The Business Consumer Experience

09|12|09

Executive summary

Ofcom's duties towards business consumers

1.1 Ofcom's primary duty is to further the interests of consumers, including business consumers, and citizens in relation to communications matters.

1.2 As part of our duty to undertake research into the experiences of consumers, Ofcom wished to find out more about the views of business consumers of telecoms services, in particular, we wished to determine how satisfied they were with their current telecoms services and what concerns and frustrations they experienced. We therefore commissioned a research agency to conduct telephone interviews with over 1200 businesses across the UK. This report sets out our research findings and some of the actions being taken by Ofcom in areas relevant to the research findings.

1.3 The research sample included businesses (from private, public and third sector organisations) with five employees or more. We also undertook a number of group discussions with smaller businesses and other key representatives of business interests in Northern Ireland, Scotland and Wales. This research helps us gain an insight into the views of businesses and follows on from previous research we have conducted into the views of small and medium sized companies (including those with fewer than five employees).

Telecoms services are an important driver of businesses' success

1.4 Business consumers are an important part of the telecoms market: in total, businesses (including businesses with fewer than five employees) spent £13.9bn on telecoms in 2008, accounting for 45% of total telecoms turnover . Among our survey respondents, the mean annual spend on telecoms services was £14,600 per year, while the median spend was £3,600 per year. In other words, businesses with five or more employees spend just under 19 times more per year on telecoms services than the average household consumer .

1.5 Our research indicates that telecoms services are becoming an increasingly important driver and enabler of business customers' success. Around half of the surveyed businesses said they planned to spend more on telecoms services over the next year, with over a third saying they intended to spend more on internet services, including higher bandwidth data services. We found that 90% of businesses have internet connections, which is similar to the proportion with fixed-line telephones. Mobile services are also important to businesses although only around three-quarters of businesses directly owned or rented mobile devices (many of the others are likely to reimburse employees when they use private mobile phones for business calls). We also found evidence that mobile internet/data services are becoming more important 23% of businesses said they used Blackberry devices and 10% said they owned iPhones.

1.6 Some businesses use telecoms services primarily as a basic means of communication with customers and suppliers but growing numbers are using telecoms to transform the way in which their businesses operate. For instance, increasing numbers of retail businesses are embracing the internet as a sales channel with around 73.5% of business having their own website (up from 70.3% in 2007). These figures were based on a recent survey published by the Office of National Statistics . The same survey shows that internet sales represented 9.8% of the total of all sales by non-financial sector businesses in 2008, an increase from 7.7% in 2007.

1.7 Central and local government organisations are increasingly exploiting the internet and wireless technologies to increase citizen accessibility and reduce costs. For example, HMRC said that 67% of UK self-assessment taxpayers filed their tax returns online in the last financial year, an increase of over 50% on the previous year. In 2008, 66% of businesses used the internet to interact with government and public bodies, an increase from 60.8% since 2007 .

1.8 The extent to which businesses see telecoms as a key business enabler varies but around two-thirds of the businesses we surveyed stated that communications were either an "important way of making the business more efficient" or "a vital means to drive the business forward and ensure competitive differentiation". Telecoms services tended to be rated as more important among respondents who were also multinationals, those who considered themselves to be more informed, and those in the business services sector. But one third of respondent businesses described telecoms simply as a 'utility' such as water or energy, (in other words, a basic tool for communication only). Those viewing telecoms as a utility tended to have lower than average knowledge levels of communications services and also tended to describe themselves as making the least effective use of technology.

1.9 This suggests that many businesses are not necessarily making the most of the competitive opportunities afforded to them by the newest telecoms services. For example, around one in six businesses are still using narrowband internet services (dial-up or ISDN) rather than broadband, and this rises to one in five among businesses of 5-19 employees. Our survey also found that only 16% of business consumers use converged voice and data networks which could potentially be used to cut the cost of services and offer other benefits such as the ability to provide seamless customer service through multiple channels (telephone, mobile and the internet). There was also some divergence in the adoption of services between businesses; for example, we found that 86% of businesses with 5-10 employees used the internet compared with 94% of businesses with 25-249 employees.

Business consumer choice and value

1.10 The majority of businesses in our sample are satisfied both in overall terms with mobile, fixed and internet/data services and with each specific dimension of satisfaction we tested. When asked about their overall level of satisfaction and satisfaction with value for money, over 80% of businesses said that they were satisfied. However, businesses overall appear less satisfied than residential consumers across all services (mobile, fixed voice and internet / data). The difference in satisfaction levels is particularly stark in the case of fixed-line voice services, where residential satisfaction levels are 11 percentage points higher than business satisfaction levels. We also found that overall dissatisfaction with fixed-line and mobile services is significantly higher among businesses in rural areas.

1.11 Despite the majority indicating that they were broadly satisfied, around half of the respondent businesses we surveyed reported some concerns and frustrations with their use of communications services. Our research revealed that there was close similarity between the causes of satisfaction and the causes of dissatisfaction. For example, for mobile services, coverage and customer service were the most important reasons behind satisfaction but were also the two single most important causes of dissatisfaction. This indicates that some aspects of communications services are so important that they can have a significant impact on the level of satisfaction, e.g. many business consumers expressed satisfaction that they could keep in touch while on the move as a result of extensive mobile coverage, but others experienced significant frustration if they were not able to do so.

1.12 For all three telecoms services we researched (mobile, fixed and internet/data) around half of all businesses said that they experienced frustrations. The main concerns expressed were as follows:

• Speed and reliability of internet and data services, including both download and upload speeds - 28% of respondents cited poor or unreliable connections as a source of frustration.
• Mobile coverage - 27% of respondents said they experienced frustrations around the poor quality of connections or the unreliable nature of the connection.
• Customer service, including complaints about problems not being resolved quickly and a failure on behalf of provider to take responsibility when problems arose.

Business consumer engagement

1.13 Most business consumers believe that there is sufficient competition and choice of communications providers. Despite this, our research indicates that many consumers are not taking advantage of the opportunities afforded by greater competition and choice. For fixed and mobile services, for instance, we found that just over a third of customers have switched provider in the past four years, and that the figure for internet/data users is only 24%. We also found that 16% of mobile users have taken no action over the past four years to change their supplier, service or deal and that the corresponding figures for fixed and internet/data users are even higher, at 23% and 33% respectively.

1.14 Our research also showed that businesses are more likely than residential consumers to have switched supplier in the past year across all services, but particularly so in the mobile and fixed telephony market.

1.15 Most of those users who had not switched indicated that this was because they were happy with their current supplier. But we also found that a number of barriers are impeding businesses' ability to seek alternatives in the market, namely:

• difficulty in comparing suppliers;
• complex pricing structures; and,
• length of contracts.

1.16 This indicates that communications providers could do more to help business consumers make the most of the opportunities afforded by competition in particular by making it simpler to compare prices and services. Another demand from business consumers is for suppliers to proactively check that they are on the best deal and, if not, to offer to move them to a better deal. We found that this builds trust and goodwill and makes consumers more inclined to remain with that supplier over the longer term. It should be noted, however, that many businesses negotiate bespoke deals and therefore it may not be practical for telecoms providers to ensure that their business customers are on the best tariff in the market. Nevertheless it is important that prices are clear and transparent and that business consumers understand whether they are receiving value for money.

Availability and reliability

1.17 The importance of telecoms services to businesses was underlined by our findings on the availability and reliability of services. We found that over 90% of respondents are satisfied with the reliability of their fixed, mobile and internet/data services. Satisfaction with the geographical availability of services is also high, although across the UK as a whole, dissatisfaction with the geographical availability of mobile services is much higher (12%) than for fixed (5%) or internet/data services (3%).

1.18 These broad levels of satisfaction are only part of the overall picture, however, we also found that the quality and reliability of the connection are a key source of frustration for mobile and internet/data consumers. More than one in four mobile and internet/data users said that they experience frustrations in relation to the quality of the connection, compared with only 4% of fixed-line users. With regard to internet/data services, respondents also reported problems caused by not having consistently good upload and download speeds.

1.19 Although the issue of geographical availability is UK-wide, we found that businesses in rural areas and in Scotland were significantly more dissatisfied with the availability of internet/data services while businesses in Wales were significantly more dissatisfied with mobile coverage. A number of small business representatives who attended the various roundtable events we held across the UK, also expressed concerns about slow broadband speeds in some rural parts of Scotland, Wales and Northern Ireland, and made the point that fast broadband services are vital for these areas. Many of them also referred to poor mobile coverage as a cause of frustration, adding that in certain areas only one of the five mobile network operators covers their business location.

Customer service

1.20 We found that poor customer service is one of the most important reasons for dissatisfaction among business consumers. Businesses who said they were dissatisfied with an aspect of their service most commonly cited customer service as the cause of dissatisfaction. Those who were dissatisfied with customer services most often mentioned the failure to address a problem immediately (including being passed around numerous people before a problem is tackled). Where customers had dedicated account managers, there were also complaints about availability of the relevant account manager.

Ofcom's work to promote the interests of business consumers

1.21 Our research identifies that most business users are satisfied with their overall service and the value for money received, as well as with other aspects such as availability and range of services. That said, there are also a number of areas where business consumers seem to be experiencing problems, namely the availability of mobile and internet services, customer service and difficulties in switching. We will undertake regular research into the experiences of business users to see whether communications providers are addressing the concerns and frustrations identified above and whether the experiences of businesses are improving over time.

1.22 We are also undertaking a number of initiatives to ensure that business consumers are able to obtain better outcomes in terms of choice, quality and value for money. Our key activities are discussed below and further details are set out in our Draft Annual Plan for 2010/11, on which we are currently consulting:

• Competition continues to be the key driver of consumer benefits. Our programme of market reviews under the European Telecoms Framework and the imposition of regulation to promote competition should help ensure that business consumers continue to have an extensive choice of communications providers. We are currently undertaking a review of the Wholesale Local Access (WLA) and Wholesale Broadband Access (WBA) markets, which will consider what regulation, if any, is appropriate for both current and next generation broadband services.
• We continue to work with Openreach and the independent Telecoms Adjudicator to ensure that communications providers are able to obtain the relevant input products they require from Openreach to build their own services and propositions for business consumers.
• In our Draft Annual Plan for 2010/11, we have identified making progress on mobile and broadband not-spots as one of our priority work areas. In terms of extending the reach of current generation broadband, we have been providing support to the Digital Britain initiative to help inform the debate on the costs / feasibility of delivering 2Mbit/s broadband throughout the UK. We have undertaken work to better understand the reasons for mobile not-spots and are discussing with mobile operators how the coverage information they provide could be improved. Further, we have recently published maps of the 3G coverage offered by different mobile operators .
• We have also published a policy framework which should help facilitate the roll-out of super-fast broadband networks. We have agreed a variation to BT's Undertakings and are consulting on a further variation which will enable BT to deliver next generation broadband services in a more cost-effective way while ensuring that competition safeguards are maintained. This is in addition to the government's plans to widen next generation broadband coverage as set out in its Digital Britain report. We have also published research into broadband performance , including how performance varies by internet service provider; this information should be useful to business consumers who use DSL and cable broadband.
• Our research showed that customer service is a significant source of dissatisfaction and indicates that operators need to do more in this area. We have imposed regulatory requirements on Openreach which are aimed at improving customer service outcomes. We are also considering how to ensure that competitive pressures work to drive improvements in this area. We are currently consulting on proposals to restructure the charge controls on wholesale line rentals to ensure that Openreach has appropriate incentives to offer higher levels of service which in turn should allow communications providers to offer a greater range of service levels to their business clients .
• We have also published a new guide for small businesses on how to get the best deal for their telecoms services which is available at: Getting the best telecoms deal – An Ofcom guide for small businesses

The research provides insights for Ofcom and communications providers

1.23 Our research revealed some key lessons for communications providers as well as possible implications for Ofcom's ongoing work. As explained above, business consumers have described a number of areas where they are currently experiencing difficulties, notably network coverage and performance, cost and customer service. As part of our ongoing, informal engagement with communications providers, we will seek to establish the underlying causes of business consumers' concerns as well as consider what actions are being put in place by individual communication providers to address these concerns.

1.24 We intend to conduct regular research into the experiences of business consumers. Next year we will conduct research on small businesses. When we conduct similar research in future, we will continue to monitor which issues continue to be a cause of concern for business consumers and what effect any actions from communications providers have on improving the overall customer experience. In the meantime, we will continue to engage with the Communications Management Association (CMA) and other representative bodies, including the Communications Consumer Panel and Ofcom's Advisory Committees in England, Northern Ireland, Scotland and Wales.

1.25 We also welcome feedback from other stakeholders, particularly on the results of the research or the possible implications for Ofcom. Please send any views to market.intelligence@ofcom.org.uk