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The Consumer Experience - Evaluation Report 07

20|11|07

Foreword

Ofcom’s principal duty under the Communications Act is to further the interests of citizens in relation to communications matters; and to further the interests of consumers in relevant markets, where appropriate by promoting competition. The two reports we are publishing today help us to evaluate the experience of consumers and citizens and to assess the impact of Ofcom’s policies and priorities.

The research report sets out the results of comprehensive research measuring how well consumers are faring in terms of four aspects of their relationship with communication services: choice and range; availability and take-up; level of engagement; consumer protection and concerns. We track the research results over time and benchmark them against other countries.

The policy evaluation examines the research data and uses it to assess the impact of our regulatory policies and activities. This evidence will help us make sure that we have the right priorities and that our actions are securing positive outcomes for citizens and consumers. It provides an opportunity to consider the effect of our policy work and market developments on all consumer groups - in particular older people, children, disabled consumers and consumers on low-incomes.

We have changed aspects of this year’s reports in response to suggestions we received from stakeholders last year. We provide more details on older consumers – reporting separately on those between 65 and 74 and on the over 75s rather than a single ‘over 65s’ group – and on disabled consumers, reporting separately on visual, hearing and mobility impairments. This year the reports also include international price comparisons. And to provide a richer understanding of barriers to take-up and use, we have included reports of two qualitative studies on consumers with hearing impairments and on low-income households.

This year’s reports also show convergence becoming a reality. With consumers increasingly able to obtain services from a range of alternative platforms and to choose bundles of services on the same platform, the reports examine how consumers are taking up and using services provided in this way.

We are keen to have stakeholders’ views on the research findings and the policy analysis. We want to continue our dialogue over our priorities and the actions most likely to achieve the results we are seeking. We will be arranging various opportunities over the coming months to discuss the reports and we urge you to take part and let us have your views.

David Currie   Chairman
Ed Richards   Chief Executive




Executive Summary

This is the second annual publication of Consumer Experience in which we report on Ofcom’s progress in carrying out our principal duty to further the interests of citizens and consumers in relation to communications matters.

Each year we examine the consumer’s experience in four aspects of their relationship with communication services: choice and range; availability and take-up; level of engagement; consumer protection and concerns.

Choice and range

Effective competition is one of the main drivers of consumer benefits in terms of innovation, more choice for consumers, higher quality and lower prices.

Ofcom takes vigorous measures to promote competition, including ensuring the full implementation of BT’s undertakings to provide equivalent access to its competitors as it does to its own retail business. Our report shows positive results with greater choice and falling prices for consumers.

Local Loop Unbundling (LLU) enables other providers to take over from BT the operation of the local line between the exchange and the customer’s premises. 67% of lines are now connected to LLU exchanges – a rise from around 44% in 2006.

2007 saw the increased availability of bundles of products, combining different services into packages and often containing a ‘free’ element, such as free broadband or free calls. 40% of households are now taking more than one services from the same provider – up a third on last year.

Competition is continuing to drive price reductions. A household bill for a ‘basket’ of fixed, mobile and broadband services has fallen in real terms from £113 a month in 2001, to £76 in 2006 and further to £69.85 a month in 2007. Our analysis indicates that prices are now typically lower in the UK for fixed-line, post pay mobile and broadband services than in Germany, Italy and US.

Access

Availability of services remains at very high levels driven by competition and a regulatory framework that encourages investment and ensures that essential services are available. The Universal Service Obligation effectively ensures 100% availability of fixed-line services. Coverage for 2G mobile services remains very high but not universal with lower levels of coverage in some rural areas.

BT reports 99.6% of its lines can now receive broadband with speeds of at least 512kbit/s. With growing expectations, the policy focus is now turning to the availability of higher speeds and next generation networks.

98% of households are able to receive digital satellite television with 73% able to receive Freeview, rising to 98.5% at digital switchover. 45% of households can access digital cable.

Take-up of services continues to rise, driven by this wider availability, increased choice and falling prices. Household take-up of mobile phones is higher than fixed-line for the first time. 71% of adults are now using the internet.

There are positive signs that the size of the differential between the levels of take-up by older consumers and other groups is now reducing. We are now seeing some of the biggest increases in PC ownership and take-up of the internet and of digital TV services amongst the 65-74 age group and in particular by consumers over 75s. However, older consumers continue to have lower absolute levels of take-up across all services, with the exception of fixed lines.

Consumers with hearing, visual and mobility impairments have generally lower levels of take-up of services. However levels are increasing, particularly amongst consumers with hearing and mobility impairments, and appear broadly consistent with their age and income profiles.

However this growth in take-up is leaving a group of consumers who are increasingly hard to reach. For them costs seem to be less of a barrier than other factors. Among low-income consumers, barriers exist around other factors such as lack of a bank account and variability of income. Our research amongst consumers with hearing impairments indicates that barriers remain around the cost and usability of equipment and difficulties using telephone-based customer service and in dealings with retail sales staff.

This sets challenges for suppliers and policy makers to understand and address the needs of those who may still wish to take up services. Our work on digital inclusion and on media literacy is examining the barriers to take-up and use and developing proposals on how they might be tackled. As cost and availability appear to be becoming less significant barriers than other social and economic factors, we will need to work closely with stakeholders to identify possible solutions.

Empowerment

It is vital that consumers can compare and change providers and products easily to secure the benefits of competition. As the competitive market and convergence deliver more choice for consumers - with different platforms and an expanding range of options and bundles available - it becomes harder for consumers to make informed choices.

Our research shows that there is increased participation in markets by consumers – actively switching, comparing services or negotiating new deals – but that they are finding comparing quality of service (QoS) more difficult than making price comparisons. To help consumers compare providers, over the last year we have introduced a new price accreditation scheme and are working with industry to develop QoS initiatives further, in particular to provide broadband comparisons.

Our research shows falling level of satisfaction with broadband services. One area of complaint has been that advertised headline broadband speeds do not reflect actual speeds delivered. Ofcom is currently working to make sure consumers have clear and accurate information about broadband speeds to address concerns.

We reported in 2006 that consumers seeking to switch broadband providers were experiencing considerable difficulties and delays. We introduced new measures in February 2007 to address these problems. These appear to be having a very positive effect with a significant reduction in complaints and similar improvements being shown in data from industry.

Protection and concerns

Consumer protection is a priority for Ofcom. Our work aims to prevent scams and unfair practices from occurring as far as possible and that, when they do, we respond effectively.

We have introduced new rules to combat mis-selling and slamming (where consumers are transferred to another supplier without their permission) in respect of fixed-line services and have taken enforcement action against the worst offenders. Complaint levels have stabilised with some industry data indicating that aspects of mis-selling activity may be reducing.

There has been a significant rise in complaints from consumers about the mis-selling of mobile services, notably about the use of ‘ cash-back’ deals. Ofcom wishes to see this problem resolved urgently. Mobile providers introduced a voluntary Code of Practice over the summer to address the issue. Ofcom is now examining the effectiveness of the code and will consider whether more formal regulation is needed to protect consumers.

Silent calls are generated by automatic calling systems which create silence or terminate calls if a call-centre agent is not available when the call is answered. They can cause inconvenience and anxiety. Ofcom introduced new rules in 2006 to tackle this problem and has taken enforcement action against a number of organisations. These measures appear to be having success with the level of complaints to Ofcom and BT falling significantly over the last year.

On additional charges, it is essential that consumers have confidence that any charges are fair, transparent and justified. Ofcom is carrying out a review of the use of these additional charges across the industry.

We also ask consumers what concerns they have generally about communication services. Concerns overall have fallen sharply over the last year. As in 2006, the highest levels of consumer concern relate to children’s access to internet contentandto internet security generally.

Internet protection, particularly with regard to children, is an area where we actively support the work of other stakeholders. In particular we are working with the Home Office to develop a British standard for internet access control software to be introduced next year which will allow adults to easily control children’s access to internet-based content. We will also be submitting evidence to the Byron review commissioned by the government to assess the risks to children from exposure to potentially harmful or inappropriate material on the internet and in video games.

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