| Business use of Internet Oftel small and medium business survey Q12 February 2003 12 May 2003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Chapter 1 Introduction Chapter 2 Summary Chapter 3 Internet penetration Chapter 4 Internet access methods Chapter 5 Business use of ISPs Chapter 6 Satisfaction with Internet service Chapter 7 Business use of ISP's Chapter
8 Satisfaction with Internet service Annex A Q12 business questions on Internet Introduction1.1 This report provides an overview of business use of Internet, taken from the twelfth wave of Oftels quarterly business survey, conducted in February 2003 amongst 827 UK businesses 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 In some cases throughout the report, data on a rolling basis is shown. This combining of two periods increases the sample size and allows trends in the data to be analysed and interpreted with greater confidence. For example, where identical questions have been asked over the past two waves (November 2002 and February 2003), combined data have been used. 1.4 The survey was conducted on behalf of Oftel (see note two below) by Continental Research during February 2003. This report has been prepared by Oftel based on the results provided by Continental Research. 1.5 The report covers:
1.6 A list of the questions is attached in Annex A. 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 surveys were 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 the survey of 827 businesses is about 2-4% and 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. Summary findingsHeadline figures
Internet market broadly unchanged, some movement in connection methods 2.1 The Internet market sees little overall change this quarter - two thirds of businesses remain connected to the Internet. Almost all medium businesses have access (94%) compared to 64% of small businesses and overall 88% are satisfied with the overall quality of service. Satisfaction remains stable but lower than the other telecoms markets (94% in the fixed and 95% in mobile market). 2.2 Just over a third (35%) of businesses with Internet use an unmetered narrowband package and 30% use metered. There has been little change in use of individual narrowband packages over the past few quarters. Overall narrowband usage (PSTN/ISDN) has fallen recently, driven by a fall in use of ISDN connections. The proportion of businesses using DSL/cable modem connections has been rising steadily (currently used by 16% of businesses with Internet). Almost half of broadband businesses connected straight to the Internet using this connection 2.3 46% of businesses using a broadband Internet connection have never used an alternative method. A third upgraded from a PTSN connection and 1 in 10 (11%) switched from ISDN. The remainder switched from various other connection types. A third of businesses with Internet claim they are likely to upgrade to broadband at current prices 2.4 In addition to those businesses with Internet currently using a broadband connection (DSL/cable modem), a third claim they are likely to upgrade their current connection to broadband. Small businesses were as likely as medium sized businesses to think they might switch (33% and 26% respectively). 2.5 The main reason small businesses were unlikely to upgrade to broadband at current prices was insufficient use of the Internet, or cost. For medium businesses on the other hand satisfaction with current speeds was the main reason, followed by cost. 50% rise in current broadband prices would encourage users to switch away largely to other high speed connections 2.6 On average businesses using broadband estimate they pay around £138 per month for their service. If current broadband prices were to rise by 10%, around half of users would continue to use broadband. This falls to 16% if prices were to rise by 50%, when almost half said they would switch away largely to other high speed access methods. 15% claim they would now stop using the Internet and almost a quarter were unsure how they would react. Businesses react similarly to an increase in narrowband unmetered charges as broadband customers 2.7 Businesses using unmetered narrowband Internet access are currently paying around £42 per month on Internet charges around a third of that paid by broadband customers. 2.8 Following a 10% increase on current costs half claimed they would continue to use their narrowband unmetered package, this falls to 1 in 5 at a 50% rise. At a 10% rise a third of unmetered narrowband customers would to switch access method half to metered narrowband, and half to a higher speed/broadband connection. Main findings Chapter 3Internet penetrationInternet penetration among small and medium businesses 3.1 Use of the Internet amongst UK businesses has remained stable over the last year to 18 months. Around two-thirds of businesses are currently connected (65%) the results are summarised in figure 3a. A further 4% of SMEs claim to be in the process of connecting to the Internet. Figure 3a: %
UK SMEs with Internet access
3.2 Figure 3b shows Internet penetration by business size, turnover, average telecom spend and industry sector. Penetration increases with the number of employees ranging from 6 in 10 amongst those with 1-10 employees, to over 9 in 10 amongst businesses with between 101-250 staff. Businesses with higher turnover, and those with high telecom spend are also more likely to have Internet access than businesses in the lower brackets. Businesses in the wholesale/retail sector are least likely to have access to the Internet (59%), as shown in figure 3b. Figure 3b: Internet
penetration
Internet access methodsConnection method 4.1 The chart below shows methods of connection used by businesses with Internet. The proportion of businesses with Internet using a narrowband metered or unmetered package are shown from May 02 these being subsets of PSTN and ISDN users. Figures do not total the sum of PSTN and ISDN as some businesses use both connections. 4.2 35% of businesses with Internet are using an unmetered narrowband package (ie. paying for some or no calls in addition to a subscription) and 30% are using a metered narrowband package (ie. paying for all calls whilst online, for some businesses this is in addition to a subscription charge). A further 15% were unsure whether their narrowband (PSTN/ISDN) connection was metered or unmetered. Figure 4a: Internet
access methods used by UK businesses
Note: figures add to more than 100% as some businesses are using more than one access medium. 4% of businesses were unsure which type of connection they were using. 4.3 Overall use of narrowband Internet access has been falling in recent quarters, currently at 79%, driven by a fall in use of ISDN as shown in figure 4a, down by a third since May 02 (36%), and currently used by less than a quarter (23%) of SMEs with Internet. Business use of ordinary phone lines (PSTN) to connect to the Internet has been fairly stable for almost a year at about 3 in 5. 4.4 Broadband continues its steady climb with around 16% of businesses claiming to access the Internet using DSL (13%) or cable modem (3%). Industry subscriber figures confirm the rise in use of broadband amongst businesses. Chapter 5 examines switching patterns between connection methods and suggests that around 1 in 10 current broadband users upgraded from an ISDN connection. 4.5 A proportion of businesses with Internet (3%), use some other method of access, such as fixed wireless access or satellite, to connect. 4.6 Small businesses remain more likely to use PSTN to access the Internet with just over 6 in 10 doing so compared with 3 in 10 medium businesses. Use of this method amongst small businesses has remained stable since August 02. Both small and medium sized businesses saw a rise in the proportion claiming to use broadband (DSL/cable modem) both up 4% points on last quarter. 4.7 Overall, medium sized businesses remain more likely than small businesses to use access methods faster than ordinary dial up such as ISDN, leased lines, cable modems and DSL, as shown in figure 4b. Figure 4b: Internet
access methods used by UK businesses
Chapter 5 Switching behaviourSwitching package and connection 5.1 During October 02 Oftel conducted an ad hoc survey which examined business switching behaviour between alternative access and connection methods, the results have been combined with those from this survey to provide a more robust sample for analysis. Hence, any changes in the following data compared to those reported in November 02 are not real changes and are likely to be due to the larger error margins evident with the previously small sample. 5.2 The results do however, indicate broadly similar results. Users of unmetered PSTN packages are more likely to have upgraded from a metered package than vice-versa as shown in figures 5a and 5b below.
5.3 Around 8 out of 10 (79%) UK SMEs with Internet claim never to have used an alternative method to connect to the Internet. Medium businesses are more likely to have switched connection (31%) than small businesses (18%). This is consistent with their use of faster access methods users of which are more likely to have upgraded from a previous connection than PSTN users. 5.4 94% of PSTN users connected straight to the Internet using this connection, while broadband users (46%), ISDN (32%) and leased line users (30%) are more likely to have upgraded from an alternative type of connection. The chart below shows which connection method current broadband users switched/upgraded from if at all. Figure 5c: Previous
connection method/package used
5.5 The main reason given by current broadband users for upgrading to this particular method of Internet access was for the increased speeds (68% mentioned this as the reason for change.) Another reason mentioned but to a lesser extent was broadband being cheaper (17%) perhaps in relation to the added benefits of broadband, or in comparison to previous broadband prices or other methods. 5.6 Broadband being more efficient, continuous access/instant access to emails, reliability, permanent connection, and better value for money were other reasons mentioned, each by less than 10% of businesses. Only 1% cited simultaneous voice and Internet usage this low mention may be due to some businesses previously having dedicated phone lines for voice calls, hence not valuing this aspect highly in comparison. These figures have been drawn from a small base so caution should be applied to these findings. BroadbandInterest in upgrading to broadband 6.1 As stated in chapter 4, 16% of businesses with Internet use a broadband connection, this is based on combined data from November 02 and February 03. Figure 6a shows this figure as 19% which is based only on data from February 03. 6.2 In addition to those businesses with Internet using a broadband connection, a further third (34%) say they are likely to replace their current connection with broadband at current prices. Around half of these businesses thought this was very likely, shown in figure 6a. Small businesses appear as likely as medium businesses to upgrade to broadband at current prices 34% of small businesses compared to 28% of medium businesses. Figure 6a: Likelihood
of upgrading current connection to broadband
6.3 Businesses currently using a PSTN subscription and calls based Internet package were most likely to think they would upgrade to broadband (c. 6 in 10), compared to PSTN unmetered (c. 4 in 10) or calls only (c. 3 in 10) users. 6.4 Of those businesses unlikely to upgrade to broadband at current prices reasons varied according to business size. The main reasons small businesses were unlikely to connect were insufficient use of the Internet (33%), broadband being too expensive (24%), and satisfaction with current speeds (19%). Other reasons were mentioned but to a lesser extent, all of which are shown in figure 6b. 6.5 For medium sized businesses the main reasons were the same but the order of importance was reversed. Medium businesses were more likely to say they were satisfied with their current Internet speeds, which is consistent with their higher use of faster access methods and higher levels of satisfaction with these. Figure 6b: Reasons
unlikely to upgrade to broadband
What would broadband prices need to fall to, to encourage PSTN users to switch? 6.6 As mentioned previously, 42% of businesses with Internet thought it unlikely that they would upgrade their current connection with broadband at current prices. On average PSTN customers (both metered and unmetered) that are unlikely to upgrade to broadband given current prices, are generally lower than average spenders. The majority of these customers would want to see broadband prices fall to around £19 per month before they would consider switching from their current connection and 16% said they would not switch to broadband at any price. 6.7 This type of result should be treated with some degree of caution as it is speculative, asking people to predict what they might do, and therefore may not accurately reflect the reality of what would happen if prices did change. Actual behaviour would depend, amongst other things, on customers noticing changes to prices and making the effort to change it is well known that the level of claimed switching intentions is rarely achieved in practice. This type of questioning however, can give a fairly reliable guide to the minimum number of customers who would not switch following price changes, and more importantly their reasons for not doing so. 6.8 There was little difference in the average price small and medium businesses unlikely to upgrade at current prices, would be prepared to pay for broadband services. 6.9 4 in 10 unmetered PSTN users, unlikely to upgrade to broadband at current prices, said prices would need to fall to around £21 before they would consider switching. A similar proportion claimed they would not pay more than their current Internet service costs for a broadband connection (around £22 per month). Just less than 1 in 10 said they were unlikely to upgrade to broadband at any price, a further 14% were unsure. 6.10 Businesses using a metered PSTN product and unlikely to switch to broadband, were more likely to say they would not consider using broadband at any cost than those using an unmetered PSTN package. Potential impact of price increase on broadband 6.11 UK SMEs with Internet access using broadband estimate that they spend approximately £138 per month in total on their Internet service, £61 amongst small businesses and £1686 amongst medium businesses. 6.12 If broadband prices were to rise by 10% over half (55%) of businesses currently using broadband would continue to do so. Around a quarter (26%) would switch to an alternative Internet connection 17% to ISDN, leased lines, satellite or fixed wireless access, around 1 in 10 (9%) to PSTN (the majority switching to unmetered), and 8% would stop using the Internet, see figure 6c. 6.13 If broadband prices were to rise by 50%, a further 1 in 5 broadband customers would switch to an alternative method of access, bringing the total proportion that would switch away from broadband to another method following a 50% price rise, to 46%. The majority would switch to an access method faster than PSTN/dial up (35%), 11% would switch to PSTN largely to unmetered packages. 15% now claim they would stop using the Internet completely and the proportion unsure rises to 23%. Figure 6c: Potential
reaction of businesses following an increase in broadband prices
6.14 Overall, broadband businesses appear more likely to switch to an access method faster than PSTN, than to an unmetered PSTN product with lower speeds, if prices were to rise. This is consistent with the reasons given by those willing to pay 50% more to retain their broadband connection. 2 in 5 valued the speed and capacity of broadband access. Other reasons were mentioned but to a lesser extent, such as convenience, worth extra cost, and the value of simultaneous voice and data lines, each mentioned by around 1 in 10 of these businesses. Potential impact of price increase on narrowband unmetered 6.15 UK SMEs using unmetered PSTN Internet access estimate they are paying on average around £42 per month for their Internet service, around a third of that paid by broadband users (£41 per month for small businesses and £121 for medium businesses). 6.16 Half of these businesses said they would continue to use their current package following a 10% rise in costs. A third claimed they would switch 14% to metered PSTN, 3% to broadband (DSL/cable modem) and 16% to either ISDN, leased lines, fixed wireless access or satellite. The remainder said they would stop using the Internet (6%), or were unsure how they would react (13%). 6.17 If unmetered PSTN access price increases by 50%, a further 2 in 10 (20%) would switch to an alternative access method. Most switchers claimed they would move to faster access methods such as ISDN, leased lines, satellite or fixed wireless access (36%), 9% said they would continue to use PSTN but switch to a metered package. This figure is slightly lower than the proportion who would switch to this metered PSTN package following a 10% rise, perhaps some of these businesses felt a 50% rise would bring the price more in line with higher speed methods and therefore would switch to these instead. 6.18 8% would now switch to broadband (DSL/cable modem). 14% now claim they would stop using the Internet and the proportion unsure stands at 11% this leaves only 22% of unmetered PSTN users remaining with this connection following a 50% price increase. These results are summarised in figure 6d. Figure 6d: Potential
reaction of businesses following an increase in unmetered PSTN prices
6.19 In summary, businesses using unmetered PSTN packages are more likely to switch to a higher speed access method such as leased lines, ISDN, fixed wireless access or satellite following a price increase in their current package than to broadband or another PSTN package. Business use of ISPs7.1 Businesses are making use of a range of ISPs, as shown in figure 7a which shows estimated 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 7a: ISP
share of SME Internet access (based on all ISPs businesses use)
7.2 BTs share of the ISP market remains around 3 in 10 (27%) and BT, Freeserve and AOL remain the most widely used ISPs amongst small and medium businesses claiming just over half (55%) of the SME Internet market. Shares have remained fairly stable over the last year, as shown in figure 7b. Figure 7b: ISP
share of UK SME Internet access (based on all ISPs businesses use)
Satisfaction with Internet service8.1 Satisfaction with the overall quality of Internet service amongst UK SMEs stands at 88% broadly similar to recent quarters and remains lower than satisfaction in the other telecom markets, 94% in the fixed market and 95% in the mobile market. 8.2 Generally satisfaction with each aspect of Internet service has remained stable this quarter, call charges (74%), and speed of access (73%) remain the least satisfactory aspects, as shown in figure 8a. This also means that the fall in satisfaction with call charges reported last quarter has been sustained. 8.3 There are slight differences in levels of satisfaction according to business size with medium sized businesses generally more satisfied than small businesses on most aspects of Internet service, except call charges. However, individual results are broadly similar to last quarter. Figure 8a: %
UK businesses satisfied with aspects of Internet service
8.4 Satisfaction with each aspect varies according to the type of Internet connection and package businesses are using, as shown in figure 8b. Figure 8b: %
UK businesses satisfied with aspects of Internet service, split by connection
method and package
* based on businesses which pay subscription charges/call costs 8.5 Satisfaction with the overall quality of Internet service is highest amongst businesses using narrowband (PSTN/ISDN connections). Of those businesses, 9 out of 10 using an unmetered package were satisfied with their overall quality of service, similar to satisfaction amongst narrowband businesses using a metered package (88%). Both these levels are significantly higher than for businesses using broadband (including leased lines), 83%, although overall satisfaction amongst broadband business has increased significantly this quarter. 8.6 Businesses using broadband, are significantly more satisfied with their speed of access compared to narrowband users. Almost 9 out of 10 (88%) businesses with broadband are satisfied with this aspect, compared to around 6 out of 10 (64%) using metered narrowband Internet access and 7 out of 10 using unmetered narrowband. 8.7 Last quarter saw a fall in satisfaction with speed of access amongst businesses using an unmetered narrowband package, which has been sustained this quarter. For metered narrowband users satisfaction with this aspect has remained consistently lower than for unmetered users, but stable at around two-thirds. 8.8 It appears that broadband users are becoming increasingly dissatisfied with their subscription charges, falling steadily over the past few waves. However, this does not seem to have impacted on overall satisfaction, which as mentioned previously, has experienced a significant rise on last quarter. Satisfaction with this aspect has also fallen significantly amongst those businesses using a narrowband metered package whereby they pay a subscription in addition to calls. Q12 business questions on Internet Q1 ASK ALL Yes connected Q2 ASK ALL WITH
INTERNET Yes Q3 ASK ALL WITH
INTERNET Pay per minute
call charges for all the time you are online Q4 ASK ALL WITH
INTERNET Yes Don't know Q5 ASK ALL WITH
INTERNET Yes Q6 ASK ALL WITH
INTERNET AOL Q7 ASK ALL WITH
INTERNET Yes, No, Don't know Q8 ASK ALL WITH
INTERNET Ordinary phone line/dial
up access Q9 ASK ALL WITH INTERNET Has your company
ever used any methods other than [X] to connect to the Internet? Q10 ASK ALL CHANGED METHOD What type of connection
did your company previously use? Q11 ASK ALL USING
DSL/CABLE MODEM AND PREVIOUSLY USED OTHER METHOD Q12 ASK ALL WITH
BROADBAND DSL/CABLE MODEM Very likely Q13 ASK ALL UNLIKELY
TO REPLACE CURRENT METHOD WITH BROADBAND Q14 ASK ALL USING BROADBAND OR UNMETERED NARROWBAND INTERNET How much does your company pay each *month* for its "broadband" / "unmetered" Internet service? Please do not include any other phone charges or bills, only the subscription you pay for your "broadband"/"unmetered" service. Q15 ASK ALL USING
NARROWBAND UNLIKELY TO CONSIDER BROADBAND Q16 ASK ALL USING
BROADBAND Continue to use
broadband Q17 ASK ALL USING
BROADBAND Continue to use
broadband Q18 ASK ALL USING UNMETERED NARROWBAND Which one of the following do you think your business would be most likely to do if unmetered charges were to rise by 10%? Would you Continue to use
unmetered Q19 ASK ALL USING
UNMETERED NARROWBAND Continue to use
unmetered Q20 ASK ALL CONTINUE USING BROADBAND FOLLOWING 10% OR 50% INCREASE Why would your company continue to use broadband rather than switching to a narrowband package? |
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