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| Business use of Internet, Oftel small and medium business survey, Q13 May 2003 – 31 July 2003 | |
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ContentsChapter 1 – Introduction Chapter 2 – Summary Chapter 3 – Internet penetration, access methods and use of ISPs Chapter 4 – Switching behaviour Chapter 5 – Focus on broadband Chapter 6 – Satisfaction with Internet service Annex A – Q13 business questions on Internet 1.1 This report provides an overview of business use of Internet, taken from the thirteenth wave of Oftel’s quarterly business survey, conducted in May 2003 amongst 815 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 (February and May 2003), combined data have been used. 1.4 The survey was conducted on behalf of Oftel by Continental Research during May 2003. This report has been prepared by Continental Research (see note two below). 1.5 The report covers:
1.6 The terms ‘broadband’ and ‘narrowband’ are referred to throughout the report. For definitions of these terms see paragraphs 3.3 and 3.4. 1.7 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 815 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.
Chapter 2 – Summary findingsHeadline figures
Internet market broadly unchanged, some movement in connection methods, especially broadband 2.1 The Internet market sees little change in penetration over the last year, stable at two-thirds of businesses. Satisfaction also remains stable at 9 in 10, marginally lower than the other telecoms markets (92% in the fixed and 93% in mobile market). Broadband use continues to rise – a quarter of businesses with Internet use broadband and a further quarter claim they are likely to consider switching to it current prices 2.2 As SMEs upgrade to broadband (now used by a quarter of businesses) narrowband use falls. Two-thirds of current broadband users upgraded from narrowband – fairly equally split between metered and unmetered. 2.3 In addition to those businesses with Internet currently using a broadband connection, a quarter of SMEs with Internet (representing 4 in 10 non-broadband users, currently using narrowband) claim they are likely to upgrade their connection to broadband at current prices. According to claimed reactions, a 10% increase in broadband price would slow, rather than stop growth 2.4 If businesses act as they claimed they would, a 10% increase in broadband prices would mean broadband use would increase at a slower rate. Over a third of current users claimed they would switch to a different type of connection. This finding should be treated with a degree of caution due to the hypothetical nature of the analysis. Speed is most valued feature of broadband and overall, speed of Internet service is meeting or exceeding expectations 2.5 The feature of broadband valued most by both small and medium sized businesses is the faster speed, mentioned by over three-quarters (78%) of SMEs with Internet. This is followed by the fact that broadband has a permanent connection and the ability to use the phone at the same time as the Internet. 2.6 Over half (57%) of SMEs state that the speed of their Internet service is about the same as they expected. 16% state is faster, and 23% state it is slower. This is higher amongst broadband businesses – 79% say their connection is as fast as or faster than expected – 29% say the service is faster than expected. Unsurprisingly, whether speed meets expectations has an impact on satisfaction with speed – businesses whose Internet speed meets expectations are more likely to be satisfied with speed. Nearly two-thirds of SMEs with Internet have lost their connection whilst using it in the past 12 months 2.7 In the past previous 12 months 3 in 5 SMEs claim to have been cut off from the Internet or lost their connection whilst using it. 16% claim to have been cut off on a weekly basis. There is no significant difference between businesses on narrowband and broadband packages in frequency of being cut off or disconnected.
Main findingsChapter 3 – Internet penetrationInternet penetration among small and medium businesses 3.1 Use of the Internet amongst UK businesses has remained stable over the last 18 months. Around two-thirds of businesses are currently connected (65%) – the results are summarised in figure 3a. A further 3% 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 number of employees, turnover, average telecom spend and industry sector. Figure 3b:
Internet penetration
Internet access methods Definitions 3.3 For the purposes of this report, Broadband includes DSL and cable modem connection methods. All broadband users in this quarter’s sample used a connection speed in excess of 256 kilobits per second. 3.4 Narrowband includes PSTN (ordinary phone line/ dial-up) and ISDN (including BT Highway) connections. Connection method 3.5 Broadband continues its climb with a quarter (24%) of businesses claiming to access via this method. Broadband use has risen amongst both small and medium businesses. Three-quarters of broadband SMEs claim to connect via DSL and a quarter by cable modem. Some businesses claiming to use cable modem do not use a cable supplier, so cable modem use may be slightly overstated. Oftel’s subscriber estimates suggest that most cable modem connections are residential packages, so some of these businesses may be using residential packages. Industry subscriber figures confirm that broadband subscriptions continue to grow. 3.6 The increase in broadband use has been driven by switching from narrowband methods. Use of ISDN has been falling in recent quarters and more recently ordinary dial-up connections have fallen. 3.7 Around 1 in 10 businesses use more than one connection method, the majority of these use PSTN as well as a faster connection such as broadband or ISDN – perhaps having kept their PSTN connection as a back up, after upgrading to a faster method. 3.8 Some ISPs provide a ‘mid-speed’ DSL/ cable modem (128-256k) product, but no SMEs in the sample currently use this. This is unsurprising, as the packages currently available are primarily marketed to residential customers. 3.9 Within ISDN/ PSTN package type remains stable with a third of Internet businesses using an unmetered narrowband package (ie. paying for some or no calls in addition to a subscription) and a third using a metered narrowband package (ie. paying for all calls whilst online, for some businesses this is in addition to a subscription charge). 3.10 Amongst businesses using dial-up as their main connection method, a third connect via a dedicated phone line, and two-thirds connect via a shared line that is also used for telephone and/ or fax calls. Medium businesses are more likely to have a dedicated line (55%) than small businesses (32%), although the base sizes are relatively small so results should be treated with a degree of caution. Figure 3c:
Internet access methods used by UK SMEs
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. *Before May ’03, figures were based on any package used. From May ’03 onwards, these figures are based on the MAIN package and are subsets of ISDN and PSTN use. 3.11 Although use of PSTN amongst small businesses has declined since August ’02, small businesses remain more likely to use PSTN to access the Internet compared with medium businesses, who tend to use access methods faster than ordinary dial up such as ISDN and broadband, as shown in figure 3d. Figure 3d:
Internet access methods used by UK SMEs
Business’ use of ISPs 3.12 Businesses are making use of a range of ISPs, as shown in figure 3e– 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. 3.13 The major ISP’s share of the market has remained stable (as shown in figure 3e) with BT, Freeserve and AOL still the most widely used ISPs amongst small and medium businesses, claiming half of the SME Internet market. Figure 3e:
ISP share of UK SME Internet access (based on all ISPs businesses use)
Chapter 4 – Switching behaviour Switching package and connection 4.1 3 in 10 (29%) SMEs connected to the Internet have previously used a different method to connect than they currently do, a rise from 21% in February ’03 that is consistent with broadband growth. Switching has been driven by businesses upgrading to faster connection methods. 4.2 Most of this switching has been from narrowband connection methods to broadband connections. There has been some switching within narrowband packages – this has mainly been from PSTN to ISDN. The incidence of businesses that had switched from broadband to narrowband is extremely low – indicating that, at present, once a business switches from narrowband to broadband they are unlikely to switch back. 4.3 Medium businesses are more likely to have switched connection (39%) than small businesses (29%). 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. Figure 4a:
Summary of main switching behaviour
NB Approximately 2% claimed to have switched to or from other, unspecified connection methods 4.4 94% of current PSTN users connected straight to the Internet using this connection, while broadband users (66%), ISDN (33%) and leased line users (24%) are more likely to have upgraded from an alternative type of connection. 4.5 No SMEs in the sample have previously used the "mid-speed" (128-256k) product offered by some ISPs. Switching to broadband 4.6 Two-thirds of current broadband users switched from another connection method. The vast majority of these upgraded from a PSTN connection – fairly equally split between former use of metered and unmetered packages. 4.7 Overall, amongst those that switched to broadband from a narrowband access method, about half were previously on a metered package and the other half were on an unmetered package. This indicates that consumers are converting to faster methods via two distinct paths. Those that upgraded from an unmetered package may previously have used a metered package, and hence have upgraded gradually through connection methods and packages (from metered narrowband access to unmetered narrowband finally, to broadband). The second group of upgraders missed out the middle step and converted directly from metered narrowband access to broadband. Figure 4b:
Previous connection method/package used
* NB 5% didn’t know or couldn’t remember what type of narrowband package they used to use 4.8 Previous packages used by current broadband users are shown in figure 4c. The majority (80%) upgraded from PSTN – 39% from unmetered PSTN and 34% from metered (the remaining 7% are unsure whether their PSTN connection was metered or unmetered). If they previously used PSTN unmetered they are more likely to have used a dedicated line (24%) than a shared line (15%). The converse is true for those switching from metered packages – 9% were on a dedicated line, and 25% were on a shared line. 4.9 It therefore appears that there is no one dominant method or type of package that broadband users switched from. 4.10 Only two respondents in the sample had switched away from broadband to another method. Figure 4c:
Previous connection method/package used
Includes 7% who used a dedicated PSTN line, but were unsure whether metered or unmetered Switching within narrowband packages 4.11 1 in 10 SMEs with Internet are currently using narrowband, having previously used another connection method. The majority of this switching was from PSTN to ISDN (mostly switching from metered PSTN packages).
Chapter 5 – Focus on broadbandCurrent broadband customers What businesses value about broadband 5.1 The most valued feature of broadband is the faster speed, with over three-quarters (78%) of SMEs mentioning this, followed by the ‘always on’ connection, and ability to use the phone at the same time as the Internet (figure 5a). 5.2 There is a noticeable and significant difference between the proportions of small (61%) and medium (24%) businesses that mentioned the ability to use the phone at the same time as being on the Internet. This may be partially explained by medium businesses being more likely to have their own dedicated line for PSTN access (55% do so), whereas the majority (68%) of small businesses share their line between Internet and either telephone or fax calls. Given that two-thirds of broadband users have upgraded from narrowband, a greater proportion of medium businesses may previously have been already able to use the phone at the same time as the Internet, so it is not seen as a distinctive benefit of broadband. Figure 5a:
Most valued features of broadband
Current broadband spend 5.3 UK SMEs with Internet access using broadband estimate that they spend on average £73 per month in total on their broadband service. 5.4 Estimated broadband spend has fallen since last quarter, when it stood at £138 amongst all SMEs. Whilst partly a consequence of the approximate estimates that this type of questioning produces, this is consistent with recent broadband price reductions for business packages by many ISPs, driven by a fall in BT wholesale prices. Impact of 10% price increase on broadband – current users 5.5 If broadband prices were to rise by 10%, 6 in 10 businesses currently using broadband would continue to use their existing connection method. There is no significant difference between small and medium businesses, nor the 1 in 5 of all broadband users that also have a narrowband connection (NB this is based on just 43 responses). 5.6 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 useful guide to the minimum number of customers who would not switch following price changes. 5.7 Over a third (36%) would switch to an alternative Internet connection – 16% to another high speed access method such as leased line or fixed radio, 11% to mid-speed DSL or a cable modem, 2% to PSTN, and 7% would switch to some other method, as shown in figure 5b. Less than 1% said they would switch to an ISDN line and less than 1% said they would stop using the Internet completely. Figure 5b:
Potential reaction of businesses following a 10% increase in broadband
prices
NB ISDN was also mentioned, by under 1% 5.8 Of all the businesses that used to use PSTN and have now switched to broadband, most would continue to use broadband if the cost rose or switch to another high-speed access method or to a mid-speed connection. None of them would go back to PSTN, and just 1% would switch to another narrowband method – ISDN. It seems that once a business has experienced the faster methods, they do not want to switch back to a slower one used previously. Potential broadband users Interest in upgrading to broadband 5.9 A quarter (24%) of businesses with Internet use a broadband connection. Amongst those businesses that currently only use narrowband, 4 in 10 (equivalent to a quarter of all SMEs with Internet) say they are likely to replace their current connection with broadband at current prices. Over half of these businesses think this is very likely, shown in figure 5c. Small businesses are as attracted as medium businesses. This does not necessarily mean that a quarter will actually get broadband, as previous research has clearly shown that claimed intentions rarely materialise in the same level of take-up. What can be more reliable however, is the proportion of consumers claiming they are not currently interested in broadband. 5.10 Around half of these businesses say that they usually take up new telecoms and Internet services once they have become established and used by many companies in their sector. 1 in 5 say that they are usually one of the last to take up new telecoms services. It seems that broadband is sufficiently established in the market place to be considered by some businesses that are usually slow to take up new technologies. Figure 5c:
Likelihood of upgrading current connection to broadband
NB this chart is based on May ’03 data and therefore use of broadband and other high speed methods does not match exactly the combined Feb and May data referred to throughout the report 5.11 Those using metered narrowband are less likely to upgrade to broadband than those that are unmetered. Businesses currently using a metered ISDN package as their main package are most likely to think they would upgrade to broadband (56%), followed by PSTN and ISDN unmetered users. PSTN metered users are least likely. 5.12 Due to small base sizes it is not possible to analyse in detail likelihood to upgrade to broadband amongst PSTN metered and unmetered users using dedicated and shared phone lines to connect to the Internet. However it appears that those using a shared line may be more likely to upgrade to broadband. 5.13 Businesses that are dissatisfied with certain aspects (eg speed of access and current subscription charges) of their current Internet service are more interested in switching than others. Figure 5d:
% Likely to upgrade to broadband
* Base size under 40, apply caution Impact of 10% price increase on potential broadband users 5.14 Amongst those that are likely to consider replacing their current connection with broadband, a price rise of 10% would deter a quarter of them (see fig 5e). Please note that this finding should be treated with a large degree of caution, and as indicative only. Claimed reactions to hypothetical situations generally give only a broad indication of what actual reactions might be should the situation actually materialise; these findings should therefore be considered in this context. Figure 5e:
Likelihood to upgrade to broadband if price of broadband rises by 10%
5.15 In summary, 4 in 10 SMEs with Internet not currently using broadband (or other high speed connection) are likely to upgrade at current prices (including 23% very likely to upgrade). If the price rises by 10%, this figure falls to 26%. 5.16 Although the base sizes of the individual packages are small and the results should be treated with caution, the pattern is broadly similar to the proportions that would upgrade at current prices. Those on PSTN metered remain the least likely, with those with unmetered PSTN more likely than those that are metered, and ISDN users being the most likely to still upgrade to broadband with a 10% price increase. Net effect of 10% increase in broadband prices 5.17 A quarter of SMEs with Internet access currently use broadband – a further quarter said they would consider replacing their current Internet package at current broadband prices. Assuming these businesses did upgrade to broadband (note that the level of claimed switching intentions is rarely achieved in practice) half of Internet SMEs would be using broadband if prices stayed at current levels and overall Internet use remained stable. 5.18 If broadband prices rose by 10%, assuming claimed reactions were carried out, up to 40% of current broadband users would stop using their current broadband connection (some would switch to mid-speed DSL or cable modem connections), leaving approximately 15% of Internet users with broadband. Around a further 15% of Internet SMEs claimed they would consider upgrading to broadband even if prices rose by 10%. 5.19 Based on these assumptions the net effect of a 10% increase in broadband prices would be to slow down the uptake of broadband, rather than halt it. Potential use would stand at 30% (5% higher than current levels). However, this analysis is based on the assumption that current broadband users would carry out their claimed potential reaction to a price rise and that those not using broadband who claimed they would consider upgrading actually went ahead and did so. The analysis also assumes that Internet penetration levels remain stable. This assessment should therefore be treated with a large degree of caution.
Chapter 6 – Satisfaction with Internet serviceNB The satisfaction figures in the chapter are based on amalgamated data for the last two quarters of research (unless otherwise stated). In all other chapters, where reference is made to satisfaction, results are from the May ’03 survey only. 6.1 Satisfaction with the overall quality of Internet service amongst UK SMEs stands at 89% – broadly similar to recent quarters – and remains lower than satisfaction in the other telecom markets, 92% in the fixed market and 93% in the mobile market. 6.2 There are some differences in levels of satisfaction according to business size, shown in figure 6a – with medium sized businesses significantly more satisfied than small businesses, as a result of the type of Internet connection and package each are using, as shown in figure 6b. Figure 6a:
% UK SMEs satisfied with aspects of Internet service
6.3 The rise in satisfaction amongst broadband businesses may be partly explained by new users that may be especially satisfied due to the superior service that broadband offers them compared to their last service. Figure 6b:
% UK SMEs satisfied with aspects of Internet service, split by connection
method and package
* based on businesses that pay subscription charges/call costs Speed of service 6.4 Businesses using broadband are significantly more satisfied with their speed of access compared to narrowband users. Over 9 out of 10 (92%) businesses with broadband are satisfied with this aspect, compared to 67% using narrowband. 6.5 Almost three-quarters (73%) say the speed of their Internet service is as expected or faster, 16% say it is faster, and a quarter (23%) say the speed is slower than expected. 6.6 Satisfaction that speed meets or exceeds expectations is significantly higher (79%) amongst broadband businesses than narrowband (69%). 1 in 5 (19%) broadband users said that speed was slower than expected, compared to 28% of narrowband users who said it was slower. Figure 6c:
Comparison of Internet speed received compared to expectations
6.7 There is an observable correlation between how the speed matches expectations (see figure 6d) and the proportion that are satisfied with their speed of access. 100% of the businesses that state their speed is faster than expected are satisfied with the speed, and amongst those that state the speed is a lot slower than expected, a third (34%) are satisfied with the speed. Figure 6d:
% of businesses that are satisfied with speed and overall service
Reliability of connection 6.8 In the previous 12 months, 6 in 10 (61%) SMEs claimed to have been cut off from the Internet or lost their connection whilst using it. 16% have been cut off weekly (see figure 6e), and a further 18% were cut off on a monthly basis. 6.9 There are no significant difference between businesses on narrowband and broadband packages and no significant correlation between how frequently they were disconnected, and the proportion that are satisfied with their overall service. Figure 6e:
Frequency of being cut-off or disconnected from the Internet in the
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