|Use of fixed line services among small and medium enterprises (SMEs)|
Summary of Oftel SME survey
Q2 September 2000
1.1 This report contains a summary of the findings on use of fixed line services from the second quarter of Oftels survey among small and medium enterprises (SMEs).
1.2 The survey was conducted among some 700 SMEs comprising 400 small (1-50 employees) and 300 medium (51-500 employees) businesses located across the UK with a minimum turnover of £50,000. Quotas were applied to small and medium businesses separately so that the sample was representative of SMEs in the UK as a whole in terms of business size, industry sector and region with further weighting of the results. The fieldwork was conducted on behalf of Oftel by Continental Research during August/September 2000.
1.3 This report has been prepared by Oftel based on the results provided by Continental Research.
1.4 The report covers:
(Footnote 1) Some sources of data (including the DTI SME Statistics) define SMEs as employing between 1-249 staff though the definition of medium businesses is arbitrary, defined sometimes by number of employees, sometimes by turnover. The current survey included businesses with up to 500 employees in order that the survey was as inclusive as possible. It was felt that, from the point of view of telecoms purchasing, little difference existed between businesses with 249 employees and those with 500.
(Footnote 2) 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 99% of businesses in the UK, medium businesses were oversampled 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 (99% small businesses; 1% medium businesses), consequently the results for small businesses closely resemble those for SMEs as a whole. The error margin for this survey of 700 businesses is about 2-4%, though higher amongst small subgroups.
(Footnote 3) The report should not be seen as recommended best buys and should not therefore be relied upon when making purchase decisions. Oftel accepts no liability in respect of any of the results provided to it by Continental Research or any decisions taken by any person in reliance on the report.
SMEs use of competition
2.1 Overall, three fifths of SMEs were aware of a cable company in their area and half were aware of an indirect supplier. By business size, awareness of both types of alternative supplier were higher among medium businesses.
2.2 36% of SMEs were using more than one fixed line supplier, ranging from 35% of small businesses to 52% of medium businesses.
2.3 Three-fifths of SMEs were using BT as their only supplier (ranging from 60% of small businesses down to 43% of medium businesses). A third of businesses were using BT and other suppliers together (32% of small businesses; 50% of medium businesses) and 8% (8% of small businesses; 6% of medium businesses) were only using suppliers other than BT.
2.4 Just over a quarter (26%) of SMEs had switched telecoms supplier (ranging from 25% of small businesses up to 37% of medium businesses).
DSL (digital subscriber line) services
2.5 Use of DSL remained low and whilst around a quarter of SMEs said that they would be likely to use DSL, the majority said that they would not be likely to use the service in the future. Businesses that said they were likely to use DSL were prepared to pay, on average, £67 per month for the service.
Satisfaction with service/problems experienced
2.6 Satisfaction with telecoms service remained high, with accuracy of billing, reliability of service, fault repair and installation/ordering of new services receiving satisfaction ratings of over 90%. However, businesses were found to be less satisfied with suppliers for value for money (82%) and cost of calls (79%). The cost of calls was also the most common telecoms problem experienced by SMEs (mentioned by 11%).
Number of fixed lines
3.1 Some 27% of SMEs (27% of small and 2% of medium businesses) were using a single fixed line. This was lower than was found in the June survey in which 33% of SMEs (34% of small and 1% of medium businesses) were found to be using a single fixed line. Whether this difference represents an actual rise in the proportion of businesses using more than one line (perhaps resulting from cable companies offering free second lines) or the difference is due to small sample differences between the surveys should be confirmed by the third quarters survey (November 2000).
3.2 Figure 1 shows the average number of fixed lines among small (1-50 employees) and medium (51-500 employees) businesses. Notably, one-person businesses had on average two fixed lines, suggesting they were using one for telephone and one for fax or perhaps one for telephone and a separate one for Internet.
3.3 The average telecoms spend of SMEs (including Internet though excluding mobile) ranged from £231 for small businesses (1-50 employees) to £2822 for medium businesses (51-500 employees).
Awareness of choice
3.4 Some 61% of SMEs were aware of a cable company in their area and 50% were aware of indirect suppliers.
3.5 As figure 3 shows, awareness was higher among medium businesses than among small businesses, just half of small businesses being aware of indirect suppliers (a full explanation of the concept was provided). In comparison, the June survey found almost universal (97%) awareness of choice in response to a less specific question about awareness of choice in general rather than awareness of suppliers locally. This suggests that whilst businesses awareness of the concept of competition is high, when it comes down to the practicalities of the suppliers available to them in their area businesses are less well informed.
Use of Suppliers
Number of fixed line suppliers
3.6 Some 36% of SMEs were using more than one fixed line supplier at September 2000, ranging from 35% of small businesses up to 52% of medium businesses.
3.7 The current survey found a higher proportion of SMEs using more than one supplier than was found in June (36% against 27% in June), in particular a higher proportion of small businesses were found to be using more than one supplier (35% against 27% previously). However, the proportion of medium businesses using more than one supplier was found to be lower in the second survey (64% in June against 52% in the current survey).
3.8 Looking at the number of suppliers used, 29% of SMEs (29% of small businesses; 39% of medium businesses) were using two suppliers at September 2000 and 6% (6% of small businesses; 13% of medium businesses) three or more.
3.9 Approaching three-fifths (59%) of SMEs were using BT as their only supplier, with 33% using BT and at least one other supplier and 8% using suppliers other than BT only. Figure 5 shows that medium businesses were more likely than small businesses to be making use of competition by using BT and at least one other supplier.
Proportion changing supplier
3.10 Overall, 26% of SMEs had used a different telecoms supplier in the past, ranging from 25% of small businesses up to 37% of medium businesses.
3.11 As in the first quarter, the proportion of SMEs that had switched supplier was higher among businesses with more than one supplier (at 36% switched).
3.12 The June survey reported that the majority of SMEs that had switched had said that it had been easy to change supplier. However, difficulties comparing suppliers on price and quality were identified as potential barriers to greater switching in that survey.
Use of DSL
3.13 Just 1% of SMEs (1% of small businesses; 3% of medium businesses) were using a DSL service at September 2000.
3.14 Around a quarter (26%) of SMEs (26% of small and 32% of medium businesses) said that they would be likely to use DSL in the future. Amongst these, 27% of SMEs already connected to the Internet or intending to connect said that they would be likely to use DSL. However, a substantial proportion of SMEs would not be likely to use DSL in the future (74% of small businesses; 65% of medium businesses).
3.15 SMEs that were likely to use DSL were, on average, prepared to pay £67 per month for DSL (ranging from £66 among small businesses to £108 among medium businesses). Please note that these figures exclude the two-fifths (39%) of SMEs likely to use DSL (38% of small businesses; 53% of medium businesses) that said that they did not know how much they would be prepared to pay for the service and are therefore based on small sample sizes.
3.16 The £67 figure from the current survey and also the £43 average amount found in the June survey both appear to be below the actual retail business charges for DSL though are in line with residential charges. However, it is possible that SMEs may find that the DSL services designed primarily for residential customers are adequate for their purposes. Future surveys will continue to monitor the prices businesses are prepared to pay for DSL to establish whether cost may discourage businesses from taking up the service.
Satisfaction with service/problems encountered
Satisfaction with overall service from telecoms suppliers
3.17 94% of SMEs were satisfied with the overall telecoms service they received, ranging from 94% of small businesses to 90% of medium businesses. This level remains unchanged from the June 2000 survey.
3.18 Accuracy of billing and reliability of service received the highest ratings. The cost of the service was less satisfactory for SMEs (82% satisfied for value for money and 79% for cost of calls) with ability to get hold of appropriate person when necessary last (though higher than in the previous quarter).
3.19 Figure 8 shows satisfaction with service by business size. Medium businesses appeared to be slightly less satisfied with all the aspects of service.
Telecoms problems encountered
3.20 The survey found that medium businesses were more likely to have encountered problems than small businesses (18% of medium businesses saying that they had encountered no problems compared with 25% of small businesses). The most common problems experienced by medium businesses were the ability to contact the right person, call costs, customer service issues and reliability of service. The main problems experienced by small businesses were call costs followed by customer service issues and the ability to contact the right person. Similar issues arose among the problems experienced by businesses in the June survey. Future surveys will monitor the problems businesses are experiencing to see if the same issues continue to arise.
3.21 Other problems encountered by businesses (mentioned by less than 2% of SMEs) included receiving unwanted/unsolicited sales calls, lack of choice, poor mobile coverage, high rental charges, poor communication/getting them to listen to what you want and installation problems.
(Footnote 4) Whether this difference represents an actual rise in the proportion of businesses using more than one supplier or the difference is due to small sample differences between the surveys should be confirmed by the third quarters survey (November 2000).
(Footnote 5) Please note that, as DSL was on trial among a few thousand customers only at the time of the June survey, it was felt that any figures collected on use of the service at that time were likely to be inaccurate. These September figures should be more reflective of the market.
SMEs use of competition
4.1 As in the June survey, small businesses were found to be making less use of competition than medium businesses both in the number of suppliers they were using and in the proportion that had switched supplier. However, the September survey picked up a higher proportion of small businesses than was found in the June survey and a slightly lower proportion of medium businesses were making use of competition. Use of suppliers and supplier switching will continue to be tracked in future quarters of the survey.
4.2 Whilst the June survey found high awareness of choice in general among SMEs, the September survey which asked specifically about awareness of alternative suppliers available locally, uncovered lower awareness of choice. In addition, the June survey identified difficulties comparing suppliers on price and quality. Initiatives such as the Comparable Performance Indicators (CPIs), located at www.cpi.org.uk, which provide quality of service information on suppliers, and the TelecomsAdvice site (www.telecomsadvice.org.uk) aimed at small businesses with information on telecoms services and equipment should assist small businesses in getting the best deal and facilitate their use of competition.
4.3 With the recent introduction of DSL, use of the service among SMEs was low. Whilst around a quarter of small businesses and a third of medium businesses said that they would be likely to use DSL in the future, the majority said that they would not be likely to use the service.
4.4 Reasons why businesses are unlikely to use DSL is a possible area for investigation in the November 2000 survey, for instance whether lack of knowledge of how these services work or could benefit businesses may be responsible for low interest or whether it is simply that businesses have no use for this service. Also, the survey found that SMEs likely to use DSL were prepared to pay on average £67 monthly for the service, a lower amount than current retail business prices for the service, and another two-fifths of those likely to use DSL did not know how much they would pay for the service. Consequently, the issue of cost will continue to be explored as a potential barrier to SMEs using DSL.
4.5 As to the availability of DSL, the TelecomsAdvice website (see para 4.2 above) has links to telcos currently providing the service and will set up links to any other suppliers offering DSL in the future.
4.6 Future surveys will continue to track SMEs use of fixed line services. The larger samples provided by combining future quarterly samples will allow analysis of the results by region and industry sector which has not been possible so far.