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 services

Chapter 6 Awareness of forthcoming changes to DQ services

Annex 1 Details of changes to quarterly survey sample

Annex 2 Q9 May 2002 residential questionnaire: fixed telecoms questions

Chpter 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 ninth wave of Oftel’s quarterly residential consumer survey, conducted in May 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. The sample and methodology have been changed this 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 2258 UK adults (footnote 1)during May 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 Recom.

1.4 This report covers:

• penetration of fixed home phones
• homes without a fixed line phone
• awareness and use of fixed phone suppliers
• spend on fixed telecoms and satisfaction with service received
• switching supplier and number portability
• awareness and use of BT’s inclusive call time
• 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

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 2258 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.

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

Oftel changed the survey sample and methodology this quarter in order to better represent consumers in rural and deprived areas. Due to these changes, some results may appear to have fallen slightly compared with last quarter (eg fixed, mobile, and Internet penetration). This is not the case. A control survey using the original sample was conducted in parallel to the new survey – the results from both surveys are shown in the main sections of this report to assist understanding of whether any change is due to the sample differences or due to a real change in consumer behaviour. The results from the new survey are quoted in the summary below as subsequent reports will be compared with this information.

Headline figures

• 93% of UK homes have a fixed line phone
• 27% of fixed line homes use an alternative or additional fixed supplier to BT
• £77 was the average quarterly spend on fixed telecoms (inc. calls, rental, VAT)
• 96% of adults were satisfied with their fixed telecoms service overall

Previous rise in the proportion of homes with a fixed phone has been sustained

2.1 Having remained virtually unchanged for two years (when this survey began), fixed phone penetration rose by a small but significant 2% between November and February, with a corresponding drop in mobile-only homes. This rise was sustained during May.

Rural vs urban, and level of deprivation

2.2 Customers in rural areas have a higher than average incidence of homes with fixed and/or mobile telephony. They have a slightly higher than average awareness and use of indirect access, but lower use of cable (due to the lower penetration of cable telephony in rural areas). Apart from this, there were few differences between fixed usage and satisfaction between customers in rural and urban areas.

2.3 The level of deprivation in an area had a greater impact (than the whether the area was rural or urban) on telecoms usage. Areas of high deprivation are unsurprisingly least likely to have a fixed phone. Those who did, were more likely to use cable, and less likely to use indirect access. Customers in these areas were least aware of indirect access and as such, might usefully benefit from information aimed at raising awareness of these services.

The vast majority of customers remain satisfied with their service

2.4 Satisfaction with fixed telecoms services remains high at 96%, although satisfaction with value for money is lower at 83% - heavy spenders are least satisfied with this aspect as would be expected. Indirect access customers also tended to be less satisfied with value for money, partly because they are heavy spenders, but recent Oftel research on brand image in the telecoms market found that some IA customers were less satisfied because they were not convinced they had achieved the savings they had expected to make.

Significant improvements in fixed number portability

2.5 A quarter of fixed phone customers claim to have switched supplier, although this rises to a third when indirect access usage is included. Almost two-thirds of recent switchers ported their original number when they switched, a significant improvement on those who switched more than a year ago but since portability was available (44%). Of those who changed their number, the majority didn’t ask to keep their number – some wanted a new number for privacy, but most were automatically given a new number. About 1 in 10 were not aware they could port their number, and a similar proportion mentioned barriers such as cost or inconvenience as reasons for not porting. This is consistent with recent mystery shopping conducted by Oftel which reported that the majority of consumers were given the correct advice about fixed number portability by their suppliers.

Currently 1 in 10 consumers aware of forthcoming DQ changes

2.6 Awareness of the changes to directory enquiries services is currently low, with only 4% of consumers aware of the forthcoming introduction of new DQ services and withdrawal of 192 and 153 services. However, in total 10% were aware of at least one or other of the changes. There is currently little difference in awareness between current users and non-users of the 192 service. We shall continue to track awareness of these changes over coming months.

Some consumers making good use of the choices available, others still some way to go

2.7 Some consumers are making good use of the choices available, evidenced by awareness and use of alternatives to BT, including indirect access; switching between suppliers, both generally and on a call by call basis to get the best deal; and use of number portability.

2.8 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, not all are fully aware of all the choices available to them.

2.9 Generally though, 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.

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). Figures from the May 2002 control survey indicate that this rise has been sustained. This can be seen in figure 3a below.

3.2 Data from February suggested that 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 Results from the new survey (see introduction for details) are also shown in figure 3a. They show a slightly lower proportion of fixed phone homes than the control survey, which is due to (a) rounding of the results to the nearest percentage, and (b) the higher representation of deprived areas in the new sample, where consumers are less likely to have a fixed line phone at home.

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

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

3.5 New features from this quarter onwards include whether the respondent lives in an urban or rural area, and the relative affluence of the area (footnote 3). Generally cities tended to have significantly greater proportions of highly deprived areas in comparison with rural areas which tended to be more affluent on the whole. Non-ownership of fixed phones, which is largely a cost-related issue, was unsurprisingly highest in areas of high deprivation (cities and large towns), and lowest in more affluent and rural areas.

3.6 It is estimated that 7% of the GB population live in areas of high deprivation. Scotland and London have a significantly higher than average proportion of highly deprived areas, between them accounting for two-thirds of this high deprivation. Consumers in these areas tend to be younger than average, low income groups / DE socio-economic groups, and not working. Those who do have fixed phones tend to spend slightly less than average on them, and are less likely to have mobiles or home Internet access.

Average spend on fixed telecoms services

3.7 Consumers spend on average £77 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, and indeed just over half of customers spend less than £70 per quarter (figure 3d).

3.8 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. There was little difference in spend between those living in rural and urban areas, and whilst areas of low deprivation spent slightly more than those in less affluent areas, again the difference was not large.

Base: UK residential fixed phone customers aged 15+, May ‘02 (Base: 2114, ‘don’t knows’ have been excluded)

Footnote

3. Deprivation index is based on a composite score of the level of unemployment, overcrowding, non-car ownership and non-home ownership in an area. The index is only available for the UK mainland (ie excluding Northern Ireland) this quarter. 46% of GB adults are classified as living in areas of low deprivation, 47% in areas of medium deprivation and 7% in areas of high deprivation.
The urban definitions are as follows: urban (large) - cities/large towns, urban (medium) - medium towns, urban (small) - small satellite or isolated towns, rural - accessible rural. These definitions cover over 99% of the UK population. It is estimated that just over 1% of the population are in remote rural areas difficult to access - about half of this group (those in the Highlands and Islands of Scotland) are excluded from our sample.

Chapter 4

Consumers’ use of fixed telecoms operators

Awareness and use of indirect access

4.2 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).

4.3 Half of fixed phone customers said they were aware of these alternatives – there has been little change in this figure over recent quarters. 53% of BT customers and 38% of cable customers were aware of this alternative.

4.4 As identified in previous reports, awareness of indirect suppliers was higher than average amongst:

• middle age groups
• higher income groups and AB socio-economic groups
• those with Internet at home, and large quarterly fixed telecoms bills
• those with both fixed and mobile phones

4.5 Awareness remains lowest amongst

• those with fixed phones only, and no mobiles
• lower income groups and DE socio-economic groups
• low quarter telecoms spenders
• older consumers (aged 55+)

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.

4.6 Almost a quarter of those aware of indirect access currently use it, equivalent to just over 1 in 10 (11%) of all fixed phone customers. Whilst there has been little change in this level over recent quarters, previously Oftel research reported higher proportions of consumers who have ever used indirect access – some who had used indirect access in the past, and others who use it only occasionally for example when they need to make international calls etc.

4.7 Customers in rural areas were significantly more likely than average to use BT (due to the limited or lack of availability of cable in their area), but were also slightly more likely to use an indirect access operator. Customers in areas of high deprivation were more likely to use cable, but less likely than those in more affluent areas to use indirect access.

4.8 The highest conversion rates (ie once they’re aware of it they’re more likely than average to use it) were amongst AB social grades, and consumers with both fixed and mobile phones, perhaps trying to reduce their overall telecoms expenditure. The February 2002 report identifies some of the customers who form an important audience, in terms of their receptivity to information and likelihood to action it, for information initiatives aimed at raising awareness of such options. This report also examined some of the reasons why consumers don’t use indirect access.

How are consumers using indirect access?

Awareness and use of BT’s inclusive call allowance

4.11 Just over half (56%) of fixed phone customers were aware of inclusive call time. 56% of BT customers were aware, as were 59% of customers using indirect access operators. Since there has been little change in these figures since August, the more selective use of indirect access is not due to a rise in awareness of the inclusive call allowance.

4.12 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 47% of IA customers), were asked how they made use of the inclusive time. The results of IA customer behaviour regarding this allowance are summarised in figure 4d.

4.13 Just over a fifth (22%) of all indirect access customers claim to consciously make use of BT’s call allowance before switching to their indirect service. This small rise during the last quarter (16%) is not statistically significant, although the level has doubled since August 2001 (10%). Overall, this equates to 3% of BT customers, or 2% of all fixed phone customers, consciously making use of BT’s call allowance before switching to their indirect supplier, as shown in figure 4e.

Switching supplier

4.14 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.

4.15 Altogether, 25% of residential consumers said they had ever changed their fixed phone supplier – 5% in the last year and 19% more than a year ago. There has been little change in these figures during recent quarters.

4.16 Use of competition is actually higher when partial switching (ie use of an additional supplier for some calls eg indirect access) is included, rising to a third of consumers who have ever switched or currently use different suppliers.

4.17 The February report contains further details of the types of consumers most and least likely to switch supplier, and in the August report, the vast majority (92%) of consumers who had changed their fixed phone supplier said the process had been easy.

Number portability

4.18 Just less than half (43%) of those who had switched said they kept their original phone number when they changed companies - equivalent to about 11% of residential fixed phone customers who have ever ported their number.

4.19 This rises to 63% amongst customers who changed supplier in the last 12 months, which is significantly higher than those who switched more than a year ago, as seen in figure 4f.

4.20 The main reason for changing number was that the consumer didn’t to ask to keep their original number, and were automatically given a new one – this was as high as 50% amongst recent switchers. This is consistent with results from recent Oftel mystery shopping examining the information given to consumers about their ability to port their fixed number when switching supplier. The results were largely positive and the majority of consumers were given the correct advice when they asked about portability. Clearly though portability is not being actively prompted to consumers in all instances, and hence some customers are changing their number when they could keep their original number.

4.21 The reasons why customers (who switched supplier since portability was introduced) changed their number are summarised in figure 4g. Fewer than 1 in 10 (8%) mentioned barriers such as the cost or perceived hassle of arranging to port the number. Just over 1 in 10 (12%) weren’t aware they could port their number, and the vast majority of the remainder hadn’t asked perhaps indicating a lack of awareness or an assumption that they would be offered portability if it had been available to them. Not all switchers want to keep their original number however, seeking the benefits of privacy from getting a new number.

  Chapter 5

Satisfaction with fixed telecoms

5.1 Overall, 96% of residential customers were satisfied with their fixed telecoms service. This is slightly higher than previous quarters, and is coupled with a rise in value for money, and similar rises in satisfaction levels in the mobile market. These changes are largely due to the sample changes made this quarter – lower spending customers traditionally tend to be more satisfied with value for money and their overall service, and the sample now contains a slightly higher proportion of these customers than before.

5.2 There was little difference between users of different suppliers, apart from indirect access customers who were slightly less satisfied with value for money, Two possible reasons for this include (i) they tend to be heavier spending customers who as a result tend to be less satisfied with value for money (ii) they may not have achieved the savings they had expected to make. Oftel research conducted last year on brand image in fixed telecoms identified that some indirect access customers had made significant savings while other were less certain they had achieved what they had expected. This could result in lower levels of satisfaction amongst these customers.

5.3 There was no difference in satisfaction with overall service and reliability between urban and rural customers. Rural customers however, were slightly less satisfied with value for money, possibly linked to their slightly higher use of indirect access.

5.4 Equally, there was little difference in satisfaction between customers living in low and high areas of deprivation.

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 (69%) 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 Frequency of calling DQ services is shown in figure 6a. The most frequent users of DQ services include:

• Younger adults (15-34)
• Higher income and AB social groups
• Heavy telephone (fixed and mobile) users, in particular mobile customers on monthly subscription packages.

6.7 By default of their frequent DQ use, these groups will initially be most affected by the changes, and are likely to be amongst the first to experience the changes when they are introduced. Any information aimed at raising awareness of the forthcoming changes might usefully be targeted at this group initially. Oftel will be tracking consumers’ awareness of these changes during coming months.

6.8 By the end of May 2002, 8% of UK adults were aware of the forthcoming introduction of new DQ numbers. The vast majority of these were not yet aware of what the new numbers would be (only 1% were aware they would follow the format 118 xxx).

6.9 Similarly, 6% of UK adults were aware that the current 192 and 153 DQ numbers would be withdrawn from service, 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 6b.

6.10 In total, 10% of UK adults were aware of some 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.

6.11 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.

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 this quarter, in parallel to the 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 surveys are discussed where appropriate in the 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 will continue) in the context of the previous trend data.

      Appendix 2

Q9 May 2002 residential questionnaire: fixed telecoms questions

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE ON THE TELEPHONE

IF AWARE OF INDIRECT ACCESS OPERATORS (Q5 code 1)

ASK ONLY THOSE WHO USE INDIRECT ACCESS OPERATORS AT (Q6 code 1)

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE USING INDIRECT ACCESS (Q6 code 1) AND WHO DO NOT USE INDIRECT ACCESS FOR ALL CALLS (NOT Q7 code 7) AND AWARE OF BT’S FREE CALLS (Q8 code 1)

ASK ONLY THOSE ON THE TELEPHONE

ASK ONLY THOSE WHO HAVE CHANGED SUPPLIER (Q10 codes1-3)

ASK THOSE CHANGED NUMBER (Q11 code 1)

ASK THOSE CHANGED NUMBER

ASK ONLY THOSE ON THE TELEPHONE

ASK ALL