Www.btwholesale.com Market Research & Analysis Sharing: Churn Analysis Tracking David Lowrie BT Wholesale, Marketing Manager “Specialist ISP” Workshop

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Market Research & Analysis Sharing:

Churn Analysis Tracking

David Lowrie

BT Wholesale, Marketing Manager

“Specialist ISP” Workshop – 20th June

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© MORI 2005. Not to be used, reproduced or shown to any third party without the prior written permission of MORI

End User Churn in the GB Broadband Market

Presentation to ISP Forum

June 2005

David Lowrie

3

Since October 2004 Broadband has overtaken Narrowband

0

10

20

30

40

50

60

Jan '03 Apr '03 Jul '03 Oct '03 Jan '04 Apr '04 Jul '04 Oct '04 Jan '05 Apr '05

Narrow band only All Broadband All internet at home

Base: circa 4,000 interviews per month May 2004 – 1,940 interviewsMORI Technology Tracker January 2003 – May 2005

%

35%

20%

55%

Wave 1

Wave 2

Wave 3

4

The number of households with broadband has increased by 2.4 million in the last 6 months

0

2

4

6

8

10

12

14

Jan '03 Apr '03 Jul '03 Oct '03 Jan '04 Apr '04 Jul '04 Oct '04 Jan '05 Apr '05

Narrow band only All Broadband All internet at home

Base: circa 4,000 interviews per month May 2004 – 1,940 interviewsMORI Technology Tracker January 2003 – May 2005

Households (million)

8.4

4.8

13.2

Wave 1

Wave 2

Wave 3

5

Broadband Users: Users are more likely to be male and live in the South

All population All home internet users

Use broadband at home

Base: 4,171 2,200 1,382

% % %

Gender

Male 48 52 57

Female 52 48 43

Age

15-34 32 38 42

35-54 34 42 42

55+ 34 20 16

Region

North 33 31 29

Midlands 31 30 30

South 36 39 40

Base: All adults aged 15+ (4,171), MORI Tech Tracker, May 2005

6

3%

16%Likely to migrate from dial up to broadband over next 12 months

Non internet users likely to go straight to broadband*

Base: All respondents (2,100), MORI general public omnibus, May 2005

Growth in Broadband set to continue – could be as many as 4.6 million new lines over next 12 months

19% of the public expect to adopt broadband over

next 12 months

46%

37%

17%

Dial-up internet

users

Broadband user

Non internet

user

7

73%

38%

75%

38% get additional bundled services beyond internet and basic broadband services as part of their broadband package

Basics broadband services

Additional bundled services

Using the internet

Base: All respondents (999), May 2005

Q Which of the following services do you get from your main broadband supplier (i.e. services which are part of your packages)?

8

Phone line is the most common bundled service


Q Which of the following services do you get from your main broadband supplier (i.e. services which are part of your packages)?

Using the Internet (75%) Basic Broadband services (73%) Additional bundled (38%)

E-mail accounts 70% Hardware (modem and router) 49% Phone Line 29%

Security 36% Downloads (unlimited) 38% Phone line with special tariffs 17%

Web hosting facilities 25% Free customer support 37% Digital TV with extra channels 11%

Instant messaging 21% Extra storage 16%

Online gaming 7% Downloads (limited) 15%

Other telephone services 4% Extra bandwidth 3%

Web logs 4%

Pay-as-you-go 2%

9

7% would pay extra for Digital TV with extra channels


Q Which of the following services would you pay extra for?

Using the Internet (8%) Basic Broadband services (12%) Additional bundled (11%)

E-mail accounts 1% Hardware (modem and router) 1% Phone Line 2%

Security 4% Downloads (unlimited) 4% Phone line with special tariff 3%

Web hosting facilities 1% Free customer support 2% Digital TV + extra channels 7%

Instant messaging 1% Extra storage 5% Digital TV (basic) 4%

Online gaming 2% Downloads (limited) 0%

Other telephone services 2% Extra bandwidth 2%

Web logs 0%

10

Just under one half downloading music


Q Which, if any of these do you or members of your household use the internet for whilst at home?

Communication (97%) Obtaining Information (96%) Rich Media (81%)

Send/receive email 94% General surfing the internet 90% Download music 49%

Send/share photos 60% Finding information (personal) 81% Listen to radio 47%

Chatting 58% Finding information (work) 51% Playing games online 45%

Send/share video clips 21% Finding information (school) 45% Download computer games 26%

Phone calls on internet 6% Download movies 14%

Watch TV 10%

11

More than half downloading software


Q Which, if any of these do you or members of your household use the internet for whilst at home? Continued….

Transactions (80%) Software (58%)

Banking 77% To download software 58%

Real time gambling/trading 27%

12

Usage of Suppliers in the Market

13

23%

19%

15%

10%

10%

7%

4%

11%

Market share in line with October 2004

NTL

October 2004 May 2005

Q Which is your main supplier for broadband services?

BT (All brands)

Base: All respondents (1,003) October 2004, (999) May 2005

Telewest/Blueyonder

AOL

Freeserve/Wanadoo

Tiscali

Pipex

Other

Don’t know (1%)

22%

19%

15%

10%

10%

8%

NTL

BT (All brands)

Telewest/Blueyonder

AOL

Freeserve

Tiscali

Pipex (2%)

OtherDon’t know (1%)

13%

14

Over half have stayed with their current supplier for over a year

10%

11%

18%61%


Q And how long have you been using your current supplier?

3 months or under

4 – 6 months

7 months – 1 year

Over a year

May 2005

5046

61

0

10

20

30

40

50

60

70

80

90

100

May-04 Oct-04 May-05

Over a year%

15

92%

90%

85%

84%

83%

95%

Reliability, speed and costs remain the three most important factors when deciding which broadband supplier to use

Speed of connection available

Easy to sign up

Reliable connection

Cheap usage costs

Quality of customer service

Cheap installation costs

% very/fairly important

Q How important are the following factors to you when deciding which suppliers of broadband services to use?


Importance Change

Oct ’04 –

May ‘05+

-2

-2

-1

-3

-2

-2

16

73%

66%

56%

54%

37%

36%

83%

Bundled packages important for around one third

Availability of free modem

Better deal on telephone/digital TV package

Suppliers has good reputation

Cost of phoning helpdesk

Length of contract

Content provided by broadband supplier

% very/fairly important

Q How important are the following factors to you when deciding which suppliers of broadband services to use? Continued…


Importance Change

Oct ’04 – May ‘05

+

-2

-1

+1

+3

0

-4

Billed on my ordinary phone or cable bill 0

17

Loyalty

18

24%

37%

27%

5%4%

Around nine in ten broadband users are satisfied with their current supplier – no change from the levels of satisfaction seen in 2004

Extremely satisfied

Q Which of the following best describes your overall satisfaction with your broadband supplier?

Very satisfied


Fairly satisfied

Neither/nor

Fairly dissatisfied

Very dissatisfied (1%)Extremely dissatisfied (1%)

8989 88

6 6 7

0

10

20

30

40

50

60

70

80

90

100


Satisfied Dissatisfied%

19


7%

7%

8%

6%

88%

88%

88%

91%

85%

90%

7%

5%

DissatisfiedSatisfied

All (999)

Women (435)

Men (564)

Broadband speed less than 512kbs (332)

Broadband speed more than 512kbs (499)

Those with faster broadband are slightly more satisfied than those on slower bandwidth

Base: Varies (see above) May 2005

Over 55 years old (128)

Satisfied Change Oct ’04 – May ‘05

+

-1

-1

-1

0

-1

-1

20


20%

32%

88%

70%

55%

97%

7%

1%


All (999)

Likely to switch supplier (167)

Disloyal users (164)

Less than two thirds are satisfied among those who are likely to switch


Unlikely to switch supplier (584)


+

-1

-7

-10

+2

21


3%

9%

9%

88%

93%

85%

94%

83%

7%

1%


All (999)

Telewest/Blueyonder (145)

Those who use NTL as a supplier tend to be least satisfied, whilst Telewest/Blueyonder are most satisfied


AOL (104)


+

-1

-2

-5

0

BT all brands (190)

NTL (221)

+4

22

11%

88%

11% have ever switched supplier compared to 6% 12 months ago

Yes

May 2005

Q Have you ever changed the supplier of your broadband connection?

No


106

11

9088 88

0

10

20

30

40

50

60

70

80

90

100


Yes No%

23

6%10%

20%

19%

40%

5%

Very little change in the likelihood to switch broadband supplier over the next 12 months. 58% are unlikely to switch

Q How likely are you to switch broadband provider in the next 12 months?

Neither/nor

Very likelyDon’t know

Fairly unlikely

Fairly likely

Very unlikely

Expect to discontinue

(1%)


1518 17

5953

58

0

10

20

30

40

50

60

70

80

90

100


Likely Unlikely%

24

Why are People Switching?

25

28%

23%

20%

16%

54%

Cost is the most important consideration among likely switchers

High cost/too expensive

Poor customer service/help desk

Cheaper deal from other suppliers

Moving home

Base: All respondents who are likely to switch supplier in the next 12 months (167), May 2005

Change Oct ’04 – May ‘05

+

-10

-15

+8

+5Faster connection from other supplier

0

Q Which of the following are likely to influence your decision to change supplier over the next 12 months?

26

25%

25%

18%

4%

37%

Among users who have actually switched supplier in the past, nearly four in ten said a cheaper deal from another supplier was the main reason. Moving house and poor quality service are still catalysts for change

Moved house/flat

Cheaper deal from other suppliers

Poor quality service

Faster connection from other supplier

Base: All respondents who have switched supplier in the past (113), May 2005 NOTE: SMALL BASE SIZE


+

-2

-2

-1

-1

-17

Q Which of the following influenced your decision to change supplier?

Lack of availability

27

31%

30%

44%

Four in ten could be encouraged to switch supplier if another supplier provided broadband basics that interested them.

Additional bundled services

Basic Broadband services

Using the Internet


Q Which of these services (provided by another supplier would encourage you to switch to another provider?

28

Download limits and customer support are important reasons to change supplier


Q Which of these services (provided by another supplier would encourage you to switch to another provider?

Basic Broadband (44%) Additional bundled (31%) Using the internet (30%)

Downloads (unlimited) 28% Digital TV with extra channels20% E-mail accounts 17%

Free customer support 26% Phone line + special tariffs 18% Security 8%

Extra bandwidth 22% Digital TV (basic package) 8% Web hosting facility 8%

Hardware 19% Phone line 6% Instant messaging 7%

Extra storage 10% Other telephone services 5%

Downloads 1% Online gaming 5%

Pay-as-you-go 1% Web logs 2%

29

19%

9%

10%

6%13%

42%

22%

7%

15%11%

17%

4%6%

Switching still appears to be from the incumbent telephony and cable suppliers to other suppliers

BT (all brands)

Previous supplier Current supplier

Q Which supplier of broadband services did you use before your current supplier?

Telewest/ Blueyonder

Freeserve/ Wanadoo

AOL

Don’t know

Other

NTL

BT (All brands)

Telewest/Blueyonder

Freeserve/Wanadoo

Other

Base: All respondents who have switched supplier in the past (113), May 2005 NOTE: SMALL BASE SIZE

AOLNTL

30

What Can Suppliers Improve On?

31

The top three most important factors to consider when deciding which broadband supplier to use continue to be costs, reliability and the speed of connection.

Reliable connection

Speed of connectionavailable

Availability of a free modem

Q Three most important factors when deciding which suppliers of broadband services to use?

Cheap usage costs

62%

25%

19%

16%

16%

83%

56%

46%

23%

14%

10%

20%

43%

73%

All Likely switchers

Base: All respondents (999) and all who are likely to switch supplier in the next 12 months (167), May 2005

Cheap installation costs

Quality of customer service

Supplier has good/trustworthy reputation

All Change Oct ’04 – May ‘05

+-5

-1

+3

-3

+5

+1

-1

32

48%

26%

25%

18%

15%

6%

71%

Nearly three quarters of likely switchers say that a better deal from their current supplier would stop them from switching. Speed, reliability and customer service have all become more important

Increase the speed

Offer bundled packages

Cheaper /lower price/ deals

Improve customer service/helpdesk

Unlimited downloads

Improve reliability/connection

Base: All respondents who are likely to switch supplier in the next 12 months (167), May 2005


+

+7

+29

+17

+15

+13

-

Nothing +1

Q What could your current supplier do, if anything, to avoid you changing to another provider?

33

35%

26%

25%

12%

11%

7%

47%Improved availability/ reliability/connection

Cheaper /lower price/ deals

Increased speed

Not limit use on downloads

Improved customer service/helpdesk

Base: All respondents who have switched broadband supplier (113), May 2005

Change May – Oct

’04+

+8

+21+10+12 -

+7Nothing

-

Q What could your previous supplier have done, if anything, to avoid you changing to another provider?

Nearly half of those who have switched in the past said that a better deal from their previous supplier would have stopped them from switching. Again reliability is increasingly an issue

Offer bundled packages

34

Around two thirds of users say a reliable service and ease of use are what they like most about their current service.

Reliability/No problems

Speed

Good/helpful customer service

Q What aspects of your current service do you most like?

Easy to use

60%

42%

37%

32%

26%

80%

59%

43%

44%

39%

28%

33%

57%

61%



Good/cheap price

Good quality service

Unlimited downloads

AllChange

May – Oct ’04+

+49

+24

+39

+25

+32

+26

+15

35

Likely switchers are much more likely than non switchers to mention costs, customer issues and speed as things they like least about their current connection

Poor customer service/helpdeskDifficult to access helpdesk

Poor/unreliable e-mails

Q What aspects of your current service do you least like?

High cost/too expensive

14%

7%

7%

4%

3%

49%

25%

21%

17%

24%

14%

3%

12%

21%



Poor connection/unreliable

Speed

Poor quality service

All Change

May – Oct ’04+

+2

0

+3

-2

-2

0

-4

36

Around two thirds of broadband users mention price as an area suppliers can improve on. Speed of connection and the reduction of spam are potentially areas that suppliers can differentiate on

46%

31%

31%

30%

19%

60%

53%

31%

27%

42%

43%

28%

35%

66%


Speed

Reduction of spam/ pop-ups

Customer communication/ information

Q What aspects of service can broadband suppliers improve on?

Price


Virus protection

Reliability of connection

Customer service/ helpdesk

AllChange

May – Oct ’04+

+30

+26

+31

-

+23

+14

+14

37

Conclusions

38

Context

The Broadband market has shown significant growth since October 2004. Broadband has overtaken narrowband as the main form of access to the internet from the home

Growth in broadband is set to continue, we estimate there could be as many as 4.6 million new lines over next 12 months

There are a range of different packages offered to the market. Around two in five users (38%) get additional bundled services beyond internet and basic broadband services.

This offers potentially an opportunity for new “triple play” providers. The Phone line is the most common bundled service and 7% would pay extra for Digital TV with extra channels

39

Suppliers

NTL, BT and Telewest remain the dominant players with more than half of the market.

The market is maturing, over half of broadband users have had broadband in their homes for more than a year an 8% increase compared to the previous wave

Over half have stayed with their current supplier for over a year while 11% have ever switched supplier compared to 6% 12 months ago

The rate of churn appears to be lower however. More people have switched as broadband has been around for longer

Reliability, speed and costs remain the three most important factors when deciding which broadband supplier to use

40

Loyalty

Most customers are satisfied - around nine in ten broadband users are satisfied with their current supplier

Subscribers in the Telewest region still show highest levels of loyalty

Catalysts for change remain moving house and poor quality service. Improving download limits and customer support are important reasons for changing supplier

Likely switchers are much more likely than non switchers to mention costs, customer issues and speed as things they like least about their current connection

Improving customer support and a better deal on connection speeds appear to be key areas of focus to maintain loyalty

© MORI 2005. Not to be used, reproduced or shown to any third party without the prior written permission of MORI

Broadband Loyalty

Source: BT Wholesale End-User

Customer Satisfaction Programme

42

% of business respondents who claim to have switched Broadband supplier – monthly results

Have you ever changed the supplier of your Broadband connection?

9%

15%

19%

15%16%

14%

12%

0%

5%

10%

15%

20%

Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05

Perc

enta

ge

Base: Sept: 214 Oct: 178 Nov: 171 Dec: 171 Jan: 173 Feb: 157 Mar: 189

43

% of business respondents who claim to have switched Broadband supplier – 3mra analysis

Have you ever changed the supplier of your Broadband connection?

9%

12%

14%

16% 17%

15%14%

0%

5%

10%

15%

20%

Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05

Perc

enta

ge

Base: Sept: 214 Oct: 392 563: 171 Dec: 518 Jan: 514 Feb: 501 Mar: 519

Note: Sept is a monthly result. Oct is based on 2mra.

44

Reasons for change – January to March 2005

Why did you change supplier?

“My IT expert recommended another SP’s services, as he found them reliable”

“Not long before moving office, we were having problems with our SP’s service – so we took the

opportunity to change”

“My previous employer supplied me with the link and I am no longer with them”

“Because of VPN issues – they would not allow me to connect to a company network”

“My SP could not offer me the e-mail options I required for my business”

“We moved premises – it was easier that way”

45

Reasons for change – October 2004

“Because it was recommended to me by my IT company”

“After being with my Service Provider for six months my line suddenly stopped working and was out of action for eight

weeks ”

“It was the speed and connection. I kept losing the connection”

“When we moved offices we brought in a new IT technician”

Why did you change supplier?

“I get a faster service for the same old price”

“They were cheaper and I find I can get through to the Helpdesk easier”

“The price and the availability of static addresses”

46

Likelihood of being with SP in 12 months

Base: 500 (3mra data)

0

10

20

30

40

50

1,2 3,4 5,6 7,8 9,10

%

How likely are you to be a customer of X Broadband service one year from now?

1 = ‘not at all likely’, 10 = ‘very likely’

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Www.btwholesale.com Market Research & Analysis Sharing: Churn Analysis Tracking David Lowrie BT Wholesale, Marketing Manager “Specialist ISP” Workshop