Contents

Chapter 1 – Introduction

Chapter 2 – Summary

Chapter 3 – Main findings

Chapter 4 – Internet access methods and ISPs

Chapter 5 – Satisfaction with Internet service

Annex 1 – Q9 business questions on Internet

Chapter 1

Introduction

1.1 This report provides an overview of business use of Internet, 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 for further sample details (see note one below).

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 (see note two below) during May 2002. This report has been prepared by Continental Research based on the results provided by the survey.

1.4 The report covers:

• Internet penetration among SMEs;
• type of package, ISPs used;
• payment of Internet for employees working from home;
• Internet connection methods used including DSL (digital subscriber line) services and other non-PSTN/dial-up connection methods; and
• satisfaction with Internet services.

1.5 A list 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 the 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) 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.

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 findings

Headline figures

• 63% of all SMEs have Internet access
• 55% SMEs with Internet access use unmetered packages (60% medium and 55% small)
• 90% satisfied with overall quality of service
• 36% of SMEs with Internet now using ISDN up from 29% in February ’02
• 13% of SMEs pay for (at least some) home Internet usage for employees working from home
• 12% of SMEs with Internet currently use a broadband connection (DSL/cable modem)

Internet penetration remains broadly unchanged

2.1 Just over 6 in 10 (63%) UK SMEs have Internet access, this figure remains broadly similar to recent months. The number of medium sized businesses with Internet access appears to be reaching saturation (95%).

2.2 Internet penetration increases with business size from 55% in single employee businesses to 96% amongst those with 100-250 employees.

Continuing drop in usage of PSTN access via ordinary phone line dial up

2.3 Just over a half (55%) of UK businesses use PSTN/ordinary dial up access for their Internet connection, a drop from 67% last quarter and 76% the quarter before. The fall appears to be mainly driven by small businesses, currently 56% are using this method compared to 69% in February 2002.

2.4 As a result in the drop in use of ordinary dial up, other methods such as ISDN and broadband access such as DSL/cable modem are increasing. Currently 36% of SMEs have an ISDN connection compared to 29% last quarter and subscriber figures suggest that 12% are currently using a broadband connection.

2.5 With the rise in SMEs changing to faster connection methods, the proportion of businesses now using unmetered packages has also risen to 55%, from 38% last quarter. Use of unmetered packages does increase with business size, 60% of medium sized businesses currently use this type of package compared to 55% of small businesses connected to the Internet. This gap is however closing.

Overall satisfaction remains generally high

2.6 9 in 10 businesses are satisfied with the overall service provided by their ISP. This has remained quite consistent over the last three-quarters. There has been a marked increase in satisfaction with speed of access, from 71% being satisfied with this aspect in February ’02 to 78% in May ’02. This is likely to be the result of businesses migrating from an ordinary dial up connection to ISDN and other faster connection methods. There has however been a significant decrease in the level of satisfaction with subscription charges, from 92% to 83%.

Reimbursement of employees working online from home

2.7 Just over 1 in 10 (13%) SMEs make a contribution to employees who use the Internet when working from home. This rises to nearly 3 in 10 (27%) amongst medium sized businesses.

Chapter 3

Main findings

Internet penetration among small and medium businesses

3.1 The proportion of small and medium businesses with Internet access remains broadly unchanged this quarter. Currently 6 in 10 (63%) SMEs have Internet access (62% of small businesses and 95% of medium sized businesses). The number of medium sized businesses with Internet access appears to be reaching saturation. The results are summarised in figure 3a.

Figure 3a: % UK SMEs with Internet access
Base: UK businesses, May ’02 (Small – base: 502, Medium – base: 308)

3.2 A further 5% of SMEs claim to be in the process of connecting to the Internet and 6% think they are likely to within the next 12 months. Most of these are small businesses where Internet penetration is considerably lower.

Figure 3b: Internet penetration amongst UK businesses
Base: UK businesses, May ’01 (Base: 801), May ’02 (Base 810)

3.3 Figure 3b demonstrates that the number of SME businesses connecting to the Internet has grown over the last 12 months from 55% to 63%. Most of these connections will be amongst small businesses where penetration is considerably lower as shown in figure 3c, and the majority of medium sized businesses were already connected 12 months ago (92%).

3.4 Figure 3c shows the proportion of small and medium businesses with Internet access and whether those without are likely to connect. As mentioned before the majority of medium sized businesses already have Internet access or are in the process of connecting.

Figure 3c: Internet penetration amongst UK businesses
Base: UK businesses, May ‘02 (Small – base: 502, Medium – base: 308)

3.5 Similar to last quarter 76% of small businesses that have not yet connected claim that they are unlikely to connect to the Internet in the next 12 months, equating to a quarter (24%) of small businesses unlikely to connect to the Internet in the next year. The vast majority of these are the very small businesses with under 10 full time employees.

3.6 Internet penetration increases with business size, currently rising from 55% in single employee businesses to 96% at the larger end of the market (100+ employees). The trend of higher penetration amongst larger companies has remained quite consistent over time.

Figure 3d: Internet penetration amongst UK businesses by employee size
Base: UK businesses, May ‘02 (Small – base: 502, Medium – base: 308)

Chapter 4

Internet access methods and ISPs

Connection method

4.1 The number of SMEs connecting to the Internet via ordinary phone line dial-up has fallen significantly over recent months and this quarter sees a continuation of this trend. Currently just over a half (55%) are connecting using this method compared to nearly three quarters (73%) in November ‘01, as shown in figure 4a. There has been a corresponding rise in the usage of other methods such as ISDN and broadband (DSL or cable modem), as can be seen in figure 4a.

4.2 Almost 1 in 10 businesses with Internet (9%) claim to be accessing the Internet using broadband services, either DSL or cable modem. Industry subscriber figures suggest this is about 12%, as at June 2002. This equates to approximately 3% of all small and medium-sized businesses with Internet using DSL or cable modem.

Figure 4a: Internet access methods used by UK businesses
Base: UK businesses with Internet access, Nov ’01 (Base: 650), Feb ’02 (Base: 615), May ’02 (Base 641)

Note: figures add to more than 100% as some businesses are using more than one access medium

4.3 The fall in usage of ordinary dial up for Internet access is mainly driven by small businesses. Currently 56% of small businesses use dial up access via PSTN compared to 78% in November ’01. Consistent with previous surveys more small businesses still have ordinary phone line/dial up access than other methods although this bias is less apparent than 6 months ago. Medium sized businesses remain more likely to use ISDN, leased lines or broadband services, as shown in figure 4b.

Figure 4b: Internet access methods used by UK businesses
Base: UK businesses with Internet access, May ’02 (Small – Base: 347, Medium – Base: 294)

Connection method prior to DSL or cable modem services

4.4 Of all SMEs currently connected to the Internet 9% claim to be connecting via DSL or a high speed cable modem link. As figure 4c shows most of these have up-graded from either a regular PSTN dial up access (50%) or ISDN (41%) (please note that this is a small base size so caution should be applied when viewing these figures).

Figure 4c: Internet access methods previously used by SMEs now using a broadband connection
(DSL or cable modem)
Base: UK businesses with Broadband access (DSL or cable modem), May ’02 (Base: 78)

Type of package used

4.5 As already reported there has been a significant increase in the number of SMEs moving away from PSTN dial up access to faster connections. This has impacted on the type of Internet package used by SMEs with significantly larger proportions using some type of unmetered package (55%).

Figure 4d: Main type of Internet package used by businesses
Base: UK businesses with Internet access May ’02 (Base: 641, ‘don’t knows’ and ‘others’ have been excluded)

4.6 Six in ten (61%) medium sized businesses currently claim to use unmetered packages, as shown in figure 4e. Although over half of small businesses use unmetered packages, a significantly higher number (21%) use a completely metered package compared to medium sized businesses (15%). Calls only packages decrease in popularity as business size increases.

Figure 4e: Main type of Internet package used by businesses
Base: UK businesses with Internet access, May ’02 (Small – base: 347, Medium – base: 294, ‘don’t knows’ have been excluded)

Payment of Internet use for employees working from home

Figure 4f: % UK businesses who pay for Internet equipment or usage for employees working at home
Base: UK businesses May ‘02 (Base: 810, ‘don’t knows’ have been excluded)

ISPs used

4.8 Businesses are making use of a range of ISPs, as shown in figure 4g – which shows individual ISP share of the SME market, based on which ISPs businesses said they were using (NB this is not the same as the proportion of businesses using each ISP as some businesses are using more than one). Only ISPs with a share of 2% or more are shown. Those with less than 2% share are included in the ‘other’ category.

Figure 4g: ISP share of SME Internet access (based on all ISPs businesses use)
Base: All ISPs used in small and medium UK businesses with Internet access, May ’02 (Base: 641, 8% ‘don’t knows’ have been excluded)

4.9 As already reported a considerable number of businesses have moved onto unmetered ISDN packages this quarter. BT’s share of the ISP market has risen from 19% to 30%. BT, Freeserve and AOL remain the most popular ISPs used amongst small and medium businesses claiming over half (55%) of the SME Internet market.

Figure 4h: ISP share of UK SME Internet access (based on all ISPs businesses use)
Base: All ISPs used in small and medium UK businesses with Internet access, May ’02 (Base: 641, 8% ‘don’t knows’ have been excluded)

Chapter 5

Satisfaction with Internet service

5.1 Consistent with previous quarterly surveys businesses continue to express fairly high levels of satisfaction with their Internet service, as shown in figure 5a. 9 out of 10 (90%) businesses are satisfied with their overall quality of service from their Internet provider. This compares to 93% for fixed telecoms services and 88% for mobile suppliers.

Figure 5a: % UK businesses satisfied with aspects of Internet service
Base: UK businesses with Internet May ‘02 (Base: 641, ‘don’t knows’ have been excluded)

5.2 There has been little change in satisfaction levels for call charges since August ’01. However satisfaction levels with subscription charges continues to fluctuate. This change could be bought about by the changing customer profile of this group. As already reported significant numbers of businesses are upgrading their access package to faster subscription based services. The effect of this is especially noticeable on the rise in satisfaction with speed of access which has risen significantly from 71% in February ’02 to 78% in May ‘02. Satisfaction with customer care from their ISP continues to remain at just over 80%.

5.3 Generally medium sized businesses are slightly more satisfied with speed than smaller businesses (84% and 78% respectively). This is consistent with medium sized businesses access methods – more of these businesses tending to use faster access methods such as leased lines and ISDN than smaller businesses.

5.4 As the number of businesses moving from metered to unmetered packages increases, differences are starting to emerge in satisfaction levels between customers of the different packages. As figure 5b below shows those who are on a subscription package which does have some call costs are slightly less satisfied with the quality of service than those on the other two types of package. In particular their dissatisfaction is mainly centred around their subscription costs and any call costs they also incur. Overall ISP customer care is quite consistent (as reported in previous quarters) across all three packages. Speed of access continues to show a strong differential, with those on the unmetered services showing far higher satisfaction than those on the call based ones.

Figure 5b: % UK businesses satisfied with aspects of Internet service, split by package used
Base: UK businesses with Internet access May ’02 (Base 641, ‘don’t knows’ have been excluded)

Annex 1

Q9 business questions on Internet

Q1 Is your company connected to the Internet or in the process of connecting to the Internet?

Yes connected
Yes in process of connecting
No not connected/not in process of connecting

Q2 Is your company likely to become connected to the Internet in the next 12 months?

Q3 Does your company pay for any Internet equipment or Internet usage such as subscription and call costs for employees working at home?

Yes - pays for equipment only
Yes - pays for usage (any subscription or call costs) only
Yes - pays for equipment AND usage
No - pays for neither

Q4 Which of these best describes the package provided by your business' main ISP?

Monthly or annual subscription and cost of calls made when online
No subscription fee and pay cost of online calls only
Monthly/annual subscription which gives unlimited free usage and pay no call costs
Monthly/annual subscription which gives free usage at certain times or for certain amount of time but pay for call costs at
other times
Other (specify)

Q5 Which ISP's do you use to access the Internet?

Q6 Overall are you satisfied with the following aspects of Internet use?

Overall quality of service offered by ISP
The call costs
The speed of access
The customer care offered by ISP
The subscription charges
The information available on broadband services

Q7 Which of the following does your company use to connect to the Internet?

Ordinary phone line/dial-up access
BT Highway
ISDN line
High speed access via DSL, always on, unmetered access, faster than an ordinary phone line which enables you to make voice calls at the same time as using the Internet
Leased line
Cable modem – always on, unmetered access, offering various access speeds, faster than an ordinary phone line which enables you to make voice calls at the same time as using the Internet
Fixed access delivered by radio

Q8 What type of connection did you use before you got DSL/ a cable modem?

Ordinary phone line/ dial up access
BT Highway
ISDN line
Leased line
Fixed access delivered by radio
Other