fifth of those who were aware of it (again little change since last quarter). Amongst those aware, usage shows a similar pattern to awareness – highest amongst higher income groups, heavy telecoms spenders, and homes with Internet. These groups exhibit greater than average conversion rates from awareness to usage (ie once they are aware of it, they are more likely than average to use it), and as such would be one important audience for information initiatives aimed at raising awareness of such options.

4.9 Similarly, younger customers (under the age of 34) tended to be slightly less aware of indirect access alternatives but were more likely to make use of them. This indicates another particularly receptive group for relevant information campaigns, which could be targeted further by examining reasons for not using indirect access amongst those already aware. Reasons reported in November for not using indirect access included lack of interest, perceptions of insufficient savings, and a lack of knowledge about, or ability to trust the company.

4.10 Recent Oftel research (http://www.oftel.gov.uk/publications/research/2001/bran1101.htm )highlighted 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, and few indirect access suppliers were considered to have yet established sufficiently reputable or well-known brands. Oftel recently published proposals to replace the current retail price controls on BT with a package of measures better designed to encourage competition – full details can be found at http://www.oftel.gov.uk/publications/pricing/2002/pcr0102.htm

How are consumers using indirect access?

4.11 The proportion of customers using their indirect access service for all their calls has been falling steadily over the last year and at 22% is now half the level seen a year ago. This perhaps indicates that consumers are discriminating more between the choices available in order to get a better deal. This is shown in figure 4c.

Figure 4c: Types of calls made using indirect access operator

Base: UK residential indirect access customers aged 15+, Feb ’02 (Base: 194)

Awareness and use of BT’s inclusive call allowance

4.12 BT’s standard line rental includes inclusive or ‘free’ calls per month to the value of £2.15. Higher allowances are available on the BT Together package and for those with multiple lines or Home Highway.

4.13 Just over half (58%) of fixed phone customers were aware of inclusive call time. Similarly, 59% of BT customers were aware, as were 61% of customers using indirect access operators. There has been little change in these figures since August.

4.14 Customers who used an indirect access operator for some (rather than all) of their calls, and who were aware of BT’s inclusive call allowances (in total 48% of IA customers), were asked how they made use of the inclusive time. The results, shown in figure 4d.

Figure 4d: Use of BT’s inclusive call allowance by indirect access customers

Base: UK residential indirect access customers aged 15+ and aware of BT’s ICA, Feb ‘02 (Base: 141)

4.15 In total, just over a quarter (28%) of indirect access customers aware of BT’s call allowance claimed to make use of this allowance before switching to their indirect access operator for some or all of their remaining calls. A further 18% said they sometimes remembered to make use of the allowance and sometimes forgot. Although these proportions have increased slightly since November 2001 (from 17% and 11% respectively) results should be treated with caution as this group of customers is relatively small, and equivalent to 3% of all fixed phone customers (figure 4e) – at this level there has been little change since August 2001.

Figure 4e: Awareness and use of indirect access and BT’s inclusive call allowance

Base: UK residential fixed phone customers aged 15+, Feb ’02 (Base: 2024)

Switching supplier

4.16 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.

4.17 Altogether, 22% of residential consumers said they had ever changed their fixed phone supplier – 4% in the last year and 18% more than a year ago. There has been no change in these figures during the last quarter. In August, the vast majority (92%) of consumers who had changed their fixed phone supplier said the process had been easy.

4.18 Most likely to have switched, were middle age groups, medium to higher income groups, medium to larger sized homes, and heavy telecoms spenders such as those with Internet.

4.19 Least likely to have switched, were customers aged 55+, lower income groups, smaller households and light telecoms spenders (less than £50 per quarter).

Number portability

4.20 Just less than half (45%) of those who had switched said they kept their original phone number when they changed companies - equivalent to about 10% of residential fixed phone customers who have ever ported their number.

4.21 46% of customers who changed supplier in the last 12 months also changed their number. The main reason (see figure 4f) was the new company telling the customer they had to have a new number, and to a lesser extent consumers wanting a new number for privacy. Only 1 in 20 customers said their old company wouldn’t let them keep their original numbers, or that it was too much hassle to arrange to keep the same number. There has been little change in these figures over the last six months.

4.22 Oftel recently conducted a mystery shopping exercise on the advice given to residential consumers on fixed number portability. It found that the in the majority (92%) of enquiries to their new supplier customers were given the correct advice about the ability to switch and keep the existing number. This is slightly higher than reported below, where in total about a quarter of switchers said their new company told them they had to have a new number. Partly this will be due to customers who switched before portability was available, but in more recent cases it could be that these customers did not enquire about portability and were given a new number automatically.

Figure 4f: Reasons for changing number when switching supplier (unprompted)

Base: UK residential fixed phone customers aged 15+ who changed number when switching supplier, Feb ‘02 (Base: 239)

  Chapter 5

Satisfaction with fixed telecoms

5.1 Overall, 91% of residential customers were satisfied with their fixed telecoms service, which is slightly lower than last quarter (93%), driven by a drop in satisfaction with value for money. However, this is significantly lower than satisfaction amongst those who considered their fixed phone their main method of calling (96%), as it includes fixed phone customers who use other methods as their main means of telephony.

5.2 Overall satisfaction remains comparable to the mobile and Internet markets, where 94% and 89% respectively were satisfied with their overall mobile and Internet services.

5.3 Whilst satisfaction with reliability of service remains unchanged at 96%, satisfaction with value for the money experienced a slight drop in February, from 82% to 78% although there have been no major price changes that may have contributed to this.

5.4 Satisfaction with fixed telecoms was highest amongst the 55+ age group, and low quarterly spenders (less than £50 per month), and lowest amongst the higher spending groups and larger households. There was little difference between customers using different suppliers.

Figure 5a: Satisfaction with home fixed phone service

Base: UK residential fixed phone customers aged 15+, Feb ‘02 (Base: 2024, don’t knows have been excluded)

Chapter 6

Impact of mobiles on use of fixed phones

6.1 7 in 10 UK adults claimed to personally have both a fixed and mobile phone. Some examples of the various ways in which mobile communications are impacting on fixed line usage are shown below in figure 6a. There has been little change in these figures during the last 18 months.

6.2 Convenience remains the main reason for selecting mobiles rather than fixed phones, and 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.

6.3 Mobile customers with Internet access at home tend to spend more on their monthly bill as their Internet usage increases, suggesting that some of these consumers may be using their mobile to make calls when their fixed phone line is connected to the Internet - 15% consumers with both a fixed and mobile phone claim to be doing this.

Figure 6a: Examples of consumer preference for mobile over fixed phone usage

Base: UK residential consumers aged 15+ with both fixed and mobile phone, Feb ’02 (Base: 1479)

  Annex 1

Q8 February 2002 residential questionnaire: fixed telecoms questions

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

IF YES AT Q4a (Q4a/1)

ASK ONLY THOSE WHO USE INDIRECT ACCESS OPERATORS AT Q4B (Q4B/1)

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE USING INDIRECT ACCESS (Q4b/1) AND AWARE OF BT’S FREE CALLS (Q6/1) AND WHO DO NOT USE INDIRECT ACCESS FOR ALL CALLS (NOT Q5/7)

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE WHO HAVE CHANGED SUPPLIER (Q8/1-2)

ASK THOSE CHANGED NUMBER (Q9/1)

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE