Price overwhelming impetus for consumers to switch local carriers: Decima Research

Canadians are generally open to considering alternative local telephone service providers, so long as they don’t have to pay too much, according to a new survey by Decima Research Inc. Price is by far the most important factor among those who have already switched and among those who would consider switching, however very few would consider paying more for their local service simply to have access to more competitor choices in their area. Nearly half of Canadians agree that the government should play an active role to encourage competition in the residential local service market. Only one in 40 Canadians have signed up to a supplier other than their original incumbent provider even though the local telephone market has been competitive since 1997. The poll, conducted in January 2004 for Decima Publishing Inc., shows that 2.3% of Canadian households use a local telephone supplier other than their incumbent provider. Although far from being an imposing proportion, this represents an increase of approximately 1% from results obtained in a July 2002 Decima poll where 1.4% of Canadians said they used an alternative provider. As the chart on this page demonstrates, the evolution of the competitive landscape differs from coast to coast. Whereas in 2002 the provinces experienced very similar proportions of customers migrating to alternative local telephone service providers (the highest penetration was in Atlantic Canada at 2.4%), in early 2004 the competition seems to be strongest in Ontario where 3.6% of residents claim to use an alternative provider. In the rest of the country, the use of alternative providers ranges from 0% in Manitoba/Saskatchewan to 3.1% in Atlantic Canada. Across the country, Sprint Canada is the leading alternative local telephone service provider, with a national market share of approximately 2.1%, or 89% among alternative service providers. The bulk of Sprint’s local service customers are located in Ontario (64%), according to the survey. (Sprint offers local service in Toronto and Ottawa in the province. It also offers local service in Vancouver, Calgary, and Montreal.) As can be expected, the majority of those who have switched to an alternative service provider did so to pay better rates. More specifically, when asked why they switched, 90% of Canadians who have switched referred to better or cheaper rates. Customer service as an "influencer" was a very distant second at 14%. When considering service provider satisfaction ratings, one might speculate that migration to alternative suppliers might continue in the short term, insofar as a choice is available to those who are dissatisfied. When asked how satisfied they are with their current local telephone service provider, the vast majority of respondents, 74%, assigned a score of 4 or 5 on a 5-point scale (i.e. top-2 box score) where a score of 5 means the respondent is "very satisfied." Conversely, 8% assigned a score of 2 or 1 (i.e. bottom-2 box score) where a rating of 1 means the respondent is "not at all satisfied." Results show somewhat different levels of satisfaction among those who have switched to an alternative provider and those still with the incumbent. More specifically, 65% of "switchers" are satisfied compared to 74% among those still using the incumbent provider whereas dissatisfaction ratings are 7% and 8% respectively. The research shows that new local service providers appear to be experiencing some challenges in terms of meeting customer expectations, which will likely result in some of their customers returning to the incumbent provider if the situation does not change. The potential for churn was also quantified by directly asking respondents their likelihood of switching assuming they had a choice of providers. Among those still using an incumbent provider, 6% feel they would definitely switch and another 19% feel they would probably switch to an alternative provider. Across regions, the combined switching intentions are highest in British Columbia at 40%, of which 9% would definitely switch and 31% would probably switch. Combined intentions were also high in Alberta (30%) and Ontario (25%) whereas intentions were lowest in Manitoba/Saskatchewan at 13%. It is also worth noting that younger Canadians seem more receptive to the notion of switching - 36% of those between 25 and 34 years of age and 31% of those between 35 and 44 would consider switching. This compares to only 15% among those over 55 years of age. When asked what would be the most important factor in their decision to switch to another local telephone service provider, 72% of incumbent customers who expressed an interest in switching outright mentioned "price." This is consistent with the results obtained in July 2002. Among incumbent customers interested in switching, fully 74% said "price" would be the most important factor in their decision to switch. The importance of price is further emphasized when respondents were asked if they would be willing to pay more for their local telephone service in order to have a choice of providers. Only 10% of those still using their incumbent provider would pay more to have a choice of providers, which is significantly less than the 25% who originally expressed an interest in switching. In fact, only one in five (16%) of those who would switch would pay more for their local service in order to have access to a choice of providers. Finally, nearly half of all Canadians feel the government should play an active role through policies and regulations to encourage competitive choices in local telephone service. About 14% strongly agree and 35% "agree" with this proposition. It should be noted though that one quarter of Canadians are "not sure." Consistent with results alluding to switching intentions, strong agreement with government involvement was highest in British Columbia at 19%. The survey was conducted between January 15 and 25 through the Decima teleVox, a national omnibus telephone survey conducted monthly by Decima. Results of the survey are based on a sample of 2,004 adult Canadians and are accurate to within +/- 2.2%, 19 times out of 20. Rick Nadeau is a VP in the Ottawa office of Decima Research Inc. For more information on the survey or to purchase a Summary Report of the research results and the research data tables, please contact Decima Publishing President and Publisher Mario Mota at (613) 230-1984 or by email at mmota@decima.com.

Price overwhelming impetus for consumers to switch local carriers: Decima Research

News | 03/03/2004 5:00 am EST

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