Ofcom and the premium rate services regulator ICSTIS today published the findings of their latest round of research into the performance of the liberalised 118 directory enquiries market. The latest research provides an update to a mystery shopping and consumer attitudes study - using the same methodology - published by Ofcom and ICSTIS in June 2004. Ofcom's predecessor, Oftel, replaced the old 192 directory enquiries service with new liberalised 118 services in 2003.
Key lessons
Whilst both the previous survey in 2004 and the latest analysis indicate that the market continues to stabilise and mature, the early months of liberalisation following Oftel's introduction of the new 118 numbers were characterised by a shortage of reliable and objective public information about the choices available.
Although the actual directory enquiries liberalisation process itself was handled well, there are lessons for Ofcom in future as to how to bring the benefits of liberalisation to a new market. In particular, prior to embarking on future liberalisations, Ofcom will seek to undertake more research into the pre-liberalisation status quo. That data will then serve as a benchmark against which the evolution of the newly-competitive market can be measured more comprehensively.
Consumer attitudes and behaviours
Firstly, around 67% of consumers surveyed who use directory enquiries services less frequently said they now preferred to use a phone book to find telephone numbers.
Secondly, the internet continues to grow in importance as a free and effective source of access to telephone numbers, listings and business services. 20% of consumers who use directory enquiries services less frequently now use the internet to find telephone numbers instead. This proportion may grow over time as always-on broadband connections (currently present in more than 6 million households) increase.
Thirdly, consumers have mixed views on the benefits of directory enquiries liberalisation. Whilst nine out often have selected a 118 provider and four out of ten consumers see benefits in competition, more than six out of ten only ever use one provider and therefore do not think there are advantages in an increase in choice. Seven out of ten say they are confused by the choices available and only one in ten of those surveyed believe the 118 services available are better than the former 192 directory enquiries regime.
Finally, 35% of consumers say they are using directory enquiries less than before liberalisation (26% in April 2004). However, it is important to note that these are self-reported figures and may not accurately reflect actual call volumes to 118 providers. In future research, Ofcom and ICSTIS will seek to analyse network traffic data to form a more precise view of the size of the market.
Market performance
Seventeen months after its establishment, the 118 market is still evolving, with a greater range of prices and services than were available both before and shortly after liberalisation. In this respect the UK market is developing in a similar manner to markets in other countries where directory enquiries services have been liberalised successfully.
After some consolidation in the early months of liberalisation, the total number of providers is now relatively constant. Whilst some providers have left the market, Ofcom continues to receive requests for new 118 numbers from providers seeking to enter the market. In addition, a number of new and innovative pricing models have emerged following liberalisation, including charitable giving (in which a proportion of the fee is donated to not-for-profit organisations) and free directory enquiries for customers of some alternative telecoms providers.
Overall, average accuracy (the proportion of requests which yield a correct answer) remains unchanged (86% versus 87% in April 2004). Weighted average pricing remains unchanged in real terms (50p per average call versus 49p in April 2004).
The mystery shopping research looked at the top 30 providers responsible between them for more than 95% of the total market. The two most-used services (BT 118 500 and The Number's 118 118) charge somewhat more than the weighted market average of 50p, whilst many smaller providers typically charge less - in some cases below 30p. Just under half of the providers surveyed charge less than the old 192 rate of 40p; some of the cheapest providers are also amongst the most accurate.
The research also analysed consumer usage of enhanced directory enquiry services, such as call connect and text-back (text messaging the requested number to a mobile phone). Almost half of the consumers surveyed were aware of at least one enhanced service; amongst consumers who call directory enquiries from their mobile phone, 73% were aware of text-back. The most popular enhanced services were text-back (used by 12% of mobile phone users) and call connect (used by 6% of all consumers).
However consumers do not have a good understanding of the costs involved; for example, the large majority of directory enquiries users surveyed (89%) were unaware that there is no additional charge for text-back.
Next steps
The research reveals trends in consumer understanding and pricing which include areas meriting further study.
Ofcom and ICSTIS will therefore undertake further market monitoring and consumer research - leading to publication of price and performance information for the 30 largest 118 directory enquiries providers - in order to track longer-term market trends and provide consumers with information to help them choose the most appropriate service for their needs.
The next round of research will take place over the course of 2005. Once it has been completed and the findings published, Ofcom and ICSTIS will consider the most appropriate action in response.
The full research report, including details of survey results for the top 30 providers, can be accessed via the Related Items link on this page.
