use of fixed telecoms services
Q2 August 2000
1.1 This report provides an overview of the key findings in the fixed telecoms services market, taken from second quarter 2000/01 of Oftels quarterly residential consumer survey conducted in August 2000. Results from the first quarter (conducted in May 2000) are used for comparison purposes and referred to throughout this report.
1.2 It provides trend information on which subsequent quarterly results can be compared and examines differences between consumers with different social characteristics.
1.3 The survey was conducted for OFTEL by MORI amongst 2092 UK adults between 17th-21st August 2000, of whom 92% claimed to have a fixed line at home. This report has been prepared by Oftel, based on the results provided by MORI.
1.4 This report provides tracking information on:
Issues specific to the August survey include:
(Footnote 1) This survey was conducted amongst a representative sample of UK adults, reflecting the UK profile of sex, age, social grade, region and employment status. Because the survey was conducted amongst a sample of adults, rather than the whole population, the data may be subject to a small margin of error. The error margin for this total sample of 2092 homes is about 1-2%, but is higher amongst smaller subgroups.
(Footnote 2) 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 MORI or any decisions taken by any person in reliance on the report.
UK fixed line penetration
2.1 There has been little change since May 2000 in the proportion of UK homes with a fixed line phone service at 92%. It is too early to predict whether fixed penetration is starting to drop perhaps with the increasing popularity of mobiles, although these figures have been consistently lower than data from the Office for National Statistics, which reported penetration of fixed lines virtually static at around 95% between 1997 and 1999.
2.2 Of the remaining 8% of homes without a fixed phone, 6% used a mobile, and 2% had neither fixed nor mobile.
2.3 12% of consumers claim to have more than one fixed line at home. Whilst this might possibly be a slight over-estimate they are particularly popular amongst Internet homes, of whom 1 in 5 have a second line for their Internet usage.
Awareness and use of fixed line suppliers
2.4 There has been little change since May in use of fixed line suppliers, with 7% of homes claiming to use more than one fixed supplier, and a further 1 in 5 using a sole alternative to BT.
2.5 Some consumers are more aware of, and making better use of the choices available to them. Overall, awareness of indirect operators as a viable alternative in individual areas remained relatively low at about a third of consumers. Awareness of indirect access was lowest amongst the lower income groups and consumers over the age of 55.
2.6 Almost 3 in 5 homes with a fixed phone were aware of number portability. However, confusion is evident amongst the remaining significant minority of whom about half thought they would have to change their number if they switched supplier and the remainder were unsure or thought it depended on individual companies.
Homes without a fixed phone
2.7 Preference for the convenience and flexibility and perceptions of cheaper overall costs remain the main reasons for use of mobiles rather than fixed phones in homes without a fixed line phone. Although, only a fifth of homes without a fixed phone said they were satisfied with their alternative methods for making calls, only 11% of homes without a fixed phone said they would consider getting a fixed phone if prices were cheaper. Lack of awareness of the choices available may be a potential barrier to greater uptake of fixed line services amongst this group of consumers.
Impact of mobiles on fixed phone usage
2.8 In addition to significant use of mobiles amongst homes without a fixed phone, 7 in 10 consumers with both fixed and mobiles phones claim to be actively choosing mobile rather than fixed phones for at least some of their calls. Specific circumstances in which substitution occurred included when home fixed phone was already being used, to use up free call minutes, or call savings on specific numbers or at certain times of the day.
2.9 20% of consumers with fixed and mobile phones claimed that people now call them more on their mobile and less on their fixed phone, and 8% consider their mobile rather than fixed line to be their main phone. From the callers point of view however, half of consumers said if they know its a mobile number theyre calling they tend to keep the call shorter than if they were calling a fixed phone.
3.1 During August, 92% of UK homes interviewed claimed to have a fixed line phone. Of the remaining 8% without a fixed phone, 6% used a mobile, and 2% had neither fixed nor mobile. This can be seen in figure 3a below. There has been a slight rise in mobile ownership, but little change in fixed line usage since May.
3.2 Penetration of fixed lines remained static at around 95% from about 1997 until 1999 according to data from the Office for National Statistics. Compared with Oftel surveys earlier this year, the number of homes using mobiles instead of fixed lines appears to be continuing to rise. It is too early to predict whether fixed penetration is starting to drop although in both the May and August surveys, penetration has been consistently lower than 95%. We shall continue to monitor the UK situation in subsequent surveys.
Consumers use of fixed telecoms operators
3.3 7% of fixed line homes claim to be using more than one operator for their calls and other home telecoms services, and 21% were using a sole alternative to BT (figure 3b).
Dual supply customers
3.4 Homes using more than one company for their telecoms services tended to be the typical higher spend customers - the higher income, AB social grades, and Internet users, and larger rather than smaller homes.
3.5 The May survey reported that one of the key features of multi-supply homes was their tendency to make international calls. It also reported however, that local and national calls were the main uses of secondary suppliers. Although this is probably a reflection of consumers calling patterns (ie they are likely to make more local and national calls than any other type), it indicates that secondary suppliers are not just being used for international calls. This was consistent with other recent Oftel research.
Multi fixed-line homes
3.6 Whilst 8% of homes have no fixed line, 12% claim to have more than one. There has been little change in these figures since May (figure 3c).
3.7 The distinguishing features of multi fixed-line homes were high incomes, AB social grades and home Internet usage. They tended to be larger rather than smaller households, younger rather than older, and were twice as popular amongst cable (25%) than BT customers (12%).
3.8 Homes with more than one line also tend to be making greater use of competition in the fixed market, shown in their propensity to use more than one fixed operator (figure 3d).
3.9 The May survey identified that the most popular user of second lines was for Internet or business purposes. About 1 in 5 (21%) homes with Internet access, claimed to have second lines specifically for this purpose.
How much are residential consumers spending on their fixed line service?
3.10 Since May, there has been little change in the average fixed line quarterly spend at about £80. This is slightly inflated by a small number of high spender and quarterly spends are shown in figure 3e.
3.11 Spend was related to the obvious consumer characteristics including income, social grade, household size, and use of additional telecoms such as Internet and second lines. Younger consumers tended to spend more than older customers.
(Footnote 3) Homes without a fixed line phone, conducted for Oftel by Ipsos-RSL (Mar 2000)
(Footnote 4) Oftels Market Information publication reports a continued increase in the total number of residential lines. However, this data is for the period up to March 2000, and uptake of second lines in homes may disguise any overall drop in proportion of homes without fixed lines.
(Footnote 5) Consumer switching behaviour in fixed and mobile markets, conducted for Oftel by NOP (Mar 00)
(Footnote 6) This is consistent with other recent Oftel surveys, but is higher than Oftel Market Information which collects aggregate data from operators on fixed lines provided as well as revenues and calls minutes. From this other source an estimated 5% of households have more than one line. Oftel Market Information however, is two months earlier than the survey, and may underestimate business lines in homes and second lines provided by cable operators. It is possible that some consumers in the survey may have confused the number of extensions in their home with the number of lines, thus resulting in an overestimate in the survey results. However, when asked what their additional line(s) were used for, answers supported the presence of additional lines, rather than just additional extensions. The true proportion of multi-line homes is likely to be somewhere between these two estimates.
4.1 Despite the fact that 7 in 10 consumers still use BT as the sole supplier and only 7% of homes claimed to be dual-supplied, half of BT customers think they have the option of a cable supplier in their area, and 35% of all consumers said they were aware of the option of indirect operators.
4.2 Awareness of indirect operators was lowest amongst consumers over the age of 55, the lower income and DE social groups. Awareness also tended to be lower in Scotland, Wales and Northern Ireland (although small base sizes require caution to be applied to regional results). Awareness of indirect operators was highest amongst the AB social grade and higher income groups, middle age groups, and homes with Internet. These groups were most likely to be already making use of more than one supplier for their home phone services.
4.3 Awareness was lower amongst homes without a fixed phone, which is unsurprising, but important, because if they dont realise they have a choice of supplier, they are unaware of the range of deals, and whether cheaper prices are available. It is perhaps lack of awareness and not just cost issues that is a potential barrier to fixed phone ownership.
4.4 Despite the apparent high levels of awareness and varying use of alternative suppliers, the May survey found that only 18% of consumers felt they had sufficient information to decide the best telecoms supplier and deal for them. Encouraging the development and accessibility of initiatives such as operator price comparisons, and quality of service comparisons remains very important if Oftel is to achieve its objective of well informed consumers.
Are consumers aware of number portability?
4.5 Almost 3 in 5 (57%) fixed phone customers said they knew they could keep their existing number if they changed to a different company for the fixed phone service at home. Awareness was higher amongst the high income groups and customers using more than one supplier, and was lowest amongst customers over the age of 55 and the DE social groups.
4.6 Friends and family / word of mouth, and literature from telephone companies were the main sources of information about number portability according to those who knew about it (each mentioned by 1 in 5 consumers). Just over 1 in 10 customers said they knew through personal experience of having switched supplier, and a similar proportion claimed to have found out about it from newspapers and magazines.
4.7 Almost 1 in 4 (23%) homes with fixed phones said they did not know whether or not they could keep their existing number if they were to change supplier, a further 18% said they thought they would have to change their existing number, and 2% said it depended on individual companies as to whether or not they would have to change. Evidently, there is still a significant degree of consumer confusion and lack of knowledge about number portability in the fixed line market.
4.8 A recent Oftel research publication on consumers switching behaviour did not identify portability issues as a major barrier to switching, but identified a significant proportion of customers who wanted to keep their existing number but were unable to do so when switching supplier. OFTEL is currently reviewing the availability of number portability for fixed services and as part of the review is exploring reasons why requests might not be met.
5.1 Of the 8% of UK homes without a fixed line phone, 3 in 4 claim to use mobiles instead. The incidence of homes without a fixed line phone is still higher than average amongst younger, low income / DE social grades, and those living in rented accommodation. However, personal mobile ownership is relatively high (more than 50% in all cases) amongst these groups. This is shown in figure 5a.
5.2 The main reasons for not having a fixed line phone are similar to those reported in recent Oftel surveys (Homes without a fixed line phone, March 2000, Ipsos-RSL):
5.3 Cost of fixed line phones is still an issue for some homes who do not have one, including connection, call and rental charges, but only 1 in 10 said they would consider getting a fixed phone if prices were reduced.
5.4 Only a fifth of homes without a fixed phone claimed to be satisfied with their current methods for making calls, and even amongst mobile users only 24% claimed to be satisfied. This is broadly in line with findings from the May survey, but is considerably lower than Oftels Homes without a fixed line phone survey conducted in March 2000, which reported satisfaction levels of 70%. There were no immediately obvious differences between the survey samples or market changes etc that would account for these marked differences, (although sample sizes were about 500 and 160 respectively and should therefore be treated with caution) indicating the need to track and investigate this issue further in forthcoming surveys as detailed in Oftels consultative document on Review of universal telecommunications services, September 2000.
Mobile only homes
5.5 Mobile only users tended to be younger and on slightly higher average incomes than those with neither fixed nor mobile. 16% of mobile users say they would consider getting a fixed line if prices were more affordable. Spending an average £25 each month on their mobile, mobile-only users spend no less than mobile users generally (who on average spend about £21 each month). Equating to about £75 per quarter, these consumers are spending almost as much as the average fixed line customer (about £80 per quarter). This suggests that these consumers are either not familiar with fixed line charges and perhaps overestimate them, or that the greater control and convenience of mobiles is more significant than cost alone.
Homes with neither fixed nor mobile
5.6 Despite small sample sizes, the 2% of homes without either a mobile or fixed phone tend to be from the very low income groups but were spread fairly evenly across all age-bands. A third of consumers in these homes use public payphones at least once a week. However, just under 1 in 10 of all those without a fixed line, say they wouldnt use phone enough to justify having one.
5.7 Figure 5a shows combined data from both the May and August surveys, for individual regions, to provide more robust sample sizes (minimum of 200 in each area) on which to base conclusions.
Use of public payphones
5.8 3 in 5 residential consumers claimed to use a public payphone at least sometimes, although this varies from regular use on a daily basis to less frequently than once a year.
5.9 7% of UK consumers claim to use public payphones at least once a week. This was considerably higher amongst consumers without a fixed phone, and particularly those who had neither a fixed nor mobile phone (31%). In addition to homes without a fixed phone, the most regular payphone users tended to be younger (15-34), living in London, and to a lesser extent higher, spending fixed line customers. There was no difference in average payphone usage between consumers with and without mobile phones.
5.10 2 in 5 consumers claim to never use public payphones, and this was higher amongst older consumers. Oftel will be conducting further research later this year into consumers use of public payphones as part of a review of the payphone market.
6.1 About half of UK adults claimed to personally have both a fixed and mobile phone (dual-users). Some examples of the various ways in which mobile communications are impacting on fixed line usage are shown below in figure 6a.
6.2 1 in 5 consumers with both fixed and mobile phones said that people call them more on their mobile and less on their fixed phone than they used to. This was higher still amongst younger consumers and high spending mobile customers. Almost 1 in 10 (8%) of these dual-users consider their mobile rather than their fixed line to be their main phone.
6.3 Just over a fifth of dual-users said they used their mobile when their home fixed phone was being used by someone else. This practice was more popular amongst younger rather older consumers, high rather than low income groups and larger rather than smaller households.
6.4 Other circumstances under which mobile phones are replacing fixed line usage included use of free mobile call minutes, and for cost savings where use of mobile was considered cheaper for calling other mobiles, specific numbers, or at certain times of the day.
6.5 Only 3 in 10 dual-users said they were not substituting fixed phone usage with mobile in any of the listed circumstances. These tended to be lower spending fixed and mobile customers, and was higher amongst those over the age of 55.
6.6 In addition to the obvious substitution of fixed phone usage with mobile amongst homes who do not have a fixed phone, these results indicate an increasing proportion of consumers and range of circumstances in which certain groups of consumers are actively choosing to use their mobile rather than fixed line phone. Apparent reasons for this substitution include greater convenience and perceived cost savings on a range of call types to certain numbers or at certain times of the day.
6.7 Despite indications of increasing fixed and mobile call substitution there is some evidence of consumer confusion over identification of mobile numbers, awareness of call costs and some concern over price of calls to mobiles.
6.8 Just over half (55%) of those with fixed phones said they usually know whether or not its a mobile number theyre calling, and a similar proportion (51%) said if they know theyre calling a mobile number they tend to keep the call shorter than if calling a fixed phone.
6.9 About a quarter of consumers (27%) said they know roughly how much it costs to call a mobile number from their fixed phone, and only 15% said that the cost of calling a mobile number doesnt really matter to them.
6.10 Ability to identify mobile numbers and awareness of approximate costs of calling mobiles was lowest amongst older consumers and to a lesser extent the lower social grades.
Has fixed telephony penetration reached its peak amongst UK households, and will it start to decline due to the increasing use of mobiles instead?
7.1 Both the May and August surveys reported penetration of fixed line phones in UK homes in the region of 92%, consistently lower than previously static estimates of about 95% between 1997 and 1999. It is too early to predict whether penetration will remain at this lower level or will continue to decline, but use of mobiles amongst homes who currently have no fixed line has continued to grow since May, currently at about 3 in 4.
7.2 Cost would appear to remain an issue for a significant proportion of homes without a fixed line phone and satisfaction with their alternative means of making and receiving calls was fairly low. Lack of awareness of alternative suppliers might also be a potential barrier to fixed line usage for some of these consumers.
Have there been any improvements in consumers awareness and use of competition?
7.3 The May survey reported that the vast majority of consumers (90%) claimed to be aware that they have a choice of supplier in their area. However, it was suspected that this might include mobiles rather than solely fixed suppliers. Further detail from the August survey indicates that whilst about half of BT customers were aware of a cable alternative in their area, and all but a handful of cable customers were aware of the BT option, only 35% of all residential consumers were aware of indirect operators.
7.4 Although a small proportion of consumers are making good use of competition in terms of their use of a number of companies for their home phone service, the majority of consumers are still only aware of cable and BT. There appears to have been little change in awareness and use of competition since May 2000. Lack of awareness of alternative suppliers is a potential barrier to ensuring consumers make better use of competition and get the best deal.
7.5 In addition, there would still appear to be a significant degree of confusion over number portability in the fixed line market, with 2 in 5 consumers unsure of the policies or thinking they would have to change their number if they switched supplier. Raising awareness of consumer rights and of initiatives such as www.phonebills.org.uk and its continued expansion to include a wider range of companies therefore remains important in assisting customer awareness and use of choices available to them.
What impact is mobile usage having on the fixed line market?
7.6 Results from this and other recent Oftel surveys indicate that an increasing proportion of residential consumers are actively choosing mobiles rather than fixed phones for at least some of their calls. The most obvious example of this substitution is amongst the 6% of homes without a fixed phone who claim to use mobiles instead (as mentioned above).
7.7 Even amongst homes with fixed phones however, mobiles are replacing a certain proportion of fixed calls for reasons of convenience eg when fixed phone is already in use, and for cost savings eg cheaper calls to other mobiles, at certain times of the day, or to use up free call minutes. Almost 1 in 10 consumers with both fixed and mobile phones consider their mobile rather than fixed line to be their main phone.
7.8 Recent Oftel Market Information publications (eg May and July 2000) further indicate the impact of mobiles, highlighting growth in mobile call minutes and a decline in fixed local and national call minutes during the period 1999-2000.
(Footnote 7) Mobiles - Barriers to switching, and quality of service issues, April 2000