Mobile Call Termination - Report of Market Research Findings

Published 13|09|06

Executive Summary

Introduction

The existing charge control on 2G mobile voice call termination expired on 31st March 2006 and Ofcom needed to decide whether mobile call termination charges should be controlled after this date and, if so, exactly what format these charges should take, and whom they should be levied upon. In order to understand which approaches to take, Ofcom needed up-to-date consumer research evidence to inform analysis of the market.

UK subscribers say they have owned a mobile phone for an average of 6 years

1.1 Ofcom’s research indicates that 78% of UK adults personally own or use a mobile phone .On average, UK mobile phone subscribers said had owned a mobile phone for just under 6 years.

1.2 Subscribers said they had owned their current handset for an average of a year and a half. Duration of ownership increased with age. On average, subscribers owned their handsets for two years and three months before replacing them and this was longer for older age groups.

UK subscribers say they paid £44 on average for their handset

1.3 The average claimed amount paid by existing UK mobile phone subscribers for their handset was £44. There was a significant difference between those on a Pay As You Go (PAYG) package (£57) and those with a contract (£18) – most likely related to the subsidies available on handsets for many contract packages.

1.4 Younger age groups (particularly under 35s) were likely to have paid more than older ones, partially reflecting that they were more likely to have a PAYG handset, and also that they are more likely to have a newer handset.

Three-quarters of subscribers say they were interested in buying a new handset if lost or damaged

1.5 In the event of loss or damage to their existing handset, over half (54%) of subscribers said they were “very interested” in buying a new handset, with a further 21% saying they were “fairly interested”.

1.6 PAYG customers were significantly more likely to be interested in buying a new handset (87%) than contract customers (52%).

1.7 The main reason given for this was due to that contract customers would be entitled to a free replacement handset from their operator or insurance (84% of the contract subscribers uninterested in buying a new handset mentioned this), so they would not need to pay for a new one. The proportion citing this has increased significantly since a similar question was asked by the Competition Commission in 2002, when 24% (of contract and PAYG customers together) mentioned it, compared to 64% in 2006.

1.8 The main reason PAYG customers said that they were not interested was that they felt they didn’t really need a mobile or didn’t use it enough to justify buying a new handset.

Those interested in buying a new handset said they were willing to pay £75-£87 on average

1.9 All PAYG customers that were interested in buying a replacement handset, and those that stated that the cost being too high was the reason for being uninterested, were asked a variety of questions to establish the highest price that they would be likely to pay for a replacement handset (without any line rental or airtime). The varying methods of analysis used gave a range of £75-£87 on average.

£28 was average amount likely to be paid for monthly contract package

1.10 Contract customers and those PAYG customers that had previously said they would not replace their handset with a PAYG package were asked how much they would be prepared to pay per month for a replacement contract package. The average amount was £28.

1.11 56% of PAYG customers said they were willing to pay an amount less than £70 for a new handset, meaning they were classified as ‘marginal subscribers’ for the economic analysis conducted, detailed in the main report.

The majority (83%) of non-subscribers not interested in buying a mobile phone in next 12 months

1.12 83% of non-subscribers stated they were not interested in buying a mobile phone over the next 12 months with three-quarters (73%) “not all interested”. Younger non-subscribers were significantly more likely to be interested than older ones.

1.13 The main reason that non-subscribers gave for not being interested was that they didn’t need a mobile and wouldn’t use it enough (63%).

1.14 Similarly to the subscribers, the non-subscribers (that were interested in buying a new handset or said they weren’t interested due to cost) were asked a variety of questions to establish the highest price that they would be likely to pay for a mobile phone. These varying analysis methods gave an average range of £45-£56.

1.15 Seven in ten (69%) non-subscribers who were willing to pay say they would pay an amount less than £70 for a new handset.

Over one in ten subscribers knew someone that had got a mobile phone for the first time in the previous 12 months

1.16 12% of subscribers knew someone that had got a mobile phone for the first time in the previous 12 months, and amongst these, they knew an average of 1.5 people that had done so. Note that this figure is based on less than 100 respondents so should be treated as indicative only.

1.17 These subscribers said they made an average of 10 calls a month to the (most recent) new subscriber that they knew, and received an average of 9. Note that this figure is based on less than 100 respondents so should be treated as indicative only.

1.18 These subscribers were asked if that person’s number was blocked, would they pay a one-off charge to reach their number, and how much would they pay. 30% said they would, with an average amount of slightly over £9. Note that this figure is based on less than 100 respondents so should be treated as indicative only.

1.19 All the non-subscribers that had previously stated that they would be willing to buy a mobile phone or said that they wouldn’t buy one due to cost were asked how many calls would they make (per month) from a mobile phone if they did buy one. The average estimate was 21, and they estimated they would receive an average of 23 a month.

1.20 10% of non-subscribers said that they knew someone that had got a mobile phone for the first time in the previous 12 months, and amongst these, they knew an average of 1.4 people that had done so.

1.21 These non-subscribers said they made an average of 4.6 calls a month to the (most recent) new subscriber that they knew, and received an average of 4.3 from them (approximately half the respective figures for subscribers).

Less than 1 in 10 of all respondents knew someone that did not have a mobile phone but would have liked to have had one

1.22 8% of respondents said that they knew someone that they contacted on their landline who did not have a mobile but would like them to have one. They knew an average of just over 2 people in this situation. They estimated they would make an average of 5.7 calls a month to that person on their mobile phone if they got one, and receive an average of 6.5 calls a month.

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