Ease of switching in the communications markets – Ofcom Report

In the communications market, in order to take advantage of the market conditions and also for the efficient functioning of communications market, consumers must have the facility to switch providers without much difficulty. Majority of consumers who had switched in the past said that they did not encounter any difficulty in switching providers. At the same time a higher proportion of consumers are of the opinion that switching is “very” or “fairly” difficult when it comes to switching the provider of services in their bundle. It being the position, vast majority of switchers, (91%), said that they had switched both fixed line and fixed broadband services. Hence it is concluded that the difficulty is related to managing multiple switching processes. Over time, different switching processes have developed across different communications sector. As a result, even for switching the same set of service, multiple switching processes have come into existence. Majority of mobile consumers believe that switching is easy while consumers who have never switched broadband provider believe the process of switching is ‘very’ or ‘fairly’ difficult.

Among the socio-economic group AB, who have never switched their bundled services or fixed-line believe that the switching process is difficult while consumers in the lower socio-economic group consider switching not that difficult.

There are many reasons for customers for not switching their providers. For fixed-line and bundled services, the hassle involved is the key barrier. The type of ‘hassle’ that consumers refer to is not clear, whether it relates to gathering information or switching process or comparing information. Satisfaction with the current available services provided by supplier is also a reason for not switching. Yet another reason for not switching is the non-availability of substitute service since the number of providers in the market is limited. Another barrier to switching is the terms and conditions tied up to the contract by the providers. Once a consumer signs up a contract, he has no other option but to pay ETC (early termination charges) to the supplier if he wants to terminate the contract midway. 50% of consumers in the fixed-line market are without any contract with suppliers and therefore they believe they won’t face with any difficulty in switching. In the pay-TV market, 36% of consumers with bundled services and 45% with broadband services did not have a contract. 13% of contract customers in the mobile market believe that they were not tied into a contract since they are out side their minimum contract period.

Awareness of trusted information sources
Currently there are many sources of information available to consumers with regard to any aspect of the communications market. When asked about trusted source of information, in each of the communications market, the majority of consumers could name at least one trusted source of information.

Though there are many communications services, when it comes to information relating to the internet and bundled services, the internet remains the most-mentioned source of information. For information with regard to reception of TV channels and information relating to connection to internet, reliance on supplier sources and personal sources have also increased. For mobile, supplier source remains to be the most important source of information.

In all markets, recommendations of family members and friends are considered as the second largest source of information, the first being internet. Store visit to gather information relating to mobile phone technology services and suppliers and comparison websites giving advice on internet or bundled services are also considered as important sources of information to consumers. 90% of the consumers interviewed said that they were influenced by comparison websites on their purchasing decisions. 50% of them said that comparison websites has a “fair amount of influence”. Among the 45 to 54 age group the use of comparison website is higher (64%) when compared to the group over 55 (49%)

About 67% of consumers in the communications market believe what their family members and friends say about either positive or negative experiences with companies. Consumers believe their friends and relatives more than they believe the companies.
Among the interviewed 95% said that if they had a poor experience with a company, they normally tell other people and 93% of consumers said that if they had a good experience with a company, they would tell it to other people.

Ease of making cost comparisons between suppliers
To enable consumers to obtain a better deal, to help them overcome potential barrier to switching, one must understand consumer’s experience and their difficulty of making cost comparisons between providers.

72% of consumers believe that it is easy to make cost comparisons in the fixed broadband market and 71% of consumers say that it is easy to make cost comparisons in the bundled markets. 60% of fixed-line and digital TV consumers and two thirds of mobile customers also believe that cost comparison is an easy process. However, consumers in the socio-economic groups ABC1 believe that cost comparisons in the fixed broadband, fixed-line, and bundled services market are not easy.

Consumers in the rural areas also believe that the process of cost comparisons is not easy. In the UK, consumers were asked to rate the ease of making price comparisons across three sectors namely electricity and Gas providers, communications providers and financial services providers. 68% of consumers agreed that it is easy to compare prices for communications providers than the prices for electricity and gas providers.