1.1 This report provides an overview of the key findings of business behaviour in the fixed telecoms market, taken from the ninth wave of Oftel’s quarterly business survey, conducted in May 2002 amongst 810 UK businesses. The results are subject to an error margin of about 2-4%, this is slightly higher amongst smaller subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence, please see footnote 1for further sample details.

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

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

1.4 The report covers:

• number of fixed lines and telecoms spend;
• switching behaviour and number portability;
• satisfaction with fixed telecoms service;
• familiarity with changes to Directory Enquiries numbers.

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

The survey was conducted amongst a representative sample of small and medium enterprises (SMEs) in the UK, reflecting the UK profile in terms of business size, sector and region. As small businesses (1-50 employees) make up around 97% of businesses in the UK, medium businesses (51-250 employees) were over-sampled in the survey to produce a sufficiently robust sample to allow analysis of the results among medium businesses. The combined results were re-weighted to be representative of UK SMEs as a whole (97% small businesses; 3% medium businesses), consequently the results for small businesses closely resemble those for SMEs as a whole. The error margin for this survey of 810 businesses is about 2-4%, but is higher amongst small subgroups. Results referred to as 'significantly' different, have been tested at the 95% level of confidence and hence are outside of the error margins and therefore can be considered real changes. All data shown is weighted data. Unweighted base sizes are shown on charts and tables to show the number of businesses who were asked the question.

Footnote 2

The report should not be seen as recommended best buys and should not therefore be relied upon when making purchase decisions. Oftel has conducted its own checks on the data in this report and whilst we consider it to be correct, Oftel accepts no liability in respect of any of the results provided to it by Continental or any decisions taken by any person in reliance on the report.

2.1 The current satisfaction level with fixed services stands at 93%, very similar to May ‘02. This figure is slightly higher than satisfaction in the Internet market (90%) and of a similar level to the mobile market (94%).

2.2 Satisfaction with value for money (77% at this wave) has fallen since Feb ’02 when it showed it’s highest level of recent quarters (81%).

2.3 On average small businesses have five fixed lines while medium sized businesses have 28. Small businesses spend more per employee than medium sized businesses, but less per line.

2.4 Currently 33% of UK SMEs use more than one supplier for their fixed line services (no change since Feb ’02). Medium sized businesses are nearly twice as likely to use multiple suppliers than small businesses. Multi-supplier usage increases with business size and spend on fixed services. Users of additional services such as the Internet also tend to be more likely to use more than one fixed supplier.

2.5 One in four UK SMEs claim to have ever switched fixed line supplier and the majority of these (91%) ported all their numbers and a further 2% claimed to have ported some but not all of their numbers. The majority of those who did change their numbers did so because they were told by their new supplier that they had to – but this represents less than 1% of all SMEs.

2.6 13% of businesses are aware of the plans to introduce new numbers for Directory Enquiries. Of these, just 7% were aware of what the new numbers will be, which equates to less than 1% of all SMEs.

2.7 Less than one in ten (9%) SMEs were aware that the old numbers will be withdrawn, and only 1% knew this was happening in 2003. Less than 1% were aware of the whole process.

Chapter 3

3.1 Small businesses in the UK had on average five separate lines for their fixed telecoms services (including voice, faxes, and data lines), while medium businesses had on average 28 lines. Use of fixed lines by business size is shown in figure 3a. Small businesses had on average 0.7 lines per employee, compared with 0.2 lines per employee in medium businesses.

3.2 Businesses currently connected to the Internet have on average more than three times as many lines (seven lines) as those not connected or unlikely to connect (two lines). The number of lines used amongst Internet connected businesses fell from an average of nine lines in November 2001, to six lines in May ‘02. This could be as a result of the increase in businesses using ISDN lines (as reported in the Internet report) with businesses replacing their telephone and Internet lines with an ISDN line.

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 £397 (a rise from £318 in February 2002). This ranges from an average £324 amongst small businesses to £2,874 amongst medium businesses. Figure 3b shows the spread of monthly business spends and figure 3c shows the trend over time.

3.4 Monthly spend amongst companies connected to the Internet has risen from £465 in Feb ‘02 to £564 in May ’02. This could be linked to the increase in usage of faster Internet access (as reported in the Q9 Internet report). Faster access such as DSL or cable modem is generally more expensive than ordinary narrowband dial up access possibly accounting for this higher spend. We will continue to monitor fixed spend alongside Internet access as use of faster methods of access amongst UK SMEs increases.

3.5 As shown below, after 12 months of the average monthly spend on fixed line services falling steadily, this has now risen again. However, the figure is still below what it was at this point last year – on average UK SMEs are spending around £42 less per month on these services than when surveyed in May 2001. Oftel will continue to monitor business fixed spend to establish whether the higher spend reported in May ’01 and ’02 is seasonal.

3.7 As reported previously small businesses have more fixed lines per employee and 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 are consistent with recent quarters.

3.8 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 0.3% respectively.

Chapter 4

4.1 Currently a third of all SMEs use more than one supplier for their fixed telecoms service. Medium businesses (62%) remain more likely to use multiple suppliers than small businesses (32%), as shown in figure 4a.

4.2 As in previous quarters, multi-supplier usage increases with business size, fixed telecoms spend, and use of additional technologies such as Internet and mobile phones. These figures remain broadly similar to recent results.

* caution should be applied as base less than 100

4.3 Overall 93% of SMEs use BT for some or all of their fixed telecoms services – there has been little change in this figure in recent quarters. The number of businesses using another supplier in addition to BT remains higher than reported in May ‘01 (28% to 32%).

4.4 Overall, a quarter (25%) of all 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 remain around twice as likely to have changed supplier, with 44% ever having changed, compared to 25% of small businesses. This gap is slightly smaller than at the previous waves but overall there has been little change in these figures since August 2001.

4.5 Number portability (whereby a customer can keep their telephone number(s) when moving to a new telecom supplier and remaining at the same premises) has been possible since 1996. A quarter (24%) of SMEs have changed their supplier in this period. Of these, 89% ported all their numbers.

4.6 In total nine out of 10 businesses (91%) that had ever switched supplier, kept all their existing phone numbers (this figure is unchanged since August 2001), and a further 2% claimed that they kept at least some of their original numbers when switching. There was no significant difference between small and medium sized businesses in this respect, or whether they switched more or less than a year ago.

4.7 The main reason given by the few businesses that had not kept their original numbers was because the new company had told them that they had to have new numbers. Around a third (36%) of these had not asked to keep their original numbers.

Chapter 5

5.1 Apart from the slight drop in overall satisfaction levels with fixed telecoms services reported in November 2001, satisfaction has remained broadly similar over the past 12 months (currently 93%). Small businesses are again slightly more satisfied (94%) with their overall service than medium sized businesses (88%) as shown in figure 5a.

5.2 Overall satisfaction with fixed telecoms, remains comparable to overall

satisfaction with Internet (90%) and mobile services (94%).

5.3 Companies with only one fixed line supplier were significantly more satisfied overall (96%) than those with two or more suppliers (88%).

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

Figure 5a: % UK SME businesses satisfied with various aspects of their fixed telecoms services
Base: UK SME businesses, May ’02, (Base: 810, ‘don’t knows’ have been excluded)

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 Just over one in ten (13%) of all UK SMEs stated they were already aware that new numbers for Directory Enquiries (192) and International Directory Enquiries (153) were being introduced. There was no significant difference between small and medium businesses.

6.5 Of those that were aware the numbers were changing, just 7% knew that the 118 prefix was going to be used for the new directory enquiries services, which represents less than 1% of all SMEs.

6.6 One in ten (9%) SMEs knew that the old 192 and 153 numbers were going to be withdrawn. Of the companies that were aware of this, 88% did not know when this was going to happen and 11% knew that it was happening next year (this represents 1% of all SMEs), and less than 1% stated August/Summer of 2003.

6.8 Less than 1% of the companies surveyed were aware of the entire process (ie that new numbers were being introduced, what the new numbers were, that the old numbers were being withdrawn and when this was happening).

Q2 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.

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

Q5 Thinking about all your fixed line telecoms services and suppliers, are you satisfied with them on the following attributes? Firstly .....

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

Q6 Have you ever changed the company which provides your fixed line telecoms service? Was it in the last 12 months, 1-6 years ago, or more than 6 years ago?

Yes – in the last 12 months
Yes – 1-6 years ago
Yes – more than 6 years ago
No – never changed supplier
Don't know

Yes
No

Yes – 118(xxx) – any mention of 118
Yes – any other numbers mentioned (NOT 118xxx)
No – don't know

Q12 Directory Enquiries will be introducing new numbers, and the national 192 and international 153 directory enquires numbers will be withdrawn from service. Before now, were you aware of this?

Q13 Do you know when these numbers – 192 and 153 – will be withdrawn from service?

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